How to record UAE VAT on Services sold to customers in KSA and Bahrain?

The GCC member states of the UAE, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait have signed a common VAT agreement. Article 9 of this agreement set out how taxation on sales between these member states should be treated.

It says that if a taxable person in a member state receives taxable goods or services from a resident in another member state, then he shall be deemed to have supplied these goods or services to himself and the supply is taxable in accordance with the Reverse Charge Mechanism (RCM). Read more…

Do business selling across the GCC register in each country?

A business selling across the GCC will only be required/entitled to register for VAT in another member state if the nature of its supplies of goods and services requires it to be (e.g. the place of supply is in another GCC member state and the reverse charge mechanism cannot be used).

Source: Deloitte

Will there be a common system of VAT registration so you can check whether you are dealing with a taxable person?

The GCC Agreement envisages an electronic matching system for intra-GCC systems. In practice, we do not think this system will be available for a while and so it is likely a VAT number checking system will be made available country by country.

Source: Deloitte

Will there be group registration for companies in the GCC?

Based on the GCC Agreement, member states do have the discretion to implement VAT groups. The UAE and KSA laws indicate that grouping will be available for groups of legal persons established in these respective countries, depending on control requirements being met.

Source: Deloitte

Will associations of persons (e.g. open consortium) be considered as a taxable person?

Whilst the GCC Agreement does make reference to companies being able to form VAT groups, it does not specifically confirm the legal form required to be VAT registered.

Source: Deloitte

If only residents can be VAT registered, does this mean that offshore companies cannot be VAT registered?

There is a requirement for non-residents to register for VAT in the GCC, in the event that they need to pay VAT on supplies made by them in a GCC member state (e.g. the place of supply is in the GCC and the customer is not able to self-account for the VAT due under the reverse charge mechanism).

Source: Deloitte

Will zero-rated supplies count for the registration threshold?

Yes, the taxable supplies including zero-rated supplies count for the registration threshold. However, note that it might be possible that some GCC member states will allow, under certain conditions, a company which only makes zero-rated supplies to be excluded from the mandatory registration on request. The UAE and KSA have indicated that they may allow such exclusions in certain cases.

Source: Deloitte

What do we know about the establishment VAT registration requirement?

If an entity has a Permanent Establishment (PE) for corporate tax purposes in a member state, then it is very likely to also have an establishment for VAT purposes in that country. The bar for a PE is arguably higher than that for having an establishment for VAT purposes. Where it is unclear which establishment of a legal entity (i.e. the head office or the PE) has made the supply then an analysis would be required as to the establishment most closely connected with the supply. Where such a PE is considered to be making taxable supplies, a VAT registration would be required.

Source: Deloitte

What will be the language used for registration?

The expectation is that the registration platform will be available in English. This is confirmed to be the case for KSA and the UAE.

Source: Deloitte

What is the method of registration for VAT?

VAT registration is expected to be largely online. Additional documentation may be requested offline (likely to vary by GCC member state).

Source: Deloitte