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Gulf Cooperation Council (GCC)

Gulf Cooperation Council (GCC) consist of six members, namely:

1. The United Arab Emirates,

2. The Kingdom of Bahrain,

3. The Kingdom of Saudi Arabia,

4. The Sultanate of Oman,

5. The State of Qatar, and

6. The State of Kuwait.

GCC governments remain reliant on oil revenues to finance their expenditures. Oil revenues accounted for between 70 and 95 percent of total government revenues during 2011–14 across the six countries. The large decline in oil prices has led to deteriorating fiscal balances and fiscal adjustment is needed. So, to cultivate more reliable and diverse sources of revenue and to reduce their dependence on oil-based revenue the GCC was compelled to adopt VAT.

As per the Supreme Council decision at its 36th meeting (Riyadh – 9-10 December, 2015) with respect to the common imposition by the GCC States of VAT at a rate of 5%, and delegating to the Financial and Economic Cooperation Committee the completion of all the requirements necessary to pass the (Common VAT Agreement of the states of the Gulf Cooperation Council) and signing it. GCC VAT Agreement was signed on 27 Nov. 2016 which established a common legal framework for the introduction VAT.

The common GCC VAT Agreement is modelled on the European Union (EU) VAT framework. The VAT framework provide basic guidelines for governing intra-GCC and international trade which is broadly in line with the international VAT guidelines of the Organization for Economic Co-operation and Development (OECD).

As per GCC VAT Agreement, each country will develop domestic legislation governing the treatment of local supplies and the administration of VAT internally. As with most VAT systems, there is a degree of flexibility from state to state for the VAT treatment of specific items. Businesses in each of the member state are required to comply with domestic VAT Law.

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