With the beginning of the new year, the United Arab Emirates and Saudi Arabia introduced a value-added Tax, making them the first countries of the six members of the Gulf Cooperation to introduce a harmonised consumption-based tax.
The applicability of the tax, is however still quite limited: In the UAE the VAT administration of the tax is demanded only from those businesses whose supplies exceed the threshold of AED 375.000 (around 100.000 EUR) in the previous twelve months.
Those businesses will have to register and will be liable to tax, as well as those that did not reach the threshold yet, but are expecting to do so within the following 30 days.
A voluntary registration is foreseen for taxpayers whose value supplies exceeded AED 187.500 or if the business expects its turnover to exceed that threshold within the next 30 days.
In Saudi Arabia the threshold for the mandatory registration is set at 1 million SAR (around 270.000 EUR).
The majority of goods and services fall under the scope of application of the new measure, that foresees a general rate of 5,00 % for both countries.
Some services continue to be tax-exempt (or zero-rated), in line with international norms, such as certain transport services, financial services, real estate, education, and healthcare goods and services.
Saudi Arabia's General Authority of Zakat and Tax (GAZT) and the UAE's Federal Tax Authority released an official guidance to introduce the details of the tax changes.
The other states of the Gulf, such as Kuwait, Bahrain, Oman, and Qatar, that also committed to introduce VAT, have still not presented an official timeline to carry out its introduction.
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