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.