Greta Kemper is a senior VAT advisor in the tax advisory team at Martyn Fiddler Aviation. CTA and AIIT qualified, Greta has over thirty years’ experience ...Contact Greta Kemper
Introduction of VAT to the Gulf Cooperation Council (“GCC”) countries
Who are they? – the GCC is the regional political organisation incorporating the six oil rich gulf states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Traditionally these countries have enjoyed 'no tax' or 'low tax' regimes and aircraft have been imported or bought and sold there on the understanding that no tax is likely to apply.
Discussions had been ongoing for many years about the possibility of introducing a VAT style indirect tax. Finally in April 2017 the GCC VAT Framework Agreement was completed and published in the Saudi Arabian official gazette. This set out the structure for VAT to be implemented across the six GCC member states. The intended regional standard VAT rate was set at 5% and the target date for its introduction was 2018.
The UAE and Saudi Arabia have now implemented a VAT system with effect from 1st January 2018, with a VAT rate set at 5% on relevant transactions. There is also a zero rate which may apply to the sale of commercial aircraft, and there are also various exemptions from the tax which allow for no recovery of VAT on costs. The other four GCC countries are expected to introduce this system in 2019, although the target date may slip in some countries.
If you buy, sell or use aircraft in the UAE or Saudi Arabia this may affect your future transactions and we strongly recommend that you take local tax advice on any potential VAT impact.