Value Added Tax Is Taking Shape In Gcc Nations

GCC Countries including UAE was always tax-free zone. Not anymore, five of the GCC nations already approved the Unified Agreement for Value Added Tax. VAT tax is expected to be in force from 2018 onwards.

What is Tax?

Tax is a compulsory contribution to the government, which is used to pay for public services. The tax which is collected from the public is generally used to pay for things such as public hospitals, schools and universities, defense and other important aspects of daily life.

There are mainly 2 types of taxes:

  • The direct tax is collected by the government from the person as income tax, corporate tax etc.
  • Indirect tax is collected for the government when we purchase something, which is referred to as VAT, Sales Tax etc.

Value Added Tax (VAT)

VAT is an indirect tax applied upon the consumption of most goods and services. VAT is levied by VAT registered businesses which make supplies of goods and services in the course or furtherance of their business. VAT will also apply to the importation of goods.

VAT is levied at each stage in the supply chain and is collected by businesses on behalf of the Government. VAT is ultimately incurred and paid by the end consumer.

Although VAT will apply to most goods and services there are some likely exceptions: this includes basic food items, essential medicines, and exports of goods and international services which are expected to be zero-rated supplies. Furthermore, other supplies such as healthcare, education, sale or lease of residential property and finance and insurance are expected to be exempt from a VAT.

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