United Arab Emirates: GCC Releases VAT Framework

Last Updated: 21 July 2017
Article by Ashok Hariharan, Clare McColl and Rob Dalla Costa

The text of the GCC unified agreement for value added tax (VAT) has been published (in Arabic) by the Kingdom of Saudi Arabia.

Which countries make up the GCC?

  • The United Arab Emirates
  • The Kingdom of Bahrain
  • The Kingdom of Saudi Arabia
  • The Sultanate of Oman
  • The State of Qatar
  • The State of Kuwait

What is VAT?

VAT is a tax on the consumption of goods and services. It is 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.

Why is the unified agreement important?

The unified agreement sets out the framework under which VAT can be implemented in each of the GCC member states. The framework includes agreement on certain matters but allows member states discretion on how to treat others.

Once the agreement is ratified, each member state can interpret the framework into its own local law and implement VAT. Some member states, notably the United Arab Emirates and the Kingdom of Saudi Arabia, have indicated an intention to implement VAT with effect from 1 January 2018. The framework allows for a basic rate of VAT of five percent as well as allowing for certain supplies of goods and services to be zero-rated or VAT exempt.

Who will the law apply to?

VAT will ultimately impact every business that supplies goods or services in the GCC. Businesses that make taxable supplies over the mandatory threshold must register with the relevant tax authority for the member state. There is scope for voluntary registrations. VAT registration requirements will also apply to non-resident entities. Additionally, there is scope to register multiple entities as a single VAT group, subject to conditions set out in the local laws.

What does the VAT framework cover?

The VAT framework comprises 15 chapters and 78 articles.

These include:

  • Definitions and general principles, including scope
  • Supplies within scope, including supplies of goods and services and deemed supplies
  • Place of supply of goods and services, including special cases
  • Importation
  • Due dates and calculation of taxable values
  • Provision for exempt and zero-rate supplies
  • Liability to pay VAT
  • Input tax credits and VAT refunds
  • VAT registration obligations
  • Tax invoices and the record retention requirements
  • VAT return completions and filing requirements
  • Settlements or refunds
  • Intra-GCC arrangements

What is the place of supply?

The place of supply determines where a supply takes place and therefore which member state's local VAT law is relevant.

The place of supply of goods is typically where they are placed at the disposal of the customer. The place of supply of goods provided with transport is the place where the transport starts. However, there are special rules that affect the place of supply for certain intra-GCC supplies of goods where the supply is to a VAT-registered entity in another member state.

The place of supply of services is the place where the supplier is resident. However, the place of supply of services provided to a taxable customer shifts to where the customer is resident.

There are special provisions for the place of supply of oil, gas, water and electricity, hiring means of transport, transport services for goods and passengers, services to real estate properties, the supply of telecommunication and electronically-provided services and supplies by restaurants, leisure and cultural facilities and sporting events.

What are taxable supplies?

Taxable supplies include all goods and services subject to either the basic VAT rate of five percent or the zero rate, including:

  • All goods and services (sales, transfers of ownership, disposals, leases, rentals and construction) used in business
  • Transfers of goods and services from and to other GCC countries
  • Transfers of goods and services from and to the rest of the world
  • Deemed supplies
  • The importation of goods and most services

What could be VAT zero-rated?

Zero-rated supplies include:

  • Medicines and medical supplies (a common list will be proposed by the committee of Health Ministers and endorsed by the Financial and Economic Cooperation Committee)
  • Certain foodstuffs (a common list will be ratified across the GCC by the Financial and Economic Cooperation Committee)
  • The oil sector and the oil and gas derivatives sector (at the discretion of each member state)
  • International and intra-GCC transport
  • Means of transport (at the discretion of each member state)
  • Supply outside the GCC (for example, exports)
  • Supply of precious metals for investment (gold, silver and platinum)

Additionally, each member state can zero rate or VAT-exempt:

  1. The educational sector
  2. The medical sector
  3. The real estate sector
  4. The local transport sector

What could be VAT-exempt?

Financial services performed by authorized banks and financial institutions will be VAT-exempt. Banks and financial institutions will have the right to a refund of input tax, based on refund rates determined at the discretion of each state. Each member state has the discretion to apply other tax treatments to the financial services sector.

The international practise in many VAT jurisdictions is to treat the education and medical sectors, the leasing of residential property and local transport as VAT exempt. However, this has been left to the discretion of each member state.

What are the consequences of making something VAT-exempt or zero-rated?

A VAT rate of zero is still a rate of tax and a taxable supply. A supplier of zero-rated goods or services is entitled to a credit for the VAT incurred on his or her costs. In sharp contrast, VAT exempt is not a rate of tax and not a taxable supply. As a consequence, suppliers of VAT-exempt supplies cannot claim credits on the VAT incurred on their costs. This will result in higher costs for VAT-exempt suppliers.

Will there be special treatment of VAT for specific categories or persons?

The framework agreement allows discretion for member states to provide special VAT treatments to certain categories of person, applying exemptions or refunds on tax incurred supplying:

  • Government organizations
  • Charitable organizations and public utility establishments
  • Companies hosting international events (exempted by agreements)
  • Citizens of a member state building their homes for personal use
  • Farmers and ¬fishermen not registered for VAT

What are imports and exports?

Imports are goods entering a GCC member state from outside the GCC. VAT is typically due on the importation of goods, however, there are special rules regarding, for example, the valuation of imported goods and goods under suspension.

Exports are goods leaving from the GCC. Exports are typically zero-rated but subject to certain conditions.

When is VAT charged? What is the time of supply?

Generally, the time of supply for VAT purposes is the earlier of the date of:

  • The supply of goods or services
  • The issue of a tax invoice
  • Receipt of a partial or full consideration

Who can deduct VAT?

A taxable person can deduct VAT incurred in carrying out taxable supplies from the VAT due on those taxable supplies. Evidence of VAT paid, typically a tax invoice, is essential. Each member state will adopt its own conditions for VAT deduction. For example, the UAE has suggested that VAT recovery for certain entertainment expenses maybe denied.

What happens next?

The framework provides sufficient information to begin planning for VAT, with introduction in some member states just months away. Local laws are likely to follow in the few months. Businesses should be planning and preparing now.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
BSA Ahmad Bin Hezeem & Associates LLP
BSA Ahmad Bin Hezeem & Associates LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
BSA Ahmad Bin Hezeem & Associates LLP
BSA Ahmad Bin Hezeem & Associates LLP
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions