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The first GCC States introduce VAT

carolineheath 5 January 2018 No comments

Saudi Arabia and the UAE are the first GCC States to introduce VAT with effect from 1 January 2018. It is the first time the Gulf countries have introduced this type of levy and is a significant change for a region long accustomed to a tax-free environment.

It is the latest measure introduced by Gulf states to bring in additional revenues, after governments have been forced to make spending cuts as a result of tumbling oil prices in recent years.

The IMF had recommended that the Gulf countries introduce VAT in order to diversify their oil-reliant economies.

5% VAT on most goods and services

A 5% VAT rate now applies to most goods and services, but not financial services, medical treatment or public transport. Analysts project that the two governments could raise as much as $21 billion in 2018 from the new tax.

The other four Gulf states – Bahrain, Kuwait, Oman and Qatar – are also committed to introducing VAT but it is understood they have decided to delay the move until early in 2019.

Saudi Arabia and UAE VAT Guidance

Saudi Arabia’s VAT Manual in English is available here and VAT guidance for UAE can be found here.

Please get in touch if you have any queries regarding the introduction of VAT in the GCC States.