Gulf Cooperation Council (GCC) Tax Topics
A new VAT framework is being introduced in the GCC Member States from 2018, with the United Arab Emirates (UAE) and Saudi Arabia as the first countries to roll out VAT from 1 January 2018. Other Gulf countries have time until the end of next year to implement the new tax system.
Definition of Terms
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Zero-Rated — The agreement across the GCC region is that some supplies are zero-rated such as medicine, medical equipment, goods and passenger transportation, healthcare and education services, etc.
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Out of Scope of VAT — Certain supplies will be considered as being out of scope of VAT for the UAE. The most common are sales outside of the country, or supplies made from a non-registered entity. Other examples for out of scope VAT are certain government activities or supplies made with no economic benefit. This includes providing goods or services to a different department in your own business.
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Reverse Charge — Reverse charging of VAT is required when you receive an item that has no tax applied on it, but VAT is due at the same time. An example of this is receiving of services from the UK to a business in the UAE. As the supply of service from outside of the UAE is considered out of scope of VAT, then no tax is listed on the invoice. For this example, it is better to buy the same service from overseas because it has no VAT on it and would appear cheaper. This is where the reverse charge is required, because any purchases that are made from overseas need to have the domestic tax rate applied. Application of reverse charge also means there is no financial advantage of buying a service from overseas compared to buying domestically.
For more information, read the following Gulf Cooperation Council (GCC) tax topics:
For more information on the International Tax Reports SuiteApp, see International Tax Reports.