Gulf VAT challenges

Thu 16th Feb 2017

Governments and companies in the six Gulf states are getting ready for the implementation of Value Added Tax from 1 January 2018.  The new consumption tax has been set at 5% across the region, with agreement on harmonised rules to boost trade.

There remain several obstacles ahead for businesses, including:

  • A lack of local expertise in VAT
  • There is still no legislation published which makes for an extremely tight timetable
  • Investment in IT and ERP system up-grades to manage VAT calculations and reporting
  • Varying intra-state VAT co-operation which could impact businesses providing goods are services within the region
  • For highly competitive industries, companies may not be able to pass on to the final consumer the full VAT charge, meaning a hit to profit margins
  • For exempt goods or services, there will be the irrecoverable cost on input VAT suffered
  • For all sectors, the imposition of VAT will reduce incomes and consumer spending power