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Intra-GCC Transactions Under GCC VAT Law

Intra-GCC Transactions Under GCC VAT Law

Intra-GCC transactions are the transactions (sales and purchases) between member states of GCC.

Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE have signed the GCC VAT Agreement. VAT is all set to be implemented in across GCC from January 2018.

Exports outside the country under the GCC VAT Law are zero-rated. But what about the transaction export transaction between the GCC States?

Taxpayers have many questions with respect to such transactions. Some of them are listed below:

  • How and where will VAT be collected for Intra-GCC transactions?
  • Will the taxpayer be able to claim recoverable input of VAT on purchases from member states? On what conditions recoverable input VAT be claimed?
  • In what manner the supply of goods and supply of services happen between member states under GCC VAT Law?

In order to simplify and easily understand the Intra-GCC transactions we will split them into two different topics:

  1. Intra-GCC Transaction of Goods.
  2. Intra-GCC Transaction of Services.

Let us discuss each in detail.

1. Intra-GCC Transactions of Goods

Similar to the exports of goods outside GCC, the intra-GCC transactions will be zero-rated. But in this case, the buyer will pay VAT under reverse charge mechanism.

Under reverse charge mechanism, a buyer pays will VAT as if he has sold the goods to himself. The buyer can conditionally claim the input of VAT paid in the same return and thus the effect o the VAT is NIL.

If goods are transhipped from one state to another VAT is applicable.

The Input of such tax cannot be claimed in the State of origin but is claimed at the final destination of goods in the member state where the buyer is located.

If the goods were previously imported to your country for business purposes and then exported to another member state then also the VAT is applicable.

Thus, The excess of input claimed by you on such imports has to be paid back to the tax authorities.

2. Intra-GCC Transactions of Services

Same as the case of goods, if a seller sells services to his customer who is registered under VAT in another member state, the buyer will charge himself for VAT under reverse charge.

For an Intra-GCC supply of services, the VAT applicability is subject to buyer’s registration status.

When the customer of other member state is registered,  VAT will be applicable on the reverse charge basis in the state of the customer.

But if the customer is a non-taxable person then VAT will be collected in the state of the supplier.

You can download other accounting templates like VAT Invoice Template, VAT Invoice Template in Arabic, and Cash Book with VAT from here.

 

Intra-GCC Transactions

Additionally, we also design custom accounting and invoicing software according to your requirements.

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If you have any queries please share in the comment section below. We will be more than happy to assist you.

Filed Under: UAE VAT

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About Shabbir Bhimani

I have worked in Excel and like to share functional excel templates at ExcelDataPro.

Comments

  1. Murtaza bharmal says

    November 24, 2018 at 4:55 pm

    our mainland company goods sold to saudi registered buyer.. we charged him VAT , is it ok??

    we had not treated as export and not issued zero rated invoice as buyer did not gave us EXIT PAPER AND EXPORT DECLARATION ., goods went to saudi via local transport company via road.

    Regards
    murtaza

    Reply
    • Fahim Lashkaria says

      November 26, 2018 at 1:05 pm

      Will check and revert.

      Reply
  2. murtaza says

    November 25, 2018 at 11:05 am

    Dear Fahim sir
    Greetings!!
    our saudi registered custom to whom we sold goods from dubai mainland with VAT

    As he shipped goods via cargo not giving us export papers required like exit paper , export declaration etc..

    is our treatment ok to charge him vat as usual
    regards
    Murtaza

    Reply
  3. Ananth says

    July 25, 2019 at 1:56 pm

    We are VAT registered company in Dubai and importing the goods from UK and selling to Oman client. Kindly confirm whether the import vat is claimed for this import to export of the goods. Kindly share the details of the available links to refer.

    Reply
    • Fahim Lashkaria says

      July 26, 2019 at 12:15 pm

      There are two scenarios in your type of business.
      1. If good imported from the UK enter UAE and you pay VAT and then export the same to Oman. In this case, you can claim ITC.
      2. It doesn’t enter UAE borders and directly goes to Oman then VAT will be payable by the importer(buyer) in Oman not by you.

      Reply
      • Feroskhan says

        April 26, 2021 at 11:36 am

        Dear Mr. Fahim Lashkaria

        Good Day!

        We are VAT registered company in UAE and we used to import from non GCC countries and supplies to OMAN clients via cargo . Please advise me that can we claim VAT returns..

        Reply
  4. Mian Abdul Rehman Sarwar says

    September 30, 2019 at 8:14 pm

    Our client (in Bahrain) has given us (in Saudi Arabia) to render a service in OMAN for one of their clients. So will we raise a VAT invoice or is the invoice going to be Zero-rated

    Reply
    • Fahim Lashkaria says

      September 30, 2019 at 8:16 pm

      Which country are you located in?

      Reply
  5. Pankaj Mandwani says

    December 20, 2019 at 1:19 pm

    Hello Sir,

    First of all thanks for the wonderful information.
    My Question is related to Intra-GCC-Supply of Services.

    We are the company registered under UAE Vat Laws and have special status of Designated Zone.
    We are now supplying services in another GCC Countries like Saudi and Bahrain
    Just wanted to know whether the similar provis will apply to us ( DZ’s) ?

    Regards

    Reply
    • Fahim Lashkaria says

      December 21, 2019 at 10:48 am

      The rules of Export of services will be applicable.

      Reply
  6. Lea Villaroel says

    January 15, 2020 at 6:09 pm

    Dear Sir,

    We are a VAT-registered company in Dubai Freezone, and we will be selling goods to a Client in Bahrain. (The goods will come from our Supplier in Germany.)

    Should we charge our Client the VAT for this transaction?

    Thanks,
    Leah

    Reply
  7. ali says

    February 5, 2020 at 4:45 pm

    We are based in KSA.
    We want to export material to Kuwait where VAT is not implemented yet. That material we are going to export is, imported by us from Germany on which we had paid VAT and customs duty. My question is as the VAT is not implemented in Kuwait yet, should we charge VAT in our invoice to Kuwait importer or it is exempted or zero rated?

    Reply
    • Fahim Lashkaria says

      February 5, 2020 at 7:16 pm

      Export is zero-rated. If you have already paid VAT and the good are into Saudi borders then you can include the VAT in customer price otherwise it will be a loss of amount. Legally, export is zero-rated.

      Reply
  8. Shafiq khan says

    March 4, 2020 at 1:18 pm

    Sr.NO Text Remarks
    Step1 We are in UAE -Placing order in KSA (Manufacturer )
    Step2 Manufacturer (KSA) will produce the goods and bill to us in UAE For us in UAE – in order to claim as import we need to have Physical moment of goods from KSA TO UAE-which is not happeing
    Step3 Goods will be delivered in KSA itself ,as we have customer in KSA For Manufacturer if he is delivering goods in KSA ,he need to charge VAT .,which we don’t want to happen –

    Reply
    • Fahim Lashkaria says

      March 4, 2020 at 6:18 pm

      We will have to look into this.

      Reply
  9. Usman Khan says

    April 4, 2020 at 6:04 pm

    Sir,

    We are a company located in Bahrain and exporting to KSA. The goods are directly reaching from Europe to Saudi and they have to pay VAT on Saudi Boarder.
    We are registered for VAT in Bahrain. Do we have to register for VAT in KSA ?
    Thanks

    Reply
    • Fahim Lashkaria says

      April 6, 2020 at 12:26 pm

      As per the VAT ruling, Export is out of scope. Hence it is not necessary for you to register in KSA.
      The Buyer has to pay VAT in his local land at the custom port.

      Reply
  10. Vishnu Mohan says

    May 28, 2020 at 8:38 pm

    Sir
    We are manufacturing goods and selling it to KSA from freezone zone area in dubai , is vat applicable for selling the goods to KSA ?

    Reply
    • Fahim Lashkaria says

      May 29, 2020 at 12:24 pm

      Selling to KSA is export. Your client imports goods in KSA and pays VAT through Reverse charge mechanism.

      Reply
  11. Baiju V.V. says

    July 20, 2020 at 2:17 pm

    Sir,
    We are a Tax registered person and located in Bahrain .We are purchasing from U.A.E. How wil treat this in Bahrain ie,Zero rated , Exempt Purchase ,Reverse Charge or has to pay tax and Have to show this purchase value in Bahrain Vat return.

    Reply
    • Fahim Lashkaria says

      July 20, 2020 at 4:49 pm

      You are basically importing goods from UAE and hence reverse charge is applicable. You will pay VAT while import and can this Input VAT will be adjusted against your Output VAT liability.

      Reply
      • BAIJU.V.V says

        July 21, 2020 at 4:57 pm

        Sir,
        Our consultant saying that when purchase from UAE ,It is in zero rated .So he is saying no need to mention in Bahrain vat return.But my doubt ,our transportation agent is paying customs duty and vat together and they dont give any customs and vat paid document.They are issuing freight charges bill to us(all amount including in freight charges).so how we can adjust this input vat(gcc purchase) with output vat?

        Reply
        • Fahim Lashkaria says

          July 22, 2020 at 12:38 pm

          According to the best of my knowledge and the details provided by you, it seems that your company is not directly importing goods. Hence, the import is done by the agent. The agent then issues a local invoice to your company in Bahrain.

          If it is the above case, Your invoice includes prices inclusive of VAT. You need to report the invoice given by the agent directly into your VAT return. Thus, you can only claim input of whatever VAT is given in the invoice provided by your agent.

          Reply
          • BAIJU.V.V says

            July 26, 2020 at 10:30 am

            Thank you sir for your valuevable reply.

  12. Jennifer says

    August 24, 2020 at 12:35 pm

    We have a supplier from KSA and they charge us a Tax Invoice with 15%, how can we clain the Intra GCC Taxable Purchases?
    Thanks

    Reply
    • Fahim Lashkaria says

      August 24, 2020 at 4:43 pm

      According to the best of my knowledge, Intra GCC transactions are Zero Rated. Hence, your supplier cannot charge you VAT on the invoice. Moreover, Kuwait will implement VAT in April 2021.

      Similar to the exports of goods outside GCC, the intra-GCC transactions will be zero-rated. But in this case, the buyer will pay VAT under the reverse charge mechanism.

      Under the reverse charge mechanism, a buyer pays will VAT as if he has sold the goods to himself. The buyer can conditionally claim the input of VAT paid in the same return and thus the effect o the VAT is NIL.

      Reply
  13. khalidkareem says

    September 26, 2020 at 9:10 pm

    salam. we are a company located in UAE.. and goods seeling to oman. we will raise a VAT invoice or is the invoice going to be Zero-rated.
    and how to treatment transaction entry in vat201. plz

    Reply
    • Fahim Lashkaria says

      September 27, 2020 at 7:28 pm

      If the customer is registered under VAT in Oman then Zero-rated otherwise 5% VAT will be applicable on supply. If the value of the supply is above the threshold then the supplier has to take a VAT registration in that country and then he has to charge VAT.

      Reply
  14. pankaj mandwani says

    September 28, 2020 at 10:23 am

    Hi,

    We are a company registered in DZ in UAE. We often supply goods/services to other implementing states of gulf like OMAN.
    What will be the tax implication on us if the customer is registered ?
    Is it export of Goods/services for us ? or it is Our-of-scope ?

    Reply
    • Fahim Lashkaria says

      September 28, 2020 at 1:27 pm

      If the customer is registered under VAT in Oman then Zero-rated otherwise 5% VAT will be applicable on supply. If the value of the supply is above the threshold then the supplier has to take a VAT registration in that country and then he has to charge VAT.

      Reply
  15. Rakesh says

    September 29, 2020 at 4:48 pm

    We in UAe provide digtal marketing services to customer in Saudi. should we charged to vat on not. Is special supply rule applied here?

    Reply
    • Fahim Lashkaria says

      September 30, 2020 at 5:27 pm

      According to Article 31 of Executive Regulation, Your services will be outside of the scope of UAE VAT and the service would be taxable in the receiving state, with the recipient accounting for the tax under the reverse charge mechanism.

      Reply
  16. Baiju.V.V says

    October 24, 2020 at 12:26 pm

    Our company located in UAE and Bahrain under vat registered.UAE co imports items from UK.Import Inv issued to UAE co name and delivery direct to Baharin from UK and duty paid in Bahrain Customs Dept.Vat not paid in Bahrain.So how will we treat this in Bahrain VAT return.

    Reply
  17. Baiju says

    October 24, 2020 at 12:27 pm

    Our company located in UAE and Bahrain under vat registered.UAE co imports items from UK.Import Inv issued to UAE co name and delivery direct to Baharin from UK and duty paid in Bahrain Customs Dept.Vat not paid in Bahrain.So how will we treat this in Bahrain VAT return.

    Reply
    • Fahim Lashkaria says

      October 24, 2020 at 12:48 pm

      If goods are imported into the UAE, by default the place of supply of import is the UAE. But if the importer expects to transfer the goods into another GCC state, special conditions apply.
      (i) The importer should pay import VAT without using the reverse charge, and cannot recover the VAT.
      (ii) The import VAT can only be recovered in the GCC state where the goods are transferred.

      Reply
  18. Kannan says

    March 2, 2021 at 12:16 pm

    Dear Sir,
    we registered and operated in DWC FZ, Dubai, importing goods from other Country and exporting to oman by Road Transport. while processing Customs under, previously, it will allow us to pass without payment of VAT, from 23rd Feb, it made us mandatory to pay VAT in Dubai, is this process correct, please advice the payment of VAT in Dubai is mandatory

    Reply
    • admin says

      March 4, 2021 at 7:11 am

      We will request you to consult an expert in your area to finalize on the process as the website is not for the complete legal advice but gives an overview of the law.

      Reply
  19. Brenda Montecillo says

    May 20, 2021 at 12:21 pm

    We are VAT registered company in JAFZA, we export goods to Oman and we need to issue an invoice on particular goods. My question is, do I need to include 5% vat on the invoice and how am I going to report the amount on my VAT return.

    Reply
  20. David Storey says

    August 21, 2021 at 9:25 pm

    Dear Fahim

    I have a LLC Company set up in Dubai and a project which will put me over the VAT threshold so am in the process of getting TRN

    I am selling goods to a client in KSA which will ship direct from Italy to KSA, they are asking for VAT to be applied but I wont be paying any VAT to my supplier in Italy is the VAT needed for the KSA Client

    Many Thanks

    Reply

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