United States

Gulf Cooperation Council: VAT Framework Agreement Released

May 08, 2017
From KPMG TaxWatch

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The Gulf Cooperation Council (GCC), consisting of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE), recently released the VAT Framework Agreement aimed at introducing a region-wide value added tax system in 2018. According to the Framework, all goods and services will be subject to VAT at a rate of five percent, unless an exception applies. These exceptions may include among other items: basic food products, medicines and medical equipment, the oil sector, transportation services, educational services, medical services, financial services, and sales to public bodies and nonprofits. The Agreement adopts the destination principle for cross-border transactions, including intra-GCC sales. Exports will generally be zero-rated, while imports will be taxable in the country of import. While import VAT will commonly be payable in customs, member states may allow taxpayers to self-assess VAT under the reverse charge mechanism. Taxpayers should be allowed to recover VAT incurred on expenditures in so far as the purchased goods and services are used for carrying out a taxable activity and subject to the conditions laid out by each member state. Residents making taxable sales over the mandatory threshold of $100,000 will be required to register for VAT purposes. Non-residents will be required to register regardless of their sales volume if they make taxable sales in a member state for which they are liable to collect VAT. As a consequence, nonresidents selling electronic supplied services to final consumers in the GCC member states will be required to register for VAT in these countries. For more information on the introduction of VAT in the GCC countries, please contact Jeremy Gray at 267-256-3497 or Philippe Stephanny at 202-533-3082.


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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.