GCC: VAT refund in the GCC for non-resident eligible persons

Eligibility

The Gulf Cooperation Council (“GCC”) VAT Framework Agreement (the “Agreement”) defines a “Non-Resident Person” as a person who is not resident in a State if he has no Place of Residence therein.

Article 67 of the Agreement stated that each Member State may allow persons who are not resident in the GCC territory to request refunds for VAT paid in that State if all of the following conditions are met:

1. The non-resident person does not supply goods or services for which it is required to pay VAT in any Member State;

2. The non-resident person is registered for VAT purposes in his country of residence, if such country applies a VAT system or a similar tax system;

3. The VAT is borne by a person who is not resident in any Member State for the purposes of his Economic Activity.
   
   

Each Member State’s VAT legislation provides certain non-resident businesses that are conducting economic activity outside of that State with the opportunity to apply for a refund of the VAT paid in that State. To obtain a refund, several conditions must be satisfied.

Since the Electronic Services System in the GCC is not yet implemented, supplies of goods and services between the GCC Member States are treated as international trade (exports and imports). A GCC State shall only be treated as an Implementing State if it treats the other GCC State as an Implementing State in its published legislation and comply fully with all the provisions of the GCC Agreement.

Consequently, GCC businesses incurring VAT in other Member States should also consider their eligibility for a refund of VAT incurred.

Implications 

Foreign businesses that have incurred VAT in the GCC VAT Implementing States (UAE, KSA and Bahrain) should assess their eligibility to claim the refund. 

Where foreign businesses are eligible for a refund, the refund application should be prepared along with prescribed supporting documents for submission with the tax authority of the State within a set deadline.

While tax authorities (such as KSA tax authority) has not yet provided detailed guidance on the refund mechanism, businesses should take steps to preserve their entitlement for a refund of VAT incurred during the year by way of filing a formal application within the set timeline.

Key takeaway

Non-resident  persons not carrying on any economic activity in the GCC countries having active VAT regime, should consider whether they are an eligible person and submit an application for refund of the VAT incurred in the respective state within the stipulated timeline. 

For KSA, the mechanism and process of filing refund application is still unclear, eligible persons may contact GAZT to demonstrate eligibility for refund or alternatively reserve their rights to the refund by filing a manual application or by way of submission of application to the designated email address of GAZT.