The tax system in the GCC states: the beginning of a different economic phase in the Gulf

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Saudi Arabia and the UAE will receive the new year by applying a value-added tax of 5 percent on January 1, after the government agencies issued the executive regulations for the implementation of the tax, while some other Gulf countries will have to postpone this date because they are not ready.

Official GCC studies confirm that “the Gulf states will earn $ 25 billion in value-added tax annually”, which would be a source of government welcome and carry out large-scale campaigns to make them acceptable, at a time when people are accepting them, even though they are imposed and cannot refuse them.

Governments realized that they had a long way to go to prepare for the tax, and to generate confidence that their application would be in the interest of all because it was in the interest of the nation. Since the announcement of the idea as a step in the Gulf following the decline in oil prices and the emergence of deficits in the budgets of these countries, at a time when the world economies are facing challenges and large vibrations, the GCC countries began to work to prepare the legislative, legal and economic tax, especially after it succeeded in the application of «selective tax» on tobacco And its derivatives, soft drinks and energy drinks by 100 percent since the beginning of October.

Especially after it succeeded in applying the “selective tax” on tobacco and its derivatives, soft drinks and energy drinks by 100 percent since the beginning of October.

It is certain that the UAE and Saudi Arabia, thanks to high-level coordination, will implement this tax on time. The Kingdom of Saudi Arabia has informed the Committee on Financial and Economic Cooperation in the Gulf Cooperation Council (GCC) to complete the application of VAT in 2018.

The statement of the 2017 budget announcement in the Kingdom, issued the «Royal Order» (Royal) approval of the mandate of the Committee on Financial and Economic Cooperation in the Gulf Cooperation Council to apply the value-added tax by 5 percent, starting in 2018. According to the statement, application of selective commodity tax on tobacco, soft drinks and energy.

The Ministry of Finance of the UAE, which took the legislative side of the application of the tax in the UAE, the executive regulations of the Federal Law Decree, as well as held hundreds of workshops with companies and banks to clarify the reality of the tax and ways to deal with them, to generate an understanding of the positive effects of them, pointing out that the reactions and responses issued From the public and private sectors and from the country’s commercial family, were “trustworthy”.

The rate of zero or exempt, the division of the input tax and the grounds for their recovery, details of which the Ministry of Finance and the Federal Tax Authority have cooperated with to provide sufficient time for taxpayers in various sectors to view them. Undersecretary of the Ministry of Finance Younis Haji Al-Khouri said that “the responses received by the Ministry of Finance call for confidence and showed a deep understanding of the meaning of the willingness of citizens and residents to participate in the program of economic diversification, which preserves the UAE’s economic standing and its strong presence in sustaining development and generalizing its returns.

“We cannot underestimate the importance of this tax and its role in supporting the country’s economy. In fact, in some markets it accounts for up to 40 percent of government revenue,” says Jean-Snell, global head of value-added tax at Baker McKenzie. Therefore, the readiness of systems is the top priority for the time being ».

In the end, despite the challenges of adapting to the GCC tax system, it appears that many of the relevant frameworks already in place in Saudi Arabia and the UAE have finalized the regulations. In addition, several institutions and companies are actively and actively preparing for the implementation of the new system, which has become a necessity.