UK: 
USA:
The pace of change within the world of VAT seems to come in ebbs and flows, with updates cropping up like proverbial buses (all turning up at once). It’s no shock then, that the GCC should be no exception.
We’ve put together a summary of some of the most recent developments from the past couple of months, looking at when new announcements could be made.
Oman VAT
Originally slated to introduce VAT in September 2019, Oman has pushed back the date for implementing its VAT regime until the early part of 2020.
This follows slower, albeit stable, growth for the country, which is still feeling the effects of the 2014 oil price shock. The sultanate’s plans to boost non-hydrocarbon based revenue seems to be working, with average 3-4 percent growth year on year.
Perhaps it’s not happening quickly enough however, as the IMF, despite recognizing Oman’s modest gains, earlier this month called upon the authorities to expedite the introduction of VAT.
Oman meanwhile, has since found itself caught in the middle between increasing tensions in the Gulf between US, UK and Iran, with potential knock-on effects to its oil and gas sector, which could be stymied as a result.
It stands to reason therefore that VAT is no longer a lofty aim, but an essential tool in generating a much needed boost to offset Oman’s deficit. Any inflationary impacts of the new VAT regime are predicted to be short-lived, with most economists estimating a 1 percent addition to inflation, subsiding after just a year.
The impending introduction of VAT and the revenue gains from the new Khazzan gas field were the main reasons cited by Fitch Ratings, who earlier this week affirmed Oman’s default rating at ‘BB+’ with a stable outlook. In its note, affirming the ratings, it said:
Oman’s sovereign external asset position remains for now stronger than other ‘BB’ category sovereigns, supporting the government’s financing flexibility.
OUR PREDICTION
Oman can ill-afford to rest on its laurels and with international pressure for VAT increasing, we expect announcements for timelines to be inbound imminently. Although if Bahrain was anything to go by, expect not a lot of time between official notification and ‘go live’ date. We recommend getting in contact now to make preparations to avoid any nasty surprises later.
Kingdom of Saudi Arabia VAT
The KSA introduced VAT back in 2018, making the nation one of the forerunners for indirect tax within the GCC. Since then, it has acted as something of a role model for other members, although like any nascent regime, it is still finding its feet when it comes to VAT.
In May 2019, the IMF checked to see how things were getting along and were generally pleased with their findings, granting the sovereignty an ‘A-/B+’ rating. It even went as far as to recommend that Saudi Arabia consider hiking up its VAT rates from 5% (but not without speaking to the rest of the GCC of course).
Whether this happens in the near term is anyone’s guess – particularly when 50% of the GCC nations still have yet to introduce VAT themselves. What we do now however, are the latest proposed changes to VAT legislation, in the form of the General Authority of Zakat and Tax Board’s Resolution, published earlier this week.
Courtesy of our friends at Aurifer – Dubai’s prestigious boutique accountancy firm, you can check out the unofficial English translation of the changes.
Bahrain VAT
The Kingdom of Bahrain officially went live for VAT on January 1st 2019, after a relatively short legislative process at the end of 2018. In the nearly eight months since launch, there have been a fair few disagreements and changes as the Kingdom’s constitution continues to be interpreted in different ways…
Cast your minds back to February 2019, just shy of two months after VAT was brought in, and you may remember hearing about a case against Bahrain Electricity and Water Authority (EWA). A Bahraini lawyer took the authority to court, arguing that that its decision to impose VAT on its customers was unconstitutional (as taxes should only be imposed through legislation). The plaintiff, Mohammed Al Thawadi, further argued that EWA is the only provider of its type in the country without competition, which was contrary to the conditions of imposing tax on commodities.
A bit of a tricky one, so much so in fact that the Second Supreme Court of Appeal has actually adjourned until September 2nd 2019, despite initially announcing that it would deliver its final verdict at the end of June. We’ll of course keep you updated when we find out more, but it just goes to show that nothing is ever set in stone…
…including rates and a growing list of exemptions apparently.
According to a report by the Gulf Daily News website, it was announced at a cabinet meeting on Monday, that there are plans to increase the number of government services that are VAT-exempt for Bahraini nationals by an additional 220, bringing the total number to 1,620. This surely represents a substantial workload for tax professionals who will again be scrambling around to ensure that news is cascaded and accounted for by businesses.
It’s a timely announcement however, right on the cusp of the second quarterly VAT returns and sixth monthly VAT returns becoming due on July 31st. No doubt the authorities have sensed the confusion, as at the end of June 2019, the National Bureau for Revenue released its VAT Return Filing Manual to help clarify things. Whether it’ll succeed or not is another matter indeed!
The moral of the story…
Even if VAT for a particular region or country has been seemingly written in stone, there are enough anecdotes that prove otherwise. Whilst ‘volatile’ might not be the best word to describe VAT regulation within the GCC, it does convey the right sense of changeability that exists within each regime. Tax solutions have to be built carefully, considerately and sturdily or risk falling apart / buckling under the strain of never-ending amendments. To discuss your options for GCC VAT – now and in the future – contact us now.
