VAT Agreement of the Gulf Cooperation Council (GCC) States

The GCC is made of six member states. These are Saudi Arabia, Oman, Kuwait, the UAE, Qatar, Saudi Arabia, and Bahrain. This council targets to develop cooperation among the member countries and to ensure that they work together in harmony to achieve economic integration and to have similar financial and legal foundations.

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The first article contains definitions for different expressions and words used in the agreement. The second article states that tax within the GCC will be imposed on commodities brought into the region by any individual, taxable products that are supplied by a taxable individual from a state that is in the GCC, and goods that are accepted by an individual who can be taxed either from a taxable individual or not. The third article states that dates and times that have been reported in the statute will be calculated by the Gregorian calendar. The Gregorian calendar shows that the mean length of a year is 365.2425 days and it indicates that a leap year is any year that is exactly divisible by 4. This calendar is appropriate since it is used internationally hence will not cause any confusion. Article four states that each state that is a member of the GCC may treat the VAT group to be one taxable individual.

The 5th article states that a supply of goods includes goods or real estate disposal under a contract that enables the ownership to be transferred after payment is made on the products. This means that if someone pays somebody $500 for goods, the buyer becomes the owner of the goods after completing the payments to the seller. The 6th article states that if one moves products worth for example $100 from one nation that is a GCC member to another state that is also a member of the GCC for business purposes, this will be considered as a goods' supply.

The 8th contains information concerning the activities that will be deemed as supplies. When people carry out activities that are considered to be supplied, they will need to pay taxes based on the member states' provisions. The 9th article talks about the reverse charge mechanism which shall be applied to taxable members who receive goods and services from residents of other member states and taxable people who acquire products from people who are non-members of the GCC. Hence, if one is in this category, and the tax for the buyer is 5% while that of the seller is 7%, that means that the person will pay 12% of the total cost.

The 10th article states that the place where goods are supplied without having been transported is the place where the goods will be passed on to the customer. The 11th article says that for products that are transported, the region they are supplied is the region where they are located when the transportation process commences. The 12th article says that the location of supply for goods for countries in the GCC from one nation to another in this region will be the place where transportation ends in case the buyer can be taxed and if the supplier has been registered in the customer's country.

The 13th article states that each member nation can claim the tax paid to another country that is a member of the GCC if the value of the products being supplied is higher than SAR 10,000 or its equivalent in other countries. Article 14 states that the location said to be the supply point for water, oil, and gas by a person who is taxable in one nation that is a member of the GCC to another individual in another country that is a member is where the taxable seller resides. In case the seller is not taxable, the supply location will be the place where the products are consumed.

Article 15 states that services' supply location for those that are provided by a supplier who can be taxed will be the residential location of the supplier. Conversely, article 16 states that the supply location for the services that are provided to a consumer who can be taxed by a taxable supplier will be the place where the consumer lives.

The 17th article states that the location of supply of a leased transport means will be where it was placed for use by a non-taxable consumer by a supplier who can be taxed. The 18th article states that the place where transportation commences will be the supply location for the movement of people and goods. Article 19 says that real estate related services shall be the services closely associated with real estates such as construction services and agent services. The 20th article states that the supply location of wireless and wired telecommunication services will be the place where they are enjoyed. The 21st article says that the supply region for different services such as restaurants, sports, and educational services is going to be the location where they happen.

The 22nd article states that the place where goods first enter any country in the GCC will be their point of import. Article 23 says that tax will become due on the date of supply, the date when the tax involved is issued, or when the full payment is made whichever happens first. Article 24 states that tax is due when goods are brought into the nation which is a GCC member. The 25th article says that there is a tax rate of 5% on the value of supplies or the imports except when there is a zero rate on those supplies. This means that if the supplies are worth $1000 the tax will be 50. Additionally, if a local product is worth $100, this amount should be inclusive of the VAT.

The 26th article states that the fair market value of a product can be created in an open market under competitive conditions involving both member states. The 27th article says that the one may adjust their tax value due to a decrease in the supplies' value or partial or total cancellation of a supply. Hence, this may occur if, for instance, the value of the supply decreased from $200 to $150. The 28th article states that the value of goods that are imported will be the customs value based on the regular law on customs plus customs duty and excise tax among other taxes except for the VAT. Thus if the import tax is $200 and the excise tax is $100 while the customs duty is $10,000, the value of the goods will be $10,300.

Article 29 says that the GCC member states can apply a zero tax on goods from the local transport sector, the real estate sector, the health sector, and the education sector. In zero tax, this means that the inputs are not taxed, but if the final product is worth $50000, and the rate is 6%, then a tax of $3,000 is charged.

Article 30 states that categories that can be exempted from paying taxes after they have received goods include charities, government bodies, and other persons not registered for tax. Article 31 says that food Products shall be taxed under the standard tax rate. The states in the GCC have a standard tax rate of 5%. Hence of food is worth $300, then the rate paid is $15. Member states are however allowed to have the zero rate on edible products that are contained in the unified goods list and medical equipment as well as medicines.

Article 32 states that passenger and goods transported from one member-state to another as well as international products that are transported to and from the member states will be subject to a tax at zero-rate. Article 33 says that every GCC member state can apply the zero rate to passengers and products transported through land, air, and sea transport means in return for a specific charge for services that are commercial. Zero rates may also apply for the transportation of rescue boats and planes or any help by sea, land, or vessels that carry out fishing activities.

Article 34 states that the export of goods out of the GCC territory shall be subject to the zero-rate. Additionally, products that had been brought into the region for a short while and are being re-exported will also have a zero tax rate. Article 35 states that platinum, gold, and silver that has a purity level of above 99% is considered to be an investment. These investments shall be taxed at the zero rate. Additionally, the first supply of platinum, silver, and gold will be taxed at the zero rate. According to the 36th article financial services that are carried out by different financial institutions shall not be taxed. Article 37 states that the various states should determine the taxes that they will impose on used goods. The 38th article says that different circumstances can lead to tax exemptions such as goods supplied and the final destination is exempted from tax, goods with diplomatic and military exceptions, and personal luggage.

Article 39 states that goods under custom duty suspensions will have their taxes suspended. So if the products are worth $8000 but they are under suspension, no tax will be paid. Article 40 states that the taxable individual must pay tax to the national administration of a country that is a member of the GCC where the supply is situated. Article 41 states that a consumer who can be taxed in a nation in the GCC will pay the due tax if the place of supply of the products is in a country in the GCC where the supplier does not stay. Hence if the total tax is $500, the taxable customer will pay the whole amount.

Article 42 states that the acknowledged importer should pay the importation tax. Article 43 says that anyone who violates this agreement willfully shall be required to pay the tax as well as any extra fees together with the person who was supposed to pay the tax.

Article 44 says that one can make a tax deduction if a deductible tax is allowed according to this agreement and based on the provisions of each member state. The 45th article says that input tax cannot be deducted if the goods are not for economic purposes and if the goods are prohibited from dealing in a nation that is in the GCC. Article 46 says that if the input tax relates to the products used in creating different supplies, then it remains the same. Article 47 states that the input tax can be adjusted due to changes in various factors such as rejection, reduction, or cancellation of supplies.

Article 48 states that to exercise tax deduction, the taxable person needs different documents such as the tax invoice and the customs documents. Article 49 says that an individual who is taxable can reduce the input tax on products provided to him if the goods are taken in for making taxable supplies, goods were not delivered before the date of registration, and if the fixed assets were not depreciated entirely before the registration period.

Article 50 entails details about mandatory registration where all people who are taxable should register if they are residents and their supplies each year in nations that are in the GCC exceed or are expected to surpass the Mandatory Threshold of Registration, which is SAR 375,000. However, an individual who can be taxed and who only has supplies that are zero-rated can be exempted, and non-residents should register if they are required to pay Tax under this agreement. In Article 51, a resident who is not obliged to register under Article 50 may be allowed to register if the annual supplies exceed the Voluntary Registration Threshold, which is 50% of SAR 375,000 equal to SAR 187 500.

Article 52 focuses on the calculation of annual supplies. Annual supplies = SAR 315,000(taxable supplies less Capital Asset Supply) + SAR 300,000 (products that are supplied to the individual who can be taxed) + SAR 200,000 (value of intra-GCC Supplies). In article 53, member states are required to provide a Taxable Person with a Tax Identification Number. Article 54 states that deregistration may occur if the economic activity and taxable supplies cease or the taxable supplies are below the Voluntary Registration Threshold. Additionally, one may apply for deregistration if total revenue is less than the Threshold for M...