Posted on June 22, 2016

On 16 June 2016, the Finance Ministers of the Gulf Cooperation Council (GCC)attended an extraordinary meeting in Jeddah, Saudi Arabia on GCC Value Added Tax (VAT). Economic integration in the GCC was also on the agenda.

Following the meeting, the GCC Chairman, Bahrain’s Finance Minister, Sheikh Ahmad bin Mohammed al-Khalifa announced that the Ministers approved the introduction of GCC VAT, adding that some procedural aspects will be discussed in further detail in a future meeting.The Chairman also re-affirmed previous statements made by other GCC Ministry of Finance officials to the effect that the GCC countries would be ready for the first phase of VAT implementation by the beginning of 2018.

The VAT Framework Agreement is expected to be finalized at the next meeting of the GCC Financial and Economic Cooperation Committee in October 2016. Additional details on the expected announcement on the VAT Framework Agreement will be provided once available.

Country specific developments

UAE

On 15 June 2016, the Undersecretary of the United Arab Emirates’s (UAE) Ministry of Finance (MoF) Mr. Younis Al Khoury, announced   that “companies in the UAE that report annual revenues over 3.75 million AED (US$1.021m) will be obliged to be registered under the GCC VAT system.” The requirement to be registered will arise in early 2018 during the first phase of the GCC VAT implementation. Once registered, companies will be required to account for VAT on an ongoing basis to the MoF.

Mr. Al Khoury also confirmed that companies whose revenues fall between 1.87 million AED (US$509,000) and 3.75 million AED (US$1.021m) will have the option to register for VAT during the first phase of the VAT implementation. Mr. Al Khoury also commented that it will eventually become obligatory for all companies to be registered under the system when it is rolled out in the second phase, regardless of the reported revenues. The roll-out date of the second phase of the implementation is still to be decided.

Qatar

In a related development in Qatar, as part of its economic update on 18 June, the Ministry of Development Planning and Statistics publicly confirmed for the first time that Qatar will introduce a 5% VAT in 2018 as part of the GCC-wide agreement.

Next steps

With the approval of the GCC VAT, the GCC countries will be on a tight timeline of 18 months to prepare for the first phase of VAT implementation by 1 January 2018. However a number of GCC countries, similar to Qatar, have already made substantial progress on preparing their tax administration systems for VAT and from July 2016 onwards the focus will shift to preparing the business community for VAT.

 

  1. The GCC Member States include: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
  2. See EY Global Tax Alert, Gulf Cooperation Council to implement VAT regime in 2018, dated 26 February 2016.

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