VAT-Explained
VAT in the GCC and UAE – A Comprehensive Overview
The Gulf Cooperation Council (GCC) countries, UAE, Saudi Arabia, Bahrain, Oman, Qatar, and Kuwait, signed a unified agreement to implement Value Added Tax (VAT) as a step toward diversifying revenue sources beyond oil. Historically, these countries operated under a tax-free regime due to high oil revenues. However, declining oil prices prompted a shift toward indirect taxation.
UAE and Saudi Arabia were the first to implement VAT at 5% on January 1, 2018, followed by Bahrain in 2019. Oman joined in 2021, and Saudi Arabia later increased its VAT rate to 15% in July 2020 as a fiscal response to the COVID-19 pandemic. Although unified in principle, each GCC country manages certain VAT elements independently.
Understanding VAT
Value Added Tax (VAT) is a consumption-based tax levied at each stage of the supply chain, from production to final consumption. The tax burden ultimately falls on the end consumer. VAT is collected by registered businesses on sales (output VAT) and recovered on purchases (input VAT) through regular filings.
The Federal Tax Authority (FTA) in the UAE, established under Decree Law No. 13 of 2016, governs VAT administration, registration, collection, and enforcement. Businesses with taxable supplies exceeding AED 375,000 annually must register for VAT. Those with supplies above AED 187,500 may register voluntarily. Non-resident businesses making taxable supplies in the UAE must register regardless of threshold.
Key VAT Concepts
Standard Rated Supply: Taxable at 5%, input VAT is deductible.
Zero-Rated Supply: Taxed at 0%, input VAT is still deductible. Includes exports, healthcare, education, and select commodities.
Exempt Supply: Not subject to VAT; input VAT is non-recoverable. Includes bare land, certain residential leases, and specific financial services.
Reverse Charge Mechanism (RCM): Shifts the responsibility of VAT reporting from supplier to buyer, especially for cross-border transactions.
VAT Compliance Requirements
UAE-registered businesses must:
Charge 5% VAT on standard-rated goods/services.
File VAT returns monthly or quarterly depending on turnover, typically due by the 28th of the following month after the return period ends.
Maintain accurate financial records for taxable supplies, purchases, and imports.
Ensure tax invoices are issued and VAT numbers are clearly stated.
How Blackstone Tax Consultants Can Help
At Blackstone Tax Consultancy Services, we provide end-to-end VAT support tailored for businesses in UAE and across the GCC. Our expertise spans regulatory compliance, implementation, and post-registration advisory.
Our VAT services include:
VAT Registration & De-registration
VAT Accounting & Return Filing
VAT Implementation & Planning
Reverse Charge Mechanism Support
VAT Voluntary Disclosures & Reconsideration Requests
VAT Refund Applications
Record-keeping and compliance audits
Advisory on tax invoices, stock control, and input/output reconciliation
Whether you’re starting a business in Dubai, expanding in a free zone, or need assistance navigating corporate tax or ICV certification, Blackstone ensures your operations stay compliant and efficient.
