Agreement For Vat

Single Agreement on Value Added Tax (VAT) of the Cooperation Council for the Arab States of the GulfThe Single Agreement on VAT of the Cooperation Council for the Arab States of the Gulf was published by UM AL-QURA in its number 4667 of H1438/7/24. This agreement aims to define the single legal framework for the introduction of VAT in the GCC countries, which applies to the supply of goods and services. The Kingdom`s agreement was given by Royal Decree (point m/51 of H3/5/1438). There is also considerable flexibility granted to countries in dealing with some other important sectors: government agencies, protest companies (under international agreements), farmers and fishermen who are not registered for VAT, as well as citizens who build their homes. In these cases, countries can choose between taxation, exemption and zero rating. At the time of writing, we really only know what the UAE is considering in this regard (zero rating for most health and educational institutions, with a mix of zero rating and exemption in terms of housing and taxation when it comes to commercial buildings). In the area of health, the treaty obliges countries to zero certain pharmaceutical and medical equipment, but this is based on a list that has yet to be agreed and is therefore not currently available. Subsequently, the GCC VAT system no longer resembles the EU VAT system (except mechanically, in the same way as all VAT systems) and looks more like more modern VAT systems. This is mainly reflected in the limited number of exemptions and zero rates, as well as the very low standard rate of 5%. Indeed, the GCC has achieved something that the EU has not done in a unique way and has controlled itself, so that there are only two VAT rates – 5% for most goods and services and 0% for very specific situations. Exceptions are usually limited and the system is therefore moderately simple and wide. As a result, it is likely that GCC countries will be able to maintain low VAT rates for the foreseeable future.

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