Lets welcome yet another tax reform in the world in Gulf Countries. VAT is being introduced for the first time in Gulf countries as recommended by Gulf Cooperation Council (GCC).
The GCC group of nations have historically worked together in designing and implementing new public policies as they recognize that such a collaborative approach is best for the region, therefore they framed a VAT agreement for all the member states.
GCC VAT AGREEMENT is a framework agreement signed by all six GCC countries:
The countries covered under the agreement are:
> Abu Dhabi
> Ras Al Khaimah
> Umm Al Quwain
This indirect tax (VAT) will be levied @ just 5 percent, as a single slab tax w.e.f. 1st January, 2018. While UAE and Kingdom of Saudi Arabia will levy VAT from January, 2018, other countries may have it by January, 2019.
Registration for VAT will commence prior to implementation date. In UAE, Registration has commenced w.e.f. 1.10.2017.
VAT is an indirect tax on the consumption of goods and services not exempt from tax. It shall be charged and collected by a taxable person and remitted to the tax authority. A taxable person is a person, persons or entity that carries out an economic activity that requires them to be registered for VAT.
VAT is levied at each stage in the supply chain and is collected by businesses on behalf of the Government. VAT is ultimately incurred and paid by the end consumer.
VAT will provide these countries with a new source of income which will:
VAT in Gulf countries is much simpler than GST levied in India.
Three Federal laws as follows will be in force in UAE and KSA:
Similar laws will be in force in other countries.
What businesses should do now?
Following actions output to be taken to prepare a business, accounting and reporting systems, staff, suppliers and customers for the new VAT regime: