Technical advice & information for business

How VAT will impact your GCC business

There will be specific legislation governing each companies’ obligations when it comes to VAT, but if you are engaged in any form of business activity in the Gulf region, most likely there will be several points to take into consideration:
  • Do I need to update my ERP/accounting system to reflect the correct tax treatment of transactions in the region?
  • Should we consider training/educating our employees about VAT?
  • What is the risk we might face if we are not compliant?  
  • Do we need to charge the VAT on our sales?
  • If we pay VAT, will we be able to recover it?
  • Is my business obligated to register for VAT and file tax returns?
Which sectors are subject to VAT?

The GCC’s Framework Agreement set some mandatory areas for zero-rating in all six Member States (such as exports of goods and services outside the GCC, medicines and investment metals). Individual countries are however able to elect whether exemptions or zero-rates apply in some other sectors.

The regulations reflect that Saudi Arabia has chosen a broad tax base, with VAT applying to almost all supplies of goods or services, subject to limited exceptions. The table shows the main sectors which are subject to VAT in KSA.
  • Sector
  • VAT Application
  • Sector VAT Application
  • Fee based services: Taxable
    Margin based services: Exempt
  • Insurance
  • All non-life insurance: Taxable
    Life Insurance: Exempt
  • Food Services
  • All Taxable
  • Education*
  • All Taxable
  • Health*
  • All Taxable
  • Real Estate
  • Residential Rental: Exempt
    All other real estate: Taxable
  • Local Transport
  • All Taxable
  • Oil and Gas
  • All Taxable
  • International Transport
  • Zero-rated

*Services provided by public education and health providers in the KSA are not expected to be subjected to VAT, as government entities will in many cases not be carrying on a business for VAT purposes.