GCC publishes VAT treaty

Sat 29th Apr 2017

The Gulf Co-operation Council, which incorporates six Arab Gulf States, last week published its VAT Treaty, outlining the proposed January 2018 common VAT regime.  The six GCC states are: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

This framework agreement outlines the structure of the harmonized VAT regime across the six states, and will be used as a guide for the states to implement their own legislation locally.

Key features of GCC Framework Agreement

  • Not legally binding on states
  • Follows general OECD on a VAT system, including input and output VAT, time of taxation etc
  • Since the GCC will constitute a free trade zone, the Treaty follows the EU concepts of VAT exempt B2B intra-state supplies of goods and services, plus distance selling of goods to consumers
  • 5% standard VAT rate
  • Broader tax based compared to the EU, with limited use of reduced and nil-rated supplies of goods and services
  • Imports subject to VAT; exports are exempt
  • International travel, including between GCC states, is exempt from VAT. Domestic travel services will be standard VAT rated – although states may opt to exempt this
  • VAT derogations where states can choose to tax:
  • Health and medical supplies will be nil-rated for VAT, but are subject to final agreement
  • Some foodstuffs may be reduced or nil rated, but a list of such items is to be agreed between the states
  • States may choose to exempt financial services from VAT
  • Countries may introduce VAT groups to pool VAT reporting, but these will not apply between GCC states


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