Gulf Co-operation Council Unified VAT Agreement Changes​

In detail​

The amendments introduce targeted changes to the GCC Unified VAT Agreement in five key areas. These changes are expected to impact the VAT treatment of cross-border movement of goods within the GCC, imports, and related compliance requirements. ​

Key highlights include:​

• Intra-GCC supplies of goods (Article 12(4)) - The amendment introduces an enhanced mechanism for VAT treatment where goods are supplied in one GCC Member State and subsequently transported or sent to another Member State. The objective is to ensure VAT is accounted for in the appropriate Member State, where the goods are transported to or consumed, while reducing double taxation risk and uncertainty on cross-border movements.​

• Intra GCC supplies to individuals and non-VAT registered persons (Article 13) - The change here clarifies the treatment of supplies involving individuals and non-registered persons cross-border within the GCC. In certain cases, the Member State of destination may collect VAT at the point of entry where evidence of VAT payment in the original Member State is not available.​

• VAT rates (Article 25(1)) - The amendment confirms that each GCC Member State may determine its own standard VAT rate under domestic law, provided the rate is not less than 5% (unless a zero rate or exemption applies).​

• Import VAT (Article 64) - The amendment addresses VAT on imported goods, particularly where goods enter through one GCC Member State but are destined for another. Broadly, VAT may be collected at the first point of entry and then settled with the Member State of final destination. Member States may also allow VAT-registered importers to account for import VAT through their VAT returns, subject to local implementation.​

• Access to information (Article 71(4)) - The amendment enhances the ability of GCC tax authorities to access and exchange information relating to intra-GCC supplies. This is expected to strengthen cross-border VAT compliance, transparency and enforcement.​

Key Takeaways​

The approved amendments to the GCC VAT Agreement seek to modernise and harmonise regional rules, reduce the potential for double (or non) taxation and alleviate cash-flow burdens. ​

When fully enacted across the Member States, these changes should improve VAT collection and compliance, facilitate cross-border trade, plus strengthen information sharing between and amongst tax authorities.​

The changes are both at a macro and micro level: ​

At a macro level, the confirmation that each Member State can set its own VAT standard rate (with a 5% minimum) recognizes the reality on the ground in both Saudi Arabia and Bahrain, with their current standard rates at 15% and 10%, respectively. ​

Businesses should take note and plan accordingly – not just for handling VAT efficiently and effectively, but also to keep in step with the rollout of e-Invoicing across the GCC Member States and beyond. ​

At a micro level, there are several aspects to the changes. Whilst the centralised system for handling intra-GCC transactions is not yet in place and currently all the intra-GCC rules including the amendments are still in suspension, businesses involved in cross-border GCC trade should monitor local implementation in each country in which you operate, buy from or sell to. ​

Assess the impact on key areas such as intra-GCC movement of goods, supplies to non-registered customers, import VAT treatment, ERP tax codes, Customs processes and documentation requirements.​

Watch this space - PwC will continue to monitor developments across the GCC and endeavor to keep you informed. Talk to your usual PwC contact or any of us listed below:early review of affected transactions and processes will help you manage potential compliance, audit and cash-flow risks.​