GCC VAT Agreement (2016)

Factual summary

The common legal framework agreed by the six GCC States for a general consumption tax (VAT) on supplies and imports of goods and services, executed in Arabic on 27 November 2016. It sets the 5% standard rate, the scope and place-of-supply rules for supplies between Member States, the sectors each State may exempt or zero-rate, the SAR 375,000 mandatory and 50% voluntary registration thresholds, invoicing and record-keeping minimums and the information-exchange system. Each Member State applies it through its own Local Law.

What it means in practice Professional insight

Who: mainly governments and tax administrations; businesses apply the UAE VAT law. What to check: intra-GCC place-of-supply rules and refunds of tax paid in another Member State, and the sectors the Agreement leaves to each State's choice.

Key provisions

• Art. 2 Tax applies to Taxable Supplies by a Taxable Person in a Member State, to a Taxable Customer's receipt of goods or services from a non-resident, non-taxable supplier under the reverse charge mechanism, and to imports of Goods by any Person.
• Art. 25 Standard rate of 5% of the value of the supply or import unless the Agreement provides an exemption or zero-rate; published prices in the local market must include VAT.
• Art. 29 Each Member State may exempt or zero-rate the education, health, real estate and local transport sectors, and may zero-rate its oil, oil derivatives and gas sector, under the conditions it sets.
• Arts. 50, 51 A resident Taxable Person must register when annual supplies in a Member State exceed, or are expected to exceed, the Mandatory Registration Threshold of SAR 375,000 (or its equivalent in GCC currencies); a non-resident liable to Tax registers regardless of turnover; the Voluntary Registration Threshold is 50% of the mandatory one.
• Art. 59 Tax invoices, books, records and accounting documents are kept for not less than five years from the end of the year to which they relate (fifteen years for real estate), unless a Member State's law requires longer.
• Art. 79 Coming into force (Art. 78 in the English text, which has no article on annexes): adopted by the GCC Supreme Council and ratified by Member States, the Agreement is in force from the deposit of the second ratification document with the GCC General Secretariat; each Member State issues a Local Law and stays outside the Agreement until it is effective. Executed in Arabic on 27/2/1438 H, corresponding to 27/11/2016.