An International Perspective

Taxes In GCC

Presented By:
Dr. A.S. Elavarasan F.C.A., (Prince)
ASP Auditing, Dubai UAE
Topics 01 About GCC Gulf
Presentation of GCC countries, Tax Status and Government

Economic Framework
02 Graphical presentation of Oil and Non Oil Sector

Revenues and Expenditures

03 Shortly presented regarding GCC State Revenue and Expanses

Tax Laws
04 Get short idea about Excise tax and Brief presentation about GCC
agreement state wise.

Opportunities for Indian CA in GCC

05 Presentation of Opportunities of Indian CA .
 Gulf Cooperation Council Countries
(GCC)
 Political and economic alliance of Six Middle Eastern countries
 The GCC was established in Riyadh, Saudi Arabia, in May 1981.

Sl.N Flag Common

Total Population National % Expatriate % Our Presence
o name

1 Bahrain 1,423726 664,707 ( 48%) 759,019 (52%)

2 Kuwait 4,411,124 1,337,693 (30.6%) 3,073,431 (69.4%)

3 Oman 4,599,051 2,488,755 (54.6%) 2,110,296 (45.4%)

4 Qatar 2,673,022 243,073 (10.1%) 1,456,362 (89.9%)

Saudi
5 31,742,308 20,064,970 (67.3%) 11,677,338 (32.7%)
Arabia

6 UAE 8,264,070 947,997 (11.5%) 7,316,073 (88.5%)

Objective of GCC

1. Formulating similar regulations in various fields such as :

religion, finance, trade, customs, tourism, legislation, and
administration.

2. Fostering scientific and technical progress in :

industry, mining, agriculture, water and animal resources

3. Establishing scientific research centres

4. Setting up joint ventures

5. Unified military

6. Encouraging cooperation of the private sector

7. Strengthening ties between their people

Authorities in
GCC
1. Supreme Council

2. Secretariat General

3. Ministerial Council

4. Monetary Council
 Balancing act in GCC states

GCC States Pressures Complexity Of Building Revenue Systems

Oil price decline

Rise of alternative energy and Requires a decade

electric vehicles

Rising government debts Needs to enable the economy

Elevated budget deficits

Should efficiently redistribute
wealth in the economy

Large infrastructure investment needs to fuel

transformation programmes
 GCC: Oil and Non Oil Sector -Budgeted Revenue
80

70

60

50
In USD Bn

40 Oil Sector
Non Oil Sector

30

20

10

0
2000 2005 2010 2015 2020

Source: Local News

 Saudi Arabia : Oil and Non Oil Sector -Budgeted Revenue
90

80

70

60
In USD Bn

50
Oil Sector
40 Non Oil Sector

30

20

10

0
2000 2005 2010 2015 2020

Source: Local News

 UAE : Oil and Non Oil Sector -Budgeted Revenue
90

80

70

60

50
In USD Bn

Oil Sector
40 Non Oil Sector

30

20

10

0
2000 2005 2010 2015 2020

Source: Local News

 Bahrain : Oil and Non Oil Sector- Budgeted Revenue
60

50

40
In USD Bn

30 Oil Sector
Non Sector

20

10

0
2000 2005 2010 2015 2020

Source: Local News

 Kuwait : Oil and Non Oil Sector- Budgeted Revenue
80

70

60

50
In USD Bn

40 Oil Sector
Non Sector

30

20

10

0
2000 2005 2010 2015 2020

Source: Local News

 Oman : Oil and Non Oil Sector- Budgeted Revenue
70

60

50

40
In USD Bn

Oil Sector
Non Oil Sector
30

20

10

0
2000 2005 2010 2015 2020

Source: Local News

 Qatar : Oil and Non Oil Sector GDP Growth
90

80

70

60
In USD Bn

50
Oil Sector
40 Non Oil Sector

30

20

10

0
2000 2005 2010 2015 2020

Source: Local News

 GCC: Revenues and Expenditures 2018
GCC Countries Revenues %
Saudi Arabia 58
UAE 13
Kuwait 11
Qatar 11
Oman 4
Bahrain 3

GCC Countries Expenditures %

Saudi Arabia 58
UAE 12
Kuwait 11
Qatar 10
Oman 5
Bahrain 4

Source: Respective Govt Mof

 GCC Value Added Tax Collection
Report- 2018

Flag Common
Sl.No VAT Target 2018 Collected 2018 Target 2019
name

N/A N/A N/A

1 Bahrain 2019

N/A N/A N/A

2 Kuwait 2021 (Expecting)

N/A N/A N/A

3 Oman 2020(Expecting)

N/A N/A N/A

4 Qatar
2020 (Expecting)
12.16 Billion 23 Billion 20 Billion
Saudi
5 2017 Saudi Riyals Saudi Riyals Saudi Riyals
Arabia

12 Billion 27 Billion 20 Billion

6 UAE 2018 Dhs. Dhs. Dhs.
 Excise tax in GCC

Excise tax was introduced across the GCC in 2017. Purpose behind levying excise tax:

 The GCC Government is levying excise tax to

reduce consumption
Product and Rate is an excise good,
the following definitions apply:  Of unhealthy and harmful commodities

Product Rate  While also raising revenues for the government

 That can be spent on beneficial public services.

Carbonated Drinks 50%

Energy drinks 100%

Tobacco and tobacco 100%

products
 GCC Common VAT Agreement

Pursuant to the supreme council decision at its 36th meeting (riyadh – 9-10 december, 2015)

With respect to the common imposition by the GCC states

 To establish a common legal framework

 And Most VAT compliance requirements and procedures

 Are left to the discretion of each member state under its local legislation.
 Relevant Definitions – contd.. Article (1)

• A supply of Goods or Services for a Consideration

Taxable Supply • And does not include Exempt Supply

• A supply of Goods or Services for Consideration

Exempt Supply • Where no Tax is due
• No Input Tax may be recovered

• Anything considered as a supply and treated as a

Deemed Supply Taxable Supply according to the instances stipulated
in this Decree-Law.(will be explained separately)
 Simplified Supply Chain

Third Party Third Party

Goods &
UAE Goods & Services + Services + UAE
VAT VAT
Goods-0%
Services-RCM Goods-RCM
Services-RCM ABC
GCC Company
Goods-RCM GCC
Goods & Services
Service-RCM 0%

Key Challenges
- VAT Credit position in UAE? - Working capital
Overseas
impact - Business process changes Overseas
- System changes
- Recruitment and trading -
Documentation requirements - Transactional arrangements
 GCC - VAT Rate
Sl.No Standard Zero Rated Exempt Out of Scope
Common Name
Rated
1 5% 0% Nil N/A
Bahrain

2 N/A N/A N/A N/A

Kuwait

3 N/A N/A N/A N/A

Oman

4 N/A N/A N/A N/A

Qatar

5 5% 0% Nil N/A
Saudi Arabia

6 5% 0% Nil N/A
UAE
 Zero-rated & Exempted
VAT goods and services in UAE
Sl. Zero Rated Exempted
No
1 Export of goods and services Medical fees

2 Exported Telecommunications Services Air travel

3 International transportation services for Passengers and Medicines

Goods

4 Supply or import of investment precious metals Basic and preventive surgery

5 Residential buildings Exam fees

6 Buildings specifically designed to be used by charities Local transport

7 Education services Residential rents

8 Healthcare services Public school books

VAT Rate changes – State wise
 VAT Rate changes – State wise

Sl. Sector UAE KSA Bahrain

No

1 Financial services Fee based services: Taxable Fee based services: Taxable Fee based services: Taxable
Margin based services: Exempt An implicit Margin based services: An implicit Margin based services: Exempt
Exempt

2 Insurance All non-life insurance: Taxable All non-life insurance: Taxable All non-life insurance: Taxable
Life insurance: Exempt Life insurance: Exempt Life insurance: Exempt

3 Food items All taxable All taxable Specific Food Items - Zero Rated

4 Education & Specified services: Zero rated Taxable Zero Rated

Related Services
5% VAT Expenses – in Education
 Professional education
 VAT Rate changes – State wise

Sl. Sector UAE KSA Bahrain

No
5 Health Specified services: Zero rated • Taxable (Private Healthcare Providers) Zero Rated Provided

6 Medicines and Zero-rated (identified in a Zero-rated (qualified medicines and Zero rate on
medical decision issued by the Cabinet) qualified medical equipment)
equipment
8 Local transport Exempt Taxable Zero Rated

9 Oil and gas Specified products: Zero-rated All taxable Zero Rated
 VAT Rate changes – State wise

Sl. Sector UAE KSA Bahrain

No

10 Export Zero-rated Zero-rated Zero-Rated

11 International transport Zero-rated Zero-rated Zero-Rated

12 Investment metals Zero Rated Zero Rated Zero rate

13 Diplomatic and military Exempt Exempt Exempt

exemptions
VAT Return Format
Saudi Arabia - VAT Return
 UAE- VAT Return
Page 1
Page 2
Bahrain- VAT Return
 GCC Members -Electronic Service Systems
(As per Common VAT Agreement)

1.Each Member State shall create an electronic Services system:

For the purposes of complying
With requirements related to Tax

2. The system must be reliable and secure

And must not allow the Supplier or the Customer access
To any information other than
That to which they are permitted to have access.

3. The concerned Tax authority in each Member State

Shall have a right of access to the information
Related to Internal Supplies
Between Taxable Persons registered for Tax purposes.

4. The System shall allow the follow-up

Of proof of transfer of Goods to the country of Final Destination
 Books to be maintained in GCC

1)Balance sheet and profit and loss accounts.

2) Records of wages and salaries.

3) Records of fixed assets.

4) Inventory records and statements

5)Additional records as may be required in the Tax Law and its Executive Regulation.
 Records to be maintained under GCC

 Each company shall maintain proper accounting records

 Showing its transactions and should disclose at any time

 The accurate financial position of the company

 Each company shall maintain its accounting books/records in its head office

 For a period of at least 5 (five) years from the end of the financial year of the company.
 Records to be maintained under GCC
Cont……
According to the VAT Decree Law, the taxable person shall keep the following records:

1. Records of all supplies and Imports of Goods and Services.

2. All Tax Invoices and alternative documents related to receiving Goods or Services.

3. All Tax Credit Notes and alternative documents received.

4. All Tax Invoices and alternative documents issued.

5. All Tax Credit Notes and alternative documents issued.

6. Records of Goods and Services that have been disposed of or used for matters not related to Business,
showing Taxes paid for the same.
 Records of Accounts to be maintained under GCC
Cont……
7. Records of Goods and Services purchased and for which the Input Tax was not deducted.

8. Records of exported Goods and Services.

9. Records of adjustments or corrections made to accounts or Tax Invoices.

10. Records of any Taxable Supplies made or received.

11. A Tax Record that includes the following information:

 Tax due on taxable supplies

 Tax due on supplies where tax is to be paid on reverse charge
 Tax due after correction of errors or adjustments
 Input tax recoverable on inward supplies or imports
 Input tax recoverable after correction of errors or adjustments
 VAT Penalties and Fees
Late Late Filling of Late Payment Failure to keep the
Sl.No State Registration Return required Record

1 Max. 10,000 5%-25% of the value of 5%-25% of the value of tax Max 5,000
Bahrain
tax (Within 60Days) (Within 60Days)
(in Dinars)

2 NA NA NA NA
Kuwait

3 NA NA NA NA
Oman

4 NA NA NA NA
Qatar

5 Saudi Arabia 10,000 5%-25% of the value of 5% of the value of the unpaid tax Max 50,000
(in SAR) tax each month

6 20,000 1,000 for the first time 2% Immediately 10,000 for 1st time
2,000 in case of repetition 4% After 7 days 50,000 for repeat
UAE (in Dhs) (Within 28 Days) 1 % daily after 1 calendar month
(Within 28 Days)
 In GCC Tax Structure
VAT Excise With Zakat Corporate Customs Real estate Municipal
Common
Sl. Holding Tax Tax duty transfer taxes Tax
Name
No
1 Yes Yes N/A N/A N/A Yes Yes Yes
Bahrain

2 N/A N/A Yes Yes Yes Yes N/A Yes

Kuwait

3 N/A Yes Yes N/A N/A Yes Yes Yes

Oman

4 N/A N/A Yes N/A Yes Yes N/A Yes

Qatar

5 Yes Yes Yes Yes Yes Yes Yes

Saudi Arabia

6 Yes Yes N/A N/A N/A Yes Yes Yes

UAE
 Opportunities for Indian CA’s
Sl.No Employment Practice

1 Audit Executive Auditing

2 General Manager Accounts Statutory auditor

3 Executive Accounts Internal Auditor

4 Finance Accountant Tax Consultant

5 CEO Management Consultant

6 Financial Controller

7 Financial Analysis
 Tax Agent
Registration Requirements in UAE

1. A Bachelor's or Master's degree in tax, accounting or law

2. Recent professional experience of at least three years in either tax, accounting or law.

3. Language proficiency document for both Arabic and English, written and spoken.

4. Certificate of good conduct.

5. Certificate of medical fitness

6. Pass the Authority’s Tax Agent examination.

7. Pay the Tax Agent registration fees of AED 3,000 (renewable every 3 years).

8. Hold professional indemnity insurance or be covered by one.

Thank you