Companies importing into the GCC States (Gulf Cooperation Council: Kuwait, UAE, Saudi Arabia, Oman, Bahrain and Qatar) will no longer be able to move their goods across borders tax-free. Effective January 1, 2018, a 5 percent Value-Added Tax (VAT) rate will be implemented, based on a 2015 Agreement laid-out at the 36th Meeting of the Supreme Council of the in Riyadh. The Agreement aims to establish a common legal framework for the introduction of a general tax (VAT) levied on the import and supply of goods and services at each stage of production and distribution.
According to an article in Kahleej Times, companies need to meet new, strict compliance rules and need to re-work their operations to incorporate the tax to meet the deadline. “There are three slabs for the VAT tax reform - zero percent, five percent and exempted. Regardless of the category you fall in, each firm is required to register with the system by the second phase to ensure compliance with the law. After registering with the authorities, each firm will be issued a unique VAT taxpayer identification number (TIN) that will be used in all further transactions of the firm and will be essential to file returns.”
The unification of the customs regulations and procedures is one of the most important objectives for the customs administrations of the GCC member states, among which is the adoption of “A Unified Customs Regulation of the GCC States.” This document will unify customs procedures across all of the varied customs administrations of the GCC states, and contributes to the enhancement of cooperation in the customs field among the member states.
Some member states, notably the United Arab Emirates and Kingdom of Saudi Arabia, have already published legislations confirming the implementation of VAT, which will come in force with the New Year. However, not every nation is ready for the change…
- Qatar: On May 3, 2017, The Council of Ministers of Qatar approved a draft law on Value Added Tax and its draft executive resolutions, prepared by the Ministry of Finance in accordance with the Unified GCC VAT agreement, paving the way for implementation of VAT in 2018. This legislation on VAT is expected to be published shortly.
- Oman, Bahrain and Kuwait: Though Oman, Bahrain and Kuwait are significant GCC members and signatories to the Unified GCC VAT Agreement, they have not yet made public their plans to implement the VAT. However based on the assessment, and if news in this regard is held true, it can be expected that the trio might be a bit late in implementing VAT by latter part of 2018.
To accurately assess duties and taxes, shippers need to monitor and interpret the tariff updates, and the complex calculation based on product type and classification. This is a manually intensive and daunting task. The value derived by using Amber Road’s trade automation and trade content solutions is providing the ability for manufacturers, importers and exports to accurately calculate the new VAT based on product classification. For Amber Road customers, the landed cost calculations in the Import Management module will now also take into account and calculate the applicable VAT. Although landed costs will increase, the VAT rates at 5 percent are not as high as the VAT rates that we see in the EU, which hover around the 15-20 percent range.
The identification and qualification of goods in Amber Road’s Global Trade Management solution is powered by the industry-leading Global Knowledge® database of global trade content. Global Knowledge® contains the rules of origin, product classification and duties and taxes. Global Knowledge tightly integrates into our Import solutions which enable collaboration with extended trading partners (suppliers, brokers, carriers, freight forwarders, etc.) to ensure complete and accurate information accompanies inbound shipments and documents, and that other information is readily available to the parties that need it.
Our Global Knowledge® subscribers for these regions will see the new VAT rates in the platform as of January 1, 2018 for Saudi Arabia and UAE. For the other GCC member states, publication of the final VAT legislation will be monitored closely and VAT content will be made available as and when the VAT laws are enacted.
Do you have 2 minutes to learn about how Global Knowledge® is powering global trade content updates round-the-clock? Check out our video below!