Bahrain has committed to pushing towards the introduction of the Gulf Cooperation Council’s value-added tax framework by the end of the year.
“We’ll be working with parliament on VAT and aim to have everything set up by the end of 2018,” Reuters reported Minister of Finance Ahmed bin Mohammed Al Khalifa as saying February 21.
Having introduced value-added tax on January 1, 2018, the United Arab Emirates and Saudi Arabia became the first two states of the six-member Gulf Cooperation Council grouping to follow through on the bloc’s commitment to introduce a harmonized value-added tax. The other GCC states are Kuwait, Bahrain, Oman, and Qatar.
Initially, the tax was supposed to have been in place by 2012, but certain member states struggled to lay the technical and administrative foundations for the measure. Furthermore, there has been a great deal of internal resistance to the proposals from politicians, taxpayers, and businesses. As a consequence of these problems, the timetable slipped for the introduction of VAT repeatedly.
Finally, in June 2016, GCC finance ministers approved the VAT framework, which sets out the parameters of the regime that will apply in all member states. This was eventually signed in 2017, and the framework was published in May of that year, with a view to VAT being introduced across the GCC on January 1, 2018. However, the VAT framework did not stipulate that the tax must be introduced simultaneously by the member states on a certain date and so far only two have done so.
The framework provides for a basic VAT rate of five percent, with individual states permitted to exempt or zero-rate certain supplies as they see fit, including education, local transportation, health services, and real estate sales. In addition, each member state may zero-rate the oil and gas sector under the framework. A number of other supplies are zero-rated under the framework, including medicines and medical equipment, international transport services, precious metals, and exports to jurisdictions outside the GCC.
The framework also states that member states must exempt financial services performed by banks and financial institutions. Member states are required to subject foodstuffs to VAT at the basic rate, unless an exemption is approved by the Financial and Economic Cooperation Committee.
The mandatory registration threshold is set at SAR375,000 (USD100,000, or its equivalent in the GCC state currencies). There is a voluntary registration threshold, which is 50 percent of the mandatory registration threshold. The Ministerial Committee has the right to amend the mandatory registration threshold after it has been in force for three years.
Source Credit: Tax News