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TMI BlogINTRODUCTION OF VAT IN GULF COUNTRIESX X X X Extracts X X X X X X X X Extracts X X X X ..... INTRODUCTION OF VAT IN GULF COUNTRIES X X X X Extracts X X X X X X X X Extracts X X X X ..... ementing new public policies as they recognize that such a collaborative approach is best for the region, therefore they framed a VAT agreement for all the member states. GCC VAT AGREEMENT is a framework agreement signed by all six GCC countries: * Broad framework that mainly states provisions for intra GCC trade * Gives countries discretion to choose treatment in certain sectors where it doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not affect intra-GCC trade * Mutual agreement on some provisions such as the standard rate of VAT and the registration threshold. Applicability Value Added Tax (VAT) will be applicable to all member states of the Gulf Cooperation Council, namely:- * The Kingdom of Saudi Arabia(KSA) * The United Arab Emirates(UAE), * The Kingdom of Bahrain, * The Sultanate of Oman, * The State of Qa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tar, and * The State of Kuwait, The United Arab Emirates (UAE) is a Constitutional Federation of seven Emirates, namely- * Abu Dhabi, * Dubai, * Sharjah, * Ajman, * Umm Al-Quwain, * Fujairah, and * Ras Al Khaimah What tax? VAT is an indirect tax on the consumption of goods and services not exempt from tax. It shall be charged and collected by a taxable person and remitted to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. VAT is levied at each stage in the supply chain and is collected by businesses on behalf of the Government. VAT is ultimately incurred and paid by the end consumer. From when? For UAE and KSA 1st January, 2018 is the go-live date for VAT and other G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC countries have time from January 1st , 2018 to January 1st, 2019 to implement VAT. Registration for VAT will commence prior to implementation date. In UAE, Registration has commenced w.e.f. 1.10.2017. What tax laws? There will be three Federal laws applicable in UAE and KSA: * Executive Regulation of Federal Law on Tax Procedures * Federal Decree Law on Value Added Tax * Federal Decree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Law on Excise Tax Similar laws will be in force in other countries. GCC - VAT Rates GCC VAT Rate has been pegged at 5 percent in all GCC nations which may be considered low (may be like introductory offer). India has kept GST rates under different slabs, i.e., 5%, 12%, 18% and 28% plus cess. World average is 16.4% whereas OECD average is about 18 - 19% Asia Pacific Nations have on average of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.88%. What businesses should do now? Following actions should be initiated to prepare a business, accounting and reporting systems, staff, suppliers and customers for the new VAT regime: * Preparation of different scenarios for the application of VAT and cost of implementing the same. * Continually track policy development regarding VAT and update prepared scenarios * Understand the key a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reas of impact in business and plan for adversely affected areas. * Cash flow impact analysis as VAT is paid on an accrual basis * Analyse the capabilities of existing accounting systems to deal with VAT * Contract reengineering and documentation * Analyse and understand transitional issues. * Evaluate the impact of new tax on pricing of any supplies. * Plan for the training of existin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g staff and the recruitment of skilled resources/outsourced agencies * Prepare the implementation road map and align relevant teams * IT preparedness and software upgradation * Inventory management * Working capital reassessment and management * Due diligence of existing system and procedure VAT in gulf countries is likely to be simple as compared to Indian GST as there will be no issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on account of migration from old tax regime, transitional provisions, no place of supply confusions as it is a national VAT and these countries are already on online / electronic mode of doing business. X X X X Extracts X X X X X X X X Extracts X X X X
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