VAT Legislation Moves Forward in GCC States
In January, the Cooperation Council for the Arab States of the Gulf – also known as the Gulf Cooperation Council (GCC) – announced a formal agreement regarding a new value-added tax (VAT) to be adopted by GCC member countries which are Bahrain, the Kingdom of Saudi Arabia (KSA), Kuwait, Oman, Qatar and the United Arab Emirates.
As Reuters reported earlier this year, the new tax of up to 5 per cent was developed to “boost revenues hit by falling oil prices” and could be implemented in 2018. The implementation can begin once at least two GCC member countries are ready to implement their own versions of the VAT legislation.
KSA is moving in that direction by releasing its draft VAT legislation, based on the Unified VAT Agreement the GCC developed to set out common VAT principles and a framework for all the GCC member states. The KSA’s draft legislation shows that Saudi Arabia’s national VAT legislation intends to closely adhere to the GCC agreement. As is the case with most VAT legislative processes, the KSA draft legislation only defines general principles of its VAT rules. While provisions on penalties are clearly defined, most of the practical guidelines and rules will be further defined as KSA progresses through implementing regulations.
The KSA also reiterated its previously stated intention to implement VAT on 1 Jan 2018.
The public has been invited to provide comments on the draft VAT legislation by 29 June. We’ll keep you posted on the KSA’s VAT process, as well as similar efforts within the other GCC countries.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.
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