VAT in GCC
Sector Impact > Trading
This is the largest sector in the region and more prominently in the UAE which acts as the central trading hub for the Middle East.
Companies that import from outside the GCC will be required to pay VAT under the Reverse Charge Mechanism and then claim the Input Tax Credit. The Reverse Charge Mechanism places the burden of declaring the VAT on the importer if the import is from outside the GCC. For intra-GCC imports the supplier will pay the VAT in their country of origin, but the local importer will not be allowed to claim the Input Tax. For example Goods are imported into Dubai and later exported to Bahrain, the registered entity in Dubai should reverse the input tax credit claimed earlier in its return.
- Local Sales
- All local sales will be subject to the Standard rate of 5% unless the goods or services are under Exempt or Zero rated categories.
- Traders must ensure that either they prepare separate invoices for each tax category or include the tax rate for each item separately.
- Each invoice must then declare the sum of the tax charged in each category to enable the buyer to calculate the tax credit available.
- All exports outside the GCC will be Zero rated and no tax will be charged.
- However, exports to GCC states (who have implemented VAT) will be treated differently depending on whether it is sold to a tax-registered entity in the buyer state (no VAT to be charged by the seller) or it is being sold to an end consumer, not Tax registered (VAT to be charged by the seller).
You may view the Import/Export VAT Awareness document released by the MOF to provide details and clarifications with respect to Import/Export of goods by clicking here.
Sector impact analysis is provisional based on the GCC Draft and may change when the country issues the relevant VAT laws.