GCC including Saudi Arabia,  (UAE), Qatar, Bahrain, Oman and Kuwait, going to implement a value-added tax (VAT) in 2018. The companies that operate in the region of the Gulf need to consider the affects of this new TAX calculation on their operations. For government financing all Gulf Cooperation Council countries relied almost exclusively on oil revenues . But oil fell from more than $ 100 per barrel in mid-2015 to less than $ 50 today.

So it is not effective to relay on non-oil revenues to finance the increase in public spending. Implementing a VAT is a good step to anticipated needs in these countries.

What is VAT and How it is Implemented?

VAT is a latest tax compilation on consumption that makes calculationn easy. More than 120 countries worldwide are using various versions of VAT and getting 20 percent of global tax revenues. VAT is considering at each step of the supply chain. VAT a more complex form a simple sales tax, but with huge advantages.

One is that, since each buyer along the supply chain has to pay taxes to the seller and, in turn, adds taxes to the invoice that they send to the next buyer in the chain, there is always a counterpart that has a participation in receiving a refund for the tax they have paid, and therefore that documentation is correct.

This significantly facilitates the application. The standard VAT in the CCG will initially be 5 percent. Some categories, such as basic foods and medicines, as well as exports outside the GCC, will be taxed at zero percent. In other sectors, such as education, health, real estate and local transportation, the details of the implementation of VAT may vary from state to state.

Schedules and Deadlines For Middle East Countries

The Agreement to introduce VAT in GCC was done In 2016, agreed date is 1, January 2018. Although no contrary announcement has been announced, most observers believe that only Saudi Arabia and the United Arab Emirates will meet that deadline. The UAE has started to register businesses for VAT in mid-September, but Saudi Arabia has issued December 2017 deadline for companies to register.

The GCC agreement provides members with a one-year grace period. The Kuwaiti Parliament passed a VAT bill on August 7; Oman has not announced a firm VAT date; and Bahrain has said it would introduce VAT by mid-2018. Despite finally approving the bill, it is unlikely that Kuwait can meet the deployment date of January 1, 2018.

The effects on the deployment of VAT from Qatar are unknown, although they are likely to include delays. Differences at the time of VAT implementation in several GCC countries may provide the opportunity for tax arbitration, especially if implementation in some countries is delayed beyond January 1, 2019. The need for business planning Any company operating in Saudi Arabia or the UAE should be preparing to comply when the regulations take effect in 2018. This will include ensuring that you have the proper financial records and know what VAT category applies to your organization. You must also understand what the effects will be on your final prices, profit margins and cash flow. You should also review your existing contracts to determine who will absorb VAT costs and negotiate any necessary changes.

What happens if the companies do not comply with the law and regulations?

There will be a fine of 10,000 SAR if any company does not register for taxes before the established deadlines (Art. 41. In addition, not filing a tax return within the specified period can be fined up to 25% of the total amount due for taxes (Art. Art. 42 (1), failure to pay the tax owed before the deadline will be fined at a rate of 5% per month (Art. 43).

An unregistered person who issues a fiscal invoice may receive a fine of up to 100,000 rials (Article 44); If adequate records are not kept or kept away from the authorities, a fine of up to 50,000 SR may be imposed (Art.45)

Checklist of companies for the preparation of VAT in Saudi Arabia:

• Have a focal point to determine the table of accounts of the goods sold according to the tax policies of the VAT.
• Procurement and inventory management must record and file all invoices along with a record of the suppliers’ tax details for reimbursement.
• The point of sale must show the price of the goods and the sales receipt must comply with the tax requirements when recording the sales.
• Maintain a general accounting record together with the calculation of the VAT balance for payment and reimbursement after filling.

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