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VAT Resource Center

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Simplifying the VAT process

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VAT: An overview

From the 1st of January 2018, Value Added Tax (VAT) will be introduced across all Gulf Cooperation Council (GCC) states at a standard rate of five percent (5%). This introduction—in Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman—will bring with it significant changes to the way business is conducted in the Middle East.

As an indirect tax on the consumption of goods and services, VAT is borne by end consumers and collected incrementally at each stage of a business’s supply chain on behalf of the government. All businesses which exceed a minimum, annual turnover of $1 million, must register for VAT. A failure to comply with this legislation will lead to severe penalties and/or prosecution. Certain goods and services will be zero rated or exempt.

For business owners and companies, the transition to VAT will be challenging, requiring a significant investment of time and resources to ensure their organizations are ready. Not only must their operations be updated accordingly to remain compliant with legislation, but they will also need to assess the impact VAT will have across all areas of their value chain. Including margins and pricing, sales and exports, and customer demand.

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