“1st January 2018, VAT Mubarak GCC region” – the Kingdom of Saudi Arabia (KSA) and the United Arab of Emirates (UAE) implemented their domestic VAT laws. These countries fulfilled their commitment of implementing VAT law in their respective countries as per the Common VAT agreement signed by the 6 member states of the Gulf Co-operation Council (GCC) in November’ 2016 (Kingdom of Bahrain, Sultanate of Oman, State of Kuwait and Qatar being 4 other countries).
The Unified VAT agreement is the framework agreement which provides all the necessary guidance on how a member state should frame its domestic VAT law including matters such as in which country a particular transaction will attract VAT (Place of supply rules), when VAT is payable – on billing or supply or receipt (Point of Taxation), how to treat transactions between GCC member states, how to deal with exports and imports, rate of VAT (@ 5%), etc. The said agreement also gives discretion to member states to decide on the operative part of the VAT law (such as due date of payment of VAT, filing of VAT returns, list of exempt / zero rate items, etc.) but within the defined framework. Further, not all GCC member states were required to implement this tax at the same time. KSA and UAE have taken a big step forward to manifest the new tax regime (for a sustainable federal revenue) and are leading the way for the GCC region to implement their domestic VAT laws.
Further, the UAE, KSA and Kingdom of Bahrain (Bahrain) have already explored further streams of tax revenue and implemented the Excise Tax (also popularly called the ‘sin tax’) in conjunction with the Common Excise Tax Agreement signed between the said 6 GCC nations. While KSA and UAE implemented Excise Tax in June’ 17 and October’ 17 respectively, Bahrain implemented Excise on 30 December’ 2017. Ins all the 3 countries, Excise is applicable on the same 3 products and at the same rate – Tobacco (100%), Energy Drinks (100%) and Aerated Drinks (50%).
Bahrain is committed to the GCC region together with the other member states that signed the Unified VAT agreement. Further, historically, Bahrain has been supportive of the laws propagated and / or implemented by KSA and GCC as a whole. Many newspapers articles have quoted Ministry of Finance (MoF) mentioning VAT law to be implemented in 2018. Hence, these are tangible indicators that not only Bahrain is next in line but also decisive with the implementation of VAT and the expectation is either by July’ 2018 or October’ 2018.
