Implementation of VAT in GULF Countries


VAT is being introduced for the first time in Gulf countries as recommended by Gulf Cooperation Council (GCC). VAT is being implemented in the Kingdom of Saudi Arabia or KSA under Unified VAT Agreement for The Cooperation Council for Arab States of the Gulf.


The GCC group of nations has 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:

  • Broad framework that mainly states provisions for intra GCC trade
  • Gives countries discretion to choose treatment in certain sectors where it does not affect intra-GCC trade
  • Mutual agreement on some provisions such as the standard rate of VAT and the registration threshold.

Why VAT is being Implemented?

The UAE Federal and Emirate governments provide citizens and residents with many different public services – including hospitals, roads, public schools, parks, waste control, and police services. These services are paid for from the government budgets. VAT will provide our country with a new source of income which will contribute to the continued provision of high quality public services into the future. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

Why does the UAE need to coordinate VAT implementation with other GCC countries?

The UAE is part of a group of countries which are closely connected through “The Economic Agreement between the GCC States” and “The GCC Customs Union”. The GCC group of nations have historically worked together in designing and implementing new public policies as we recognize that such a collaborative approach is best for the region.


For UAE and KSA 1st January, 2018 is the go-live date for VAT and other GCC countries have time from January 1st , 2018 to January 1st, 2019 to implement VAT.

Registration for VAT will commence prior to implementation date. In UAE, Registration has commenced w.e.f. 1.10.2017.

Meaning of Tax                             

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.

What will be Tax Laws?

There will be three Federal laws applicable in UAE and KSA:

  • Executive Regulation of Federal Law on Tax Procedures
  • Federal Decree Law on Value Added Tax
  • Federal Decree Law on Excise Tax

Similar laws will be in force in other countries.

GCC – VAT Rates

GCC VAT Rate has been pegged at 5 percent in all GCC nations which may be considered low (may be like introductory offer).

India has kept GST rates under different slabs, i.e., 5%, 12%, 18% and 28% plus cess. World average is 16.4% whereas OECD average is about 18 – 19% Asia Pacific Nations have on average of 9.88%.

Applicability of VAT

Value Added Tax (VAT) will be applicable to all member states of the Gulf Cooperation Council, namely:-

  • The Kingdom of Saudi Arabia(KSA)
  • The United Arab Emirates(UAE),
  • The Kingdom of Bahrain,
  • The Sultanate of Oman,
  • The State of Qatar, and
  • The State of Kuwait,
  • The United Arab Emirates (UAE) is a Constitutional Federation of seven Emirates, namely-
  • Abu Dhabi,
  • Dubai,
  • Sharjah,
  • Ajman,
  • Umm Al-Quwain,
  • Fujairah, and
  • Ras Al Khaimah


Note – Please note that the above article is for education purpose only. This is based on our interpretation of laws which may differ person to person. Readers are expected to verify the facts and laws.

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