This document is an English version of the Unified VAT agreement for the Cooperation Council for the Arab States of the Gulf. The information provided within this publication is for general informational purposes only. While we try to keep the information up-to-date and correct, there are no representations or warranties, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the information, products, services, or related graphics contained in this for any purpose. Any use of this information is at your own risk. IMC does not guarantee that the translation is free from error or omission. The reader should consult with professional advice in any matters relating to VAT in GCC and not rely on this document to cover specific situations.
The member states of the Cooperation Council for the Arab Gulf States (GCC), namely: United Arab Emirates,
Kingdom of Bahrain, Kingdom of Saudi Arabia, Sultanate of Oman, State of Qatar, and
State of Kuwait,
Pursuant to the objectives set out in the Statute of the Gulf Cooperation Council aimed at the importance of developing existing cooperation relations amongst them in various fields;
In line with the objectives of the GCC Economic Agreement of 2001, which seeks to reach advanced stages of economic integration, and develop similar legislation and legal foundations in economic and financial spheres, and with a desire to promote the GCC econ- omy and proceed with the measures that have been taken to establish economic unity amongst member states; and
Based on the Supreme Council decision at its 36th meeting (Riyadh – 9-10 December, 2015) with respect to the uniform imposition by the GCC States of VAT at a rate of 5%, and delegating to the Financial and Economic Cooperation Committee for Council States the completion of all the requirements necessary to pass the (Unified VAT Agreement for The Cooperation Council for the Arab States of the Gulf) and signing it. And whereas this Agreement aims to establish a unified legal framework for the introduction of a general tax on consumption in the GCC known as (VAT) levied on the import and supply of Goods and Services at each stage of production and distribution.
have agreed to the following:
In the application of the provisions of this Agreement, the following words and phrases shall have the meanings set out against each of them unless the context otherwise requires:
The Council: The Gulf Cooperation Council.
Agreement: The Unified VAT Agreement for the Council States.
Tax: Value Added Tax (VAT) imposed on the import and supply of Goods and Services at each stage of production and distribution, including “Deemed Supplies”.
Member State: Any country that has full membership status in the Council in accordance with its Charter.
Council State Territory: All the territories of the Member States.
Local Law: The VAT Law (Regulation) and relevant legislation issued by each Member State.
Person: Any natural or legal person, whether public or private, or any other form of partnership.
Taxable Person: A Person that conducts an Economic Activity independently for the purpose of generating income, who is registered or obligated to register for VAT in accordance with the provisions of this Agreement.
Economic Activity: An activity that is conducted in an ongoing and regular manner including commercial, industrial, agricultural or professional activities or Services or any use of material or immaterial property and any other similar activity.
Taxable Trader: A Taxable Person in any Member State whose main activity is the distribution of Oil, Gas, Water or Electricity.
Place of Business: The place where a business is legally established; or where its actual management center is located where key business decisions are made if different from the place of establishment.
Fixed Establishment: Any fixed location for a Business other than the Place of Business, in which the business is carried out and is distinguished by the permanent presence of human and technical resources in such a way as to enable the Person to supply or receive Goods or Services.
Place of Residence of a Person: The location where Place of Business or any other type of Fixed Establishment is. In the case of a natural person, if he does not have a Place of Business or Fixed Establishment, it will be his usual place of residence. If a Person has a Place of Residence in more than one State, the place of residence will be considered to be in the place most closely connected with the supply.
Resident Person: A person will be resident in a State if he has a place of residence therein.
Non-Resident Person: A person is not resident in a State if he has no Place of Residence therein.
Supplier: A Person who supplies Goods or Services.
Customer: A Person who receives Goods or Services.
Reverse Accounting (Charge): A mechanism by which the Taxable Customer is obligated to pay the Tax due on behalf of the Supplier and is liable for all the obligations provided for in the Agreement and the Local Law.
Related Persons: Two or more Persons; one of whom has supervisory or directive control over the others in such a way that he has an administrative power that enables him to influence the business of the other Persons from a financial, economic or regulatory aspect. This includes Persons who are subject to the authority of a third Person that enables him to control their businesses from the financial, economic or regulatory aspect.
Supply: Any form of supply of Goods or Services for consideration in accordance with the cases provided for in the Chapter Two of this Agreement.
Deemed Supply: Anything that is considered a Supply in accordance with the cases provided for in Article 8 of this Agreement.
Input Tax: Tax borne by a Taxable Person in relation to Goods or Services supplied to him or imported for the purpose of carrying on the Economic Activity.
Unified Customs Regulation (Law): The Unified Customs Regulation (Law) of the GCC.
First Point of Entry: First customs point of entry through which Goods enter the Council Territory from abroad in accordance with the Unified Customs Law.
Final Destination Point of Entry: Customs point of entry through which Goods enter the Final Destination State within the GCC Territory.
Consideration: Everything collected or to be collected by the Taxable Supplier from the Customer or a third party against the Supply of Goods or Services inclusive of the VAT.
Exempted Supplies: Supplies on which no Tax is imposed and from which associated Input Tax is not deducted pursuant to the provisions of the Agreement and Local Law.
Taxable Supplies: Supplies on which Tax is charged in accordance with the provisions of the Agreement, whether at the basic rate or zero-rate, and from which associated Input Tax is deducted in accordance with the provisions of the Agreement.
Internal Supplies: Supplies of Goods or Services by a Supplier who resides in a Member State to a Customer who resides in another Member State.
Goods: All types of material property (material assets), including water and all forms of power including electricity, gas, lighting, heating, cooling and air conditioning.
Importation of Goods: The entry of Goods into any Member State from outside the Council Territory in accordance with the provi-sions of the Unified Customs Law.
Exportation of Goods: Supply of Goods from any Member State to the outside of the Council Territory in accordance with the pro-visions of the Unified Customs Law.
Competent Tax Authority: The relevant Government entity in each Member State responsible for the administration, collection and implementation of the Tax.
Deductible Tax: Input Tax that may be deducted from Tax due on Supplies for each Tax period in accordance with the Agreement and Local Law.
Capital Assets: Material and immaterial assets that form part of a business’s assets allocated for long-term use as a business instrument or means of investment
Tax Period: The period of time for which the Net Tax must be accounted.
Net Tax: Tax resulting from deducting the Deductible Tax in a Member State from the Tax due in that State within the same Tax Period. Net Tax may either be payable or refundable.
Mandatory Registration Threshold: The lower limit of the value of actual supplies at which the Taxable Person becomes obligated to register for Tax purposes.
Voluntary Registration Threshold: The lower limit of the value of actual supplies at which the Taxable Person may apply to register for Tax purposes.
Ministerial Committee: The Financial and Economic Cooperation Committee of the Council States
The Agreement shall come into effect in the Council Territory and Tax shall be imposed on the following transactions:
Times and periods stipulated in the Agreement shall be calculated according to the Gregorian Calendar.
Each Member State may treat the Tax Group as a single Taxable Person in accordance with the rules and conditions put in place for that purpose. A Tax Group means two or more Corporate Persons who are Residents of the same Member State.
Supply of Goods
Transporting Goods from One Member State to Another
a- to use the Goods in the other Member State temporarily within the conditions of temporary entry provided for in the Unified
b- where the transportation of goods is done as part of another Taxable Supply in the other Member State.
Any Supply that does not constitute a Supply of Goods under this Agreement shall be considered a Supply of Services.
a- assignment of Goods, for purposes other than Economic Activity, with or without a Consideration; b- changing the use of Goods to use for non-taxable Supplies;
a- use by him of Goods that form part of his assets for purposes other than those of an Economic Activity; and b- Supplying Services without Consideration.
Receiving Goods and Services
Supply of Goods without Transportation
The place of a Supply of Goods that occurs without transportation or dispatch thereof shall be the place where the Goods are locat- ed on the date they are placed at the Customer’s disposal.
Supply of Goods with Transportation
The place of a Supply of Goods that occurs with transportation or dispatch thereof by the Supplier or to the account of Customer shall be the place where the Goods are located when the transportation or dispatch commences.
Special Case of Internal Supplies with Transportation
Internal Supplies to Non-Registered Persons
Each Member State has the right to claim from another Member State the tax paid if the value of the Supply exceeds the amount of SAR 10,000 or its equivalent in other currencies of the GCC to individuals and non-registered persons, and the settlement of Tax shall be according to the Customs Duties Automated Direct Transfer Mechanism applicable under the framework of the Customs Union of the GCC. The Ministerial Committee may propose any other mechanisms.
The Member State may also impose Tax on these supplies at its points of entry to such State if no evidence is presented that the Tax was paid in the other Member State.
Supply of Gas, Oil, Water and Electricity
As an exception to the provisions of Articles (10) and (11) of this Agreement:
Place of Supply of Services Section One
General Principle Article (15)
Place of Supply of Services
The place of supply for Services provided by a Taxable Supplier shall be the place of the Supplier’s residence.
Place of Supply of Services between Taxable Persons
As an exception to the provisions of Article 15 of this Agreement, the place of supply for Services provided by a Taxable Supplier to a Taxable Customer shall be the place of Customer’s residence.
Conveyance Leasing Services
As an exception to the provisions of Article 15 of this Agreement, the place of supply for conveyance leasing Services between a Taxable Supplier and a Non-Taxable Customer shall be the location where these conveyances were placed at the Customer’s dispos- al.
Supply of Goods and Passenger Transportation Services
As an exception to the provisions of Article 15 of this Agreement, the place of supply of Services for the transportation of Goods and passengers and related Services shall be the place where transportation begins.
Supply of Real Estate Related Services
b- granting the right to possess or use real estate; c- services related to construction work;
Supply of Wired and Wireless Telecommunication Services and Electronically Supplied Services
The place of supply for wired and wireless telecommunication Services and electronically supplied Services shall be the place of
actual use of or benefit from these Services.
The place of supply for the following Services shall be the place of actual performance:
a- restaurant and hotel Services and Services for the supply of food and beverages. b- cultural, artistic, sport, educational and recreational Services.
c- services linked to transported Goods supplied from a taxable Supplier residing in a Member State to a non-taxable Customer residing in another Member State.
Date of Tax Due on Supplies of Goods and Services
full receipt of the Consideration, whichever comes first, and to the extent of the received amount.
Tax Due Date on Importation
Tax becomes due on the date of importing Goods into the Member State, subject to the provisions of Article 39 related to cases of Tax suspension upon importation and Article 64 related to the mechanism for paying Tax due upon importation.
Supply Value of Goods and Services
A Taxable Person may adjust the value of the Tax imposed upon the happening of any of the following events at a date later than the Supply date:
Value of Imported Goods
Tax, Customs duty and any other imposts apart from VAT.
Goods shall be taxed when reimported on the basis of value added to them as provided for in the Unified Customs Law.
State Rights to Exempt Certain Sectors or to Apply the Zero-Rate
a- education; b- health;
c- real estate; and d- local transport.
Exceptions to Tax Payment in Special Cases
Each Member State may exclude the following categories from paying Tax upon receipt of Goods and Services in that State, and each Member State may allow these Persons to reclaim Tax borne upon receipt of the Goods and Services in accordance with the conditions and rules determined by that Member State.
These categories include:
Supply of Foodstuffs, Medicines and Medical Equipment
All foodstuffs shall be subject to the basic Tax rate. Member States may apply the zero-rate on foodstuffs mentioned in a unified
list of Goods approved by the Financial and Economic Cooperation Committee.
Medicines and medical equipment shall be subject to the zero-rate in accordance with unified controls proposed by the Committee
of Ministers of Health and approved by the Financial and Economic Cooperation Committee.
Internal and International Transportation
The following transportation transactions shall be subject to Tax at zero-rate:
Each Member State may apply the zero-rate to the following supplies:
Supplies to Outside the GCC Territory
b- supply of Goods to a customs duty suspension situation as provided for in the Unified Customs Law and the supply of Goods
within customs duty suspension situations;
Supply of Investment Gold, Silver and Platinum
be exempt from Tax. Banks and financial institutions may reclaim Input Tax on the basis of the refund rates determined by
Taxation of Supplies of Used Goods
Each Member State may determine the conditions and rules for the imposition of Tax on the supply of used Goods by the Taxable
Person based on the profit margin.
The following shall be exempt from Tax:
a- diplomatic exemptions; b- military exemptions;
c- Imports of used personal luggage and household appliances which are brought by citizens residing abroad and foreigners
who are coming to reside in the country for the first time.
d- Imports of requisites for non-profit charity organizations if they are exempted from Tax under Article 30;
e- Imports of returned Goods.
Tax shall be suspended on imports of Goods that are placed under a customs duty suspension situation in accordance with the conditions and rules provided for in the Unified Customs Law. Each Member State has the right to link the suspension of Tax to the provision of security for the value of the Tax.
Customer Obligated to Pay Tax According to the Reverse Charge Mechanism
Person Obligated to Pay Tax in respect of Importation
The Person appointed or acknowledged as an importer pursuant to the Unified Customs Law shall be obligated to pay Tax due on imports.
Tax Deduction Principle
Restrictions on Input Tax Deductions
Input Tax that has been borne cannot be deducted in either of the following cases:
Adjustment of Deductible Input Tax
a- where the Taxable Person establishes loss, damage or theft of the supplied Goods in accordance with the conditions and rules applicable in each Member State.
b- where the Taxable Person uses the supplied Goods as samples or gifts of slight value as specified in Article 8 (1)(d) of this Agreement.
Conditions for Exercising the Right of Deduction
b- the customs documents proving that he imported the Goods in accordance with the Unified Customs Law.
The Right to Deduct Input Tax Paid Prior to the Date of Registration
a- Goods and Services are received for the purpose of making Taxable Supplies; b- Capital Assets were not fully depreciated before the date of registration;
c- Goods were not supplied prior to the registration date;
d- Services were received within a specific period of time prior to the date of registration as determined by each Member
e- the Goods and Services are not subject to any restriction related to the right to make a deduction stated in this Agreement.
value of the assets as on the date of registration as specified by each Member State.
b- the value of his annual supplies in that Member State exceeds or is expected to exceed the Mandatory Registration Thresh- old.
Calculating the Value of Supplies
Tax Identification Number (TIN)
When registering for Tax purposes in any of the Member States, each Member State shall allocate a TIN for the Taxable Person provided that The Ministerial Committee shall determine the controls for issuing the TIN.
determine a minimum period to keep the Taxable Person registered for Tax purposes as a condition of deregistration.
Taxable Person or to deregister him in cases other than those provided for in the first and second paragraphs of this Article.
Issuance of the Tax Invoice
a- Supply of Goods or Services including a Deemed Supply as provided for in Article 8 of this agreement; b- Full or partial receipt of Consideration prior to the supply date.
Contents of the Tax Invoice
Amendment of Invoices (Credit Notes)
A Taxable Person who adjusts the Supply Consideration must include this adjustment in a document (credit or debit note “Tax In- voice”) correcting the original Tax Invoice. This document shall be treated in the same way as the original Tax Invoice according to the procedures determined by each Member State.
Tax authority and provided that all the obligations provided for in this Agreement and the Local Law are fulfilled.
Retention of Tax Invoices, Records and Accounting Documents Article 59
Retention Period for Tax Invoices, Records and Accounting Documents
Without prejudice to any longer period stipulated under the laws of the Member State, Tax Invoices, books, records and accounting documents shall be retained for a period not less than five years from the end of the year to which the invoices, books, records and accounting documents relate. This period shall be extended to fifteen years for the retention of Tax Invoices, books, records and documents pertaining to real estate.
Tax Period and Tax Returns Article 60
Each Member State must determine its own tax period or periods, and provided that no tax period shall be less than one month.
Each Member State shall determine the periods, conditions and rules for submission of Tax Returns by a Taxable Person for each tax period, provided that The Ministerial Committee shall determine the minimum data required to be included in the tax return.
Each Member State shall determine the conditions and rules that allow a Taxable Person to amend a Tax Return that has already been submitted.
Payment and Refund of Tax Article 63
Payment of Tax
Each Member State shall determine the periods, conditions and rules for payment of Net Tax due by the Taxable Person.
Payment of Tax on Imports
Each Member State shall determine the conditions and rules for allowing a Taxable Person to request a refund of net deductible Tax or request to carry it forward to subsequent tax periods.
Tax Refunds for Persons residing in the GCC Territory
Taxable Persons in any Member State may request the refund of Tax paid in another Member State in accordance with the condi- tions and rules determined by the Financial and Economic Cooperation Committee.
Tax Refunds for Non-Residents in the GCC Territory
Each Member State may allow Persons who are not resident in the GCC Territory to request tax refunds for Taxes paid in it if all the following requirements are met:
Tax Refunds for Tourists
a- he is not a resident of the GCC Territory;
b- he is not a crew member on the flight or aircraft leaving a Member State.
Tax Refunds for Foreign Governments, International Organizations and Diplomatic Bodies and Missions
Exchange of Information
a- the TIN for both the Supplier and the Customer; b- the number and date of the Tax Invoice;
Cooperation between Member States
Each Member State must provide in its Local Law transitional provisions dealing with the following areas at least:
the Member State.
comes into effect.
The provisions of subsection 3 of this Article shall apply to Internal Supplies between a Taxable Supplier residing in a Mem- ber State and a Customer in another Member State.
Objections and Appeals
Each Member State shall determine the conditions and rules for objecting to decisions of the concerned tax authority. This includes the right of recourse to the competent local courts in each Member State.
The Ministerial Committee shall have jurisdiction to consider matters related to the application and interpretation of this Agreement and its decisions shall be binding on the Member States.
The Member States will work to settle any dispute which may arise between them concerning this Agreement amicably, and they may, upon agreement, if such amicable settlement is not possible pursuant to the foregoing, submit the dispute to arbitration in accordance with the rules of arbitration to be agreed upon.
This Agreement may be amended upon the approval of all the Member States and based on the proposal of any of these States. The coming into force of the amendment shall be subject to the same procedures provided for in Article 79 of this Agreement.
This Agreement shall be approved by the Supreme Council and ratified by the Member States in accordance with their constitution- al process.
General of the GCC Council.
This Agreement is executed in Arabic in the city of Riyadh on ……. corresponding to …… in one original to be kept at the GCC Gen- eral Secretariat and a certified conformed copy of the same shall be provided to each Member State that is a party in this Agree- ment.
State of the United Arab Emirates
The Kingdom of Bahrain
The Kingdom of Saudi Arabia
Sultanate of Oman
State of Qatar
State of Kuwait
IMC is a cross border advisory firm focusing on the AMEA (Asia, Middle East, and Africa) markets. We specialize in corporate advisory services, global mobility services, private client and family advisory, international tax, corporate finance, mergers and acquisitions, investment advisory and business support and outsourcing solutions. IMC has been operating in GCC for over 10 years. We have a dedicated “VAT in GCC” team set-up in Dubai, UAE.
How can IMC assist you?
IMC’s comprehensive approach to tax advisory comes from a thorough understanding of ground realities and decades of experience of serving clients around the world. You can trust us your partners in the successful adoption of VAT practices in your business and being 100% compliant. Our team is involved in every stage of the process followed by a post adoption review and continuously updating you about the amendments to the laws. IMC can assist as follows:
Assistance in Implementation
Intuit Management Consultancy
M02 NBQ Building
Khalid Bin Al Waleed Road
Bur Dubai, P.O. Box 115887
Dubai, United Arab Emirates
Tel: +971 4 3709963