Value Added Tax(VAT) in Gulf Countries

by Aaron

No matter how big or small, a business thrives on expansion and change. Any business that experiences growth also continuously adapts to extrude a universal truth. Suppose there is one thing that highly regarded companies have in common. In that case, it is the constant observation of current developments in the society, politics, and economy of the areas in which they operate.

Business people operating in the gulf cooperation council ( GCC) must grasp the impending value-added tax and set up their companies for successful implementation because the Gulf Cooperation Council has indicated that the implementation will start in 2018.

What exactly is GCC VAT?

GCC VAT is an indirect tax that may apply to goods and services sold only inside the borders of Gulf member states. Gulf Cooperation Council (GCC) members are Saudi Arabia, Dubai, Qatar, Bahrain, Oman, and Kuwait.

How will the GCC VAT be calculated?

Registered businesses who operate in any of those states will impose the VAT on the goods and services they provide on behalf of the state government. It may be assessed at any point in the supply chain, and the final customer is responsible for paying it. Additionally, the GCC VAT may be assessed when goods are imported.

Do any goods or offerings have a GCC VAT exemption?

The GCC has waived fees for many goods and services, such as the delivery of precious metals for investment and the delivery of pharmaceuticals and pharmaceutical supplies, certain foods, the oil industry, international and intra-GCC shipping, and international shipping outside the GCC, and shipping of certain goods.

In addition, each GCC member state is also permitted to implement a fee-free policy in a select number of industries, including real estate, healthcare, local delivery, and education. The aforementioned goods, services, and industries are VAT-exempt in the Gulf since they cost nothing.

What cost will the GCC VAT be determined at?

A 5 percent rate will be used to determine the GCC VAT. However, as was already mentioned, some industries and exports would only be subject to a 0% tax, making them tax-exempt.

Who among the following businesses must register for the VAT?

A company must register for the VAT if it has a yearly revenue of at least SAR 375,000 (or its equivalent in the currency of any GCC member state). To put it another way, the threshold for VAT registration is a yearly turnover of SAR 375,000 or an amount equal to it. 

What records should businesses keep on hand to complete VAT returns?

The invoice is the primary record that a business should keep submitting VAT returns. Every time a company sells something or provides a service, it should issue a VAT invoice. The business ought to do the following as well:

  • Notes on a credit or debit card.
  • Import and export statistics.
  • Records of items/offerings given out or designated for private use but not at the cost.
  • Resources and purchases that are VAT-free or zero-rated

When do organizations need to register the VAT returns?

The Gulf VAT is entirely dependent on self-assessment; as a result, groups and service providers may be responsible for calculating it, filing returns, etc. Businesses must either register their VAT returns quarterly or monthly. All groups must save hard copies of the submitted VAT returns even though there may be a digital platform.

All information may be effortlessly combined into a single platform using the correct warehouse control system software for small groups, making managing and tracking them simple.

What steps can businesses take to position themselves for the impending VAT?

If businesses prepare for the new VAT policy ahead of time, they can benefit from it. Enforcing a capable ERP system that complies with the new VAT regulations will be part of early practice. Businesses in the GCC may be operating illegally for the first time. It might be essential to thoroughly test and verify ERP systems before implementing them.

What kind of software application may businesses use to compute VAT?

Because of technology, businesses may use ERP solutions to keep up with VAT computations without affecting their operations. The company should select a robust device with a wide range of features. The GCC region’s most popular and highly dependable ERP programs have emerged. It is perfect for organizations operating within the GCC region because of the following features.

  • Automatic VAT posting for both input VAT and output VAT 
  • Built-in chargeback system VAT pricing definition based on customer location
  • Flexible and customizable record for online VAT return submission
  • Automatic check form for export-based VAT exemptions for the GCC

To ensure that nothing is still off while calculating the VAT, they also offer the ability to produce exception reviews. It has the following capabilities in its rational evaluation record:

  • Invoices with calculation errors
  • Arabic and English billing and reports
  • Products/product groups’ missing VAT expenses
  • lost customer business location information
  • Customer Print format, such as necessary VAT Rates
  • Managing Exports and Imports 
  • How to Perform VAT Accounting for VAT Receivable, Payable, and Neutral 
  • How to deal with modifications and discounts 
  • Filling out a VAT Return


Different types of VAT supplies:

Standardized supply

  • Nearly all goods and services will be subject to the regular VAT rate of 5%. Commercial real estate sales and leases, hotel and restaurant services, repairs and maintenance services, and more will all be subject to the average cost.

Zero-rated supply

  • A tax column on the invoice for a product with a zero rating should display a zero rate and a zero value. The invoice shows the zero value to prevent future tax offset claims based on this transaction. Zero-rated supplies are subject to a 0% tax.
  • You are qualified to claim tax credits for your purchase even if the item is sold after you buy it and the tax has already been paid.
  • For instance, if you bought the ingredients for making a cake and paid tax on them but later sold the cake without charging tax, you can get a refund of the VAT you paid.
  • Healthcare, medications, exports, and medical equipment are some instances of 0-rated supplies


VAT-exempt supply

  • The term “exempted supplies” refers to goods and services not subject to the VAT. These supplies won’t be subject to tax charges, and any taxes already paid on them won’t be refunded.
  • Let’s take a look at the local passenger transport category-designated bus service. Bus services cannot charge passengers any VAT because local transportation is not subject to tax. It cannot claim a tax credit for the tax it paid when buying the bus because it doesn’t collect any taxes.
  • VAT-exempt supplies include financial services, pharmaceutical products, and educational institutions.

Out-of-scope supply

  • These supplies will be regarded as out-of-scope for VAT if they are made by an international supplier or a non-registered business to an international individual.
  • For instance, local candy company A2A sells candies to nearby company B2B. The sweets are sent straight to Company B2B’s London branch from Company A2A’s plant in Singapore. Selling these candies is beyond the scope of supply because the commodities do not pass through certain countries.


Deemed supply

  • A business will make a considered supply if it purchases, deducts input VAT from the cost, and then uses the item for personal or non-business purposes later. Examples include presents and private use of gasoline for automobiles.
  • Any products that a firm holds for which the input tax has already been recouped are treated as presumed supplies when the business deregisters as a VAT-registered entity.

Composite supply

  • A composite supply happens when two or more products or services are offered as a package deal. The components must not be offered separately to count as a composite supply. A mixed supply’s major part determines the VAT rate.

VAT Registration

Value Added Tax (VAT) is an actual tax levied by the Central Government on the value added to a good or service before it is delivered to the final consumers. The Value Added Tax, sometimes known as VAT, is merely a tax that was instituted by the Indian government (the Central Government) in the early 2000s. The Goods and Services Tax, a single tax system, has taken the VAT and service tax (GST) role. VAT registration is required and crucial for all business owners who are actively engaged in the production of products and services, including manufacturing. 

Although VAT and sales taxes are similar, they differ significantly in that VAT is only ever collected once at the purchase. Due to how much simpler and more flexible it is than previous ways, online VAT registration is becoming more and more popular among business owners nationwide. According to the rules and regulations, the final buyer must pay the VAT assessed on the value added to the goods. According to the nation’s VAT registration laws, all businesses and manufacturing facilities must be registered to collect VAT yearly. It takes very little time and effort to complete the VAT registration process.

Keeping track of Gulf VAT transactions

You can track a variety of sales, including domestic sales, sales inside GCC nations, sales to international visitors, and so on, after your company in the GCC activates VAT. You can print a tax invoice that includes the rate and tax for each item. Also, you can apply a new series of voucher numbering and give each sales voucher a particular voucher number.

Intra-GCC Transaction

The Intra-GCC transactions will be divided into two distinct topics for ease of understanding and simplification:

1. Goods Exchanged Within the GCC

Transactions within the GCC will be zero-rated, much like exports of goods outside the GCC. The buyer, however, will pay VAT in this instance through a reverse charge technique.

VAT is applicable when moving goods from one state to another. A buyer who uses the reverse charge method must pay VAT as though he were the one who had purchased the items. The buyer may conditionally deduct the input of VAT paid in the same return, making the impact of the VAT NIL.

Although the items’ eventual destination is in the member state where the customer is located, the input of such a tax cannot be claimed in the form of origin. The VAT is also applicable if the items were first imported for commercial use into your nation before being exported to another member state.

The extra input you claimed on these goods must thus be repaid to the tax authorities.

2. Transactions of Services inside the GCC

Similar to when a seller sells products, when a buyer purchases services from a client who is registered for VAT in a different member state, the buyer will be responsible for paying VAT under reverse charge.

The VAT applicability for an intra-GCC provision of services is dependent on the buyer’s registration status. When a customer from another member state registers, reverse charge VAT is then applied in the customer’s state. However, VAT will be collected in the state of the supplier if the client is a non-taxable individual.

Difference Between a Sales Return and a Purchase Return

Speaking of differences, these two sorts of returns differ in several ways. According to the definition, a purchase return occurs when the seller sends the supplier’s goods back after receiving them from the buyer due to an incorrect goods specification. When the buyer returns the items to the seller, the sales return is a requirement. The seller and the supplier are involved if there is a return of purchase. In the sales return, the parties engaged are the buyer and the seller. The relevant parties can observe the following differences.

Concerning each Vendor, the term “Advance Receipts” refers to all payments that have been received by that Vendor that are related to or are in relation to goods or services that have been or will be provided by that Vendor’s Business after the Completion Date as well as all other payments that have been received by that Vendor that is in relation to that Vendor’s Business to the extent that the burden associated with such receipt is borne or is to be borne


Other details

As the GCC is enforcing VAT, tax accountants are currently in high demand in the Gulf. As the GCC member states are negotiating to treat the GCC as a single territory, the concept and rules are the same in all nations with a few minor exceptions; therefore, this course will assist in preparing all Gulf accountants and administrators for this implementation process.

After completing this course, you will be prepared to handle the implementation problem, guide your organization through the process, and coach their team to provide the best results and meet corporate objectives.

  • Duration- This course’s time is flexible.
  • Certification-Tally will present certificates.
  • Eligibility- Requirements include Class 12 school leavers and PUC graduates (in any stream) with a working knowledge of Tally.
  • Skills Included-Taxation knowledge & Potential to file returns in GCC nations

Who this course is for: Accountants, consultants, and administrators who manage VAT or will manage it shortly should take it.

Why Earn Certification?

  • For qualified applicants, there are numerous career options
  • Certification for career advancement and management in the target industry
  • Students will receive a “Certificate of Completion” after completing the course.

Why Finprov?

The education company with the fastest growth is called FINPROV, where learners may enhance their professions by learning accounting, business, software, technology, and creative abilities. We help individual learners achieve their goals in addition to offering flexible, inexpensive education. Doing an internship with organizations and individuals will help to meet their specific needs. Working professionals can receive the mentoring and instruction they require from us to thrive in their careers. 


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