The Gulf Cooperation Council (GCC) framework has agreed on three VAT rates that may be levied by the member states with some degree of discretion. The first two are taxable supplies, while the third is a tax exempt supply.

  • Standard Rate
  • Zero Rate
  • Tax Exempt

Let us learn more about these taxes in detail,

1. Standard Rate

A standard rate is levied almost across all sectors and has been fixed at 5%.  All invoices will be required to show the tax value separately and the final bill value is the sum of the total plus the tax.

Businesses that quote a VAT inclusive price will be required to show the VAT charged separately in their invoices, rounded to the second decimal. All invoices must also show the VAT registration number to enable the buyer to claim VAT credit

2. Zero Rate

A zero rate means that the tax is computed at a zero rate. The invoice will be required to show the tax column, but with a zero rate and zero value.  It is important to show the zero value as subsequent transactions will not be allowed to off-set the tax charged for items in this category.

GCC List of Zero Rated Goods

  • Exports outside GCC
  • Food items as per GCC list
  • Medicine and Medical Equipment as per GCC list
  • Supply of sea, land and air means of transportation
  • International and Intra GCC transport and services
  • Charity organisations
  • Gold, silver and platinum – 99% and more purity
  • First supply after extraction of gold, silver and platinum

UAE:  Additionally:

  • Health and Education
  • Residential real estate – first supply

3. Tax Exempt

The Tax Exempt supplies are not charged any VAT, however any tax paid earlier on purchases of the item is not available for credit.

As an example consider a taxi service (local passenger transport) that is tax exempt and will not collect any VAT from passengers. Though it will not collect any tax it will not be able to get credit for the tax they have paid for purchase of motor vehicles.

GCC : Tax Exempt List

  • Imports of goods which are custom exempt
  • Local passenger transport
  • Bare Land

UAE: Additionally exempt

  • Residential buildings other than zero rated
  • Some specific financial services – margin based