VAT is all set to be rolled out by Jan 2018. VAT applicability for Traders Under GCC VAT Law is different depending on different scenarios. We will discuss in detail about them in this article.
Businesses and especially traders are eager to know the impact of VAT on their business. Activities of trading business are different from general business activities.
Trading is basically a concept of the buying and selling of ready(not manufacturing) goods or services for further selling to your customers.
In other words, you as a trader do not produce any goods. You are buying ready goods from a supplier and sell it to your customers nationally as well as internationally.
A trader works either sells directly to customers or works as a medium between buyers and sellers.
To download GCC VAT Agreement click on the link below:
We will understand the impact of VAT applicability on traders under GCC VAT Law in different scenarios.
Scenarios of VAT Applicability on Traders Under GCC VAT Law
Let us discuss in detail all 3 below-mentioned scenarios for trading activity and applicability of VAT on them.
- The traders who will buy and sell in the same country where they are registered.
- Traders who will import goods from other country and sell in the country where they are registered.
- Traders who will buy and sell outside the country where they are registered.
1. The traders who will buy and sell in the same country where they are registered.
A trader in this scenario will purchases goods locally and sells them locally. VAT is applicable to both purchase and sales here.
At the time of purchase, the trader will pay VAT on the purchase and is entitled to the recoverable input of VAT paid.
When the trader will sell the goods in the local market he will collect VAT from his customers.
Thus, he will pay the difference of Input and VAT collected to the government.
To easily calculate VAT payable, use our VAT Payable Calculator.
2. Traders who will import goods from other country and sell them in the country where they are registered.
In this scenario, the trader will imports goods from countries including GCC countries. Here, the trader will have to pay VAT on the reverse charge basis and will be entitled to the recoverable input of VAT.
Similar to the first case, the trader will collect VAT from his customers and pay the difference to the government.
3. Traders who will buy and sell outside the country where they are registered.
The third scenario is where a trader will buy and sell outside the country (except GCC countries) where he is registered.
Buying goods from countries other than GCC and supplying to customers in GCC countries, the local laws of VAT will be applicable.
Which means that your customer buying in another GCC country will pay VAT under reverse charge mechanism.
As goods do not enter your country of registration, either while buying or selling the goods VAT applicability on such transactions will be 0%.
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