GCC VAT: Registration and Ongoing Tax Compliance

The introduction of a Value-Added Tax (VAT) marks a shift in the fiscal policy of the Gulf Cooperation Council (GCC) member states. To diversify their economies beyond hydrocarbon revenues, these nations adopted VAT as a new source of income. This consumption tax is applied to the majority of goods and services.

To ensure a coordinated rollout, the six GCC member states developed the Unified VAT Agreement. This agreement serves as a legal framework, establishing common principles that guide each country in implementing its own national VAT legislation while allowing for some national flexibility.

VAT Framework and Application

While the GCC Unified VAT Agreement provides a common framework, the actual application and administration of the tax are governed by the domestic VAT laws of each member state. The core principles are shared, but specific rules and procedures can vary by country. Businesses operating across the GCC must follow the national legislation in each jurisdiction.

As of early 2025, four of the six GCC countries have implemented a VAT system. The United Arab Emirates and the Kingdom of Saudi Arabia introduced VAT on January 1, 2018, followed by Bahrain on January 1, 2019, and Oman on April 16, 2021. Saudi Arabia increased its standard rate to 15% and Bahrain raised its rate to 10%, while the UAE and Oman have maintained the 5% rate.

A central concept in the VAT framework is the classification of supplies. The default category is standard-rated supplies, where the standard VAT rate of the respective country is applied. This includes a wide array of goods and services like electronics, clothing, and professional consulting services. For any transaction not explicitly defined as zero-rated or exempt, the standard rate applies.

Certain goods and services are designated as zero-rated, meaning they are taxable, but the VAT is applied at a 0% rate. A business dealing in zero-rated supplies does not charge VAT to its customers but can still recover the input VAT it paid on its business expenses. Examples include the export of goods outside the GCC, international transportation, and the supply of certain investment-grade precious metals.

The final category is exempt supplies. For these supplies, no VAT is charged, and the supplier cannot recover any input VAT incurred on costs related to making them. This “sticking” of the tax cost within the business is a differentiator from zero-rated supplies. Examples of exempt supplies found in GCC VAT laws include certain financial services and the rental of residential properties.

Determining Your VAT Registration Obligation

A business must determine if it is legally required to register for VAT. This obligation is based on the total value of its taxable supplies, which includes both standard-rated and zero-rated goods and services. Each member state has implemented a registration threshold into its national law, with some variations in the local currency amount.

The primary threshold is the mandatory registration threshold. A business must register for VAT if the value of its taxable supplies in the previous 12 months exceeds this limit, or if it anticipates its supplies will exceed the threshold in the next 30 days. The threshold established in the GCC agreement was SAR 375,000, approximately USD 100,000.

A secondary threshold, known as the voluntary registration threshold, also exists. This allows smaller businesses, whose taxable supplies are below the mandatory limit but above a lower threshold, the option to register for VAT. The voluntary threshold was set at 50% of the mandatory one, or approximately SAR 187,500 (around USD 50,000).

To prepare for registration, a business must gather a specific set of documents and information. Required documents include:

• A copy of the business’s trade license or commercial registration
• Passport and local identification copies for the owner or partners
• Official company contact details
• Financial information, such as financial statements or revenue figures for the past 12 months, to prove the threshold has been met

The VAT Registration Procedure

After determining its registration obligation and gathering the necessary documents, a business must complete the application. In all GCC member states with VAT, registration is handled electronically through the official portal of the national tax authority. This online system is the only channel for submitting a VAT registration application.

The first action is to create a user account on the tax authority’s e-services portal. This step requires providing basic identification details for the business and the authorized person who will manage the tax account. After the account is set up and verified, the user can navigate to the VAT registration application form within the portal.

The applicant proceeds to fill in the required fields and upload digital copies of the documentation. The online form will ask for details about the business’s legal structure, its activities, turnover information for the last 12 months, and projected future turnover. The system will prompt for the upload of specific files, such as the trade license and owner’s identification.

After all information is entered and documents are uploaded, the system provides a final summary for review. Once the application is submitted, the portal will issue a reference number to track its status. The tax authority then reviews the application, and upon approval, issues a unique Tax Registration Number (TRN).

Managing Ongoing VAT Compliance

Receiving a Tax Registration Number (TRN) begins a business’s ongoing VAT compliance responsibilities. These duties include maintaining proper records, issuing correct tax invoices, and filing periodic VAT returns. Failure to adhere to these requirements can result in financial penalties.

Businesses must maintain a comprehensive set of financial and accounting records for a minimum of five years to allow the tax authority to verify VAT returns. Documents that must be retained include:

• Copies of all sales and purchase invoices
• Credit and debit notes
• Import and export documentation
• General ledger and subsidiary ledger accounts

When a registered business makes a taxable supply, it must issue a valid tax invoice. This document is the primary evidence for the transaction for both the supplier’s and the customer’s VAT accounting. A valid tax invoice must contain specific information:

• The words “Tax Invoice”
• The name, address, and TRN of the supplier
• The date of issue and a unique sequential invoice number
• A clear description of the goods or services supplied
• The unit price, quantity, and total amount excluding VAT
• The VAT rate and the final amount of VAT charged shown separately

The culmination of these activities is the filing of a VAT return. This is a periodic declaration to the tax authority summarizing the total output tax on sales and the total input tax on purchases during a tax period, which is quarterly or monthly. The net amount is calculated by subtracting total input tax from total output tax. If positive, a payment is due; if negative, the business can claim a refund or carry the credit forward.