The Gulf Cooperation Council (GCC) countries have recognized that the revenue from Indirect taxation is needed to offset the falling price of oil in the current scenario. GCC countries are planning to introduce Value Added Tax (VAT) effectively from January 1, 2018. Based on available information, VAT framework draft have been adopted which will form basis of introduction of taxing though indirect way.
The falling prices of oil has impacted the revenues of GCC countries to large extent which led to VAT introduction in GCC region. The Government is in planning stage to decide the scope, applicability and rules and regulations that will form part of VAT laws. Standard expected rate of VAT is liked to be adopted on most of the items at 5% except specified food items, healthcare and education. Further to that, there will not be any introduction of personal income tax in GCC countries. Individuals will not be taxed directly by way of income tax.
Companies in GCC region needs to determine the impact of VAT in terms and condition of their existing and future contracts. Introduction of VAT might have impact on the GCC Companies businesses. At present, there is no clarification on the VAT implementation and no information available on the overall applicability of the VAT law.
VAT will be applicable on the imports into GCC countries, whereas goods exports out of GCC countries is expected to remain out of the VAT regulations.
GCC countries includes UAE, Saudi Arabia, Oman, Bahrain and Kuwait.
By Brijesh Mehta – Senior Auditor at N R Doshi & Partners