Official: GCC states ratify VAT framework agreement

The framework agreement on the introduction of the Value Added Tax (VAT) in the region has been ratified, an official said on Sunday

Sachin Kerur, partner, Pinsent Masons
Sachin Kerur, partner, Pinsent Masons

The framework agreement on the introduction of the Value Added Tax (VAT) in the region has been ratified, an official said on Sunday.

Two members of the GCC, Saudi Arabia and the UAE, have ratified the agreement, which becomes effective when at least two member states sign it, Sachin Kerur, partner at law firm Pinsent Masons told Construction Week.

The framework will set out the main rules governing the operation of VAT in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE.

The official text of the framework was published by Saudi Arabia in May 2017. 

Each GCC member now has to issue its own local legislation implementing the VAT framework, according to a report by the Cragus Group, provided by Pinsent Masons.

Full legislation for VAT in each country is still pending however, with specific “building blocks” yet to be implemented on the final legislation, according to Kerur.

As a result, there has been a lot of speculation of a delay in VAT implementation among experts in the region, with many speculating that the implementation of the law could be pushed back a couple of months.

“It will definitely be implemented in 2018, but if there is a delay, it will not be a vast one,” Kerur said.

“Speaking to a number of tax advisers over the last few weeks, no one has said there will be a delay, but many are merely speculating. The chances of there being a long material delay are not high,” he added.

Earlier this year, legal experts reiterated the growing concern of a possible postponement in VAT implementation, with one expert predicting it could be pushed back to June of next year.

“I heard that a couple of countries might have to delay to June 2018,” Jeremy Cape, partner at law firm Squire Patton Boggs said in April, though he said it was not officially confirmed at the time.

It is expected that VAT will become applicable from 1 January, 2018 in Saudi Arabia and UAE as both countries are furthest ahead in finalising legislation.


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