Overview of Value Added Tax in the GCC
The Gulf Cooperation Council (GCC) stands as a regional group with six Arab countries on the Persian Gulf. These countries are Saudi Arabia, United Arab Emirates, Bahrain, Kuwait, Oman, and Qatar. The GCC aims to build unity and to coordinate on economic, social, and cultural goals in the region.
Over the years, the council has worked hard on creating a common tax system for all member countries. One of the most important steps was the launch of Value Added Tax (VAT). Now, VAT stands as a main tax in the Gulf countries, and businesses must follow the rules to avoid penalties.
What is Value Added Tax (VAT)?
Value Added Tax (VAT) is a tax that applies at every step of the supply chain, from making products to selling them to the final customer. Each business in the chain collects VAT on the goods or services and pays it to the government. The final buyer pays VAT on the value added during each step.
The GCC countries started VAT on January 1, 2018, to boost government revenue and create similar tax systems. The regular VAT rate in most GCC countries is 5%, but there are some exceptions.
VAT Rates and Rules in GCC Countries
Let’s break down the VAT rates and main rules in each GCC country.
Saudi Arabia
- Saudi Arabia started VAT at 5% in January 2018.
- In July 2020, Saudi Arabia increased its VAT rate to 15% because of economic changes.
- Businesses must register for VAT if their taxable supplies go over SAR 375,000 in a year.
- The country uses VAT to reduce dependence on oil and to support national programs.
United Arab Emirates (UAE)
- The UAE began VAT at 5% from January 1, 2018.
- UAE VAT applies to most goods and services, but there are some exemptions and zero-rated items.
- Exemptions include certain foods, health care, and education.
- Businesses must register for VAT if turnover is above AED 375,000. The voluntary registration limit is AED 187,500.
- The Federal Tax Authority (FTA) manages VAT in the UAE.
Bahrain
- Bahrain started VAT at 5% from January 2019.
- From January 1, 2022, the standard VAT rate increased to 10%.
- Businesses must register for VAT if annual supplies exceed BHD 37,500.
- Exempt supplies include residential property, healthcare, education, and some financial services.
- Imports and most sales have VAT, except some categories.
Oman
- Oman introduced VAT at 5% on April 16, 2021.
- VAT covers most goods and services, but there are exceptions for items taxed at a reduced 0% rate or exempt.
- Some key sectors taxed at VAT include telecom, banking, utilities, and petroleum.
- The Oman Tax Authority manages VAT registration and filing.
- Businesses must register for VAT if annual turnover is above OMR 38,500.
Kuwait and Qatar
- As of now, Kuwait and Qatar have not started VAT.
- Both countries planned to implement VAT after 2023, but there are delays due to high oil revenues and inflation.
- Businesses in Kuwait and Qatar should keep up with updates on VAT, as the law could change quickly.
Zero-Rated and Exempt Supplies in GCC VAT
Some goods and services in GCC countries have a 0% VAT rate or are fully exempt. These often include:
- Exports to countries outside the GCC
- International transport
- Certain health and education services
- Sale of residential real estate (in some countries)
- Financial services (like some types of insurance and loans)
Each country has its own rules, so companies need to check local laws.
VAT Registration in GCC
All businesses with sales over the registration threshold must register for VAT. Here’s what you need:
- Valid business/trade license
- Copies of owner and partner passports
- Emirates ID for UAE, or similar ID for other GCC states
- Contact info (address, phone, email)
- Proof of turnover (financial statements)
Businesses must file VAT returns (usually every quarter) and pay the tax on time. Non-compliance brings penalties, so keeping proper records is important.
Important Points to Remember
- VAT is collected at each step of the supply chain.
- Every business in the chain must keep records and file returns.
- Registration thresholds differ by country.
- Some items are zero-rated or exempt, but rules vary.
How Mubarak Al Ketbi (MAK) Auditing Can Help You with VAT
Why Choose MAK Auditing?
Mubarak Al Ketbi (MAK) Auditing helps you handle VAT registration, filing, and compliance in the UAE and the wider GCC. Our expert team explains the latest VAT updates, helps you avoid penalties, and keeps your business on the right side of tax law.
- We guide you on VAT registration and paperwork
- We help you claim allowed exemptions and zero-rates
- We keep your records in order for tax audits
- We train your team on VAT changes
- We advise on minimizing VAT risk
For more information:
- Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp: +971 50 276 2132
Let us handle the numbers, so you can focus on your business. If you want your VAT affairs to run as smooth as clockwork, don’t put it on the back burner—reach out to MAK Auditing today!
