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Value Added Tax (VAT) in the GCC

Frequently asked questions | Volume 2


VAT FAQ | Answering your VAT questions

Contents

04 05
Treaty and legislation Registration

07 08
Taxable transactions Forms, reporting etc

09 10
Financial services Electronically supplied services

11 12
Imports and exports Free trade zones

13 14
Transitional issues Reverse charge and special rules

15 16
VAT reliefs Appeals

17
Input tax

03
VAT FAQ | Answering your VAT questions
Treaty and legislation

Treaty and legislation


Is the Agreement published? Which countries will implement VAT
The GCC VAT Agreement has been signed on 1 January ?
by all six GCC member states and has The issue of local laws in the KSA and
been published in Arabic by the Kingdom United Arab Emirates (UAE) confirms
of Saudi Arabia’s (KSA) Ministry of Finance earlier announcements by these countries
wesbite. Deloitte’s English translation is that VAT will be introduced domestically in
available on its website. January 2018. It is unclear when the rest
of the countries will implement currently
What is happened in KSA? but this is expected to progressively
The KSA has now finalized and published happen through 2018.
its domestic VAT law and VAT regulations.
This follows earlier consultations run on What is happened in the UAE?
draft versions over the summer. Together The UAE published its VAT law on 27
with the finalized GCC Agreement, the law August, confirming many of the details of
and regulations form the formal legal the domestic VAT rules which had been
framework for the introduction of VAT signaled in an earlier Frequently Asked
across all sectors from 1 January 2018. Questions document issued by the
Federal Tax Authority, such as the sectors
Taxpayers have now been provided with eligible for exemptions and zero-rating.
the full complement of rules to
understand their obligations and the The publication of the law is the first step
impact of VAT for their businesses. The in the establishment of the complete VAT
VAT registration portal for all businesses framework in the UAE. The VAT Executive
eligible to register is now available Regulations are currently still in the
through the ERAD system. process of being prepared and approved,
and it is expected that they will be
Do you think that there will be much enacted and made public before the
variance in application of the rules end of summer.
between member states?
There will be a level of variance in
application of the rules across the GCC
member states. Similar to the EU,
there are some provisions which are
compulsory, and others which are
optional, and others where there is a
choice to be made on treatment at a
local level. How each member state
approaches the implementation of these
provisions is likely to depend on their
individual policy settings, economy, etc.

04
VAT FAQ | Answering your VAT questions

Registration
Registration
What are the VAT registration very likely to also have an establishment Will associations of persons (e.g. open
requirements? for VAT purposes in that country. The bar consortium) be considered as a
An established business in the GCC for a PE is arguably higher than that for taxable person?
performing economic activities must having an establishment for VAT Whilst the GCC Agreement does make
register for VAT if it performs taxable purposes. Where it is unclear which reference to companies being able to
supplies or imports that exceed the establishment of a legal entity (i.e. the form VAT groups, it does not specifically
mandatory registration threshold of head office or the PE) has made the confirm the legal form required to be VAT
SAR375,000 (or the local equivalent) and supply then an analysis would be required registered.
may choose to register for VAT voluntarily as to the establishment most closely
if its supplies and imports are less than connected with the supply. Where such a Will there be a common system of
the mandatory registration threshold but PE is considered to be making taxable VAT registration so you can check
exceed the voluntary registration supplies, a VAT registration would be whether you are dealing with a
threshold of SAR187,500. required. taxable person?
The GCC Agreement envisages an
When to use your VAT number Will zero-rated supplies count for the electronic matching system for intra-GCC
A customer VAT number will be needed registration threshold? systems. In practice we do not think this
to enable a supplier of goods and services Yes, the taxable supplies including zero- system will be available for a while and so
to a recipient in another GCC country to rated supplies count for the registration it is likely a VAT number checking system
invoice without VAT. In the long run, a threshold. However, note that it might be will be made available country by country.
portal to enable the checking of VAT possible that some GCC member states
numbers is expected to be made will allow, under certain conditions, a Will a business selling across the GCC
available. company which only makes zero-rated be liable to register in each member
supplies to be excluded from the state if only established in one?
Method of registration mandatory registration on request. The A business selling across the GCC will only
VAT registration is expected to be largely UAE and KSA have indicated that they may be required/entitled to register for VAT in
online. Additional documentation may be allow such exclusions in certain cases. another member state if the nature of its
requested offline (likely to vary by GCC supplies of goods and services requires it
member state). If only residents can be VAT to be (e.g. the place of supply is in another
registered, does this mean that GCC member state and the reverse
Language used for registration offshore companies cannot be VAT charge mechanism cannot be used).
The expectation is that the registration registered?
platform will be available in English. This There is a requirement for non-residents Will businesses established in one
is confirmed to be the case for KSA and to register for VAT in the GCC, in the event GCC member state and providing
the UAE. that they need to pay VAT on supplies services to individuals (i.e. non-
made by them in a GCC member state taxable persons) in another member
Establishment VAT registration (e.g. the place of supply is in the GCC and state be required to register for VAT
requirement the customer is not able to self-account in that second member state?
If an entity has a Permanent for the VAT due under the reverse charge It is unlikely that a second registration
Establishment (PE) for corporate tax mechanism). would be required. The place of supply for
purposes in a member state, then it is services supplied to individuals is normally

05
VAT FAQ | Answering your VAT questions
Registration

the country of the supplier, which would


require the supplier to charge VAT from
the country in which the supply is made.

Will there be group registration for


companies in the GCC?
Based on the GCC Agreement, member
states do have the discretion to
implement VAT groups. The UAE and KSA
laws indicate that grouping will be
available for groups of legal persons
established in these respective countries,
depending on control requirements being
met.

Can we ‘VAT group’ establishments in


different GCC states?
We do not expect that it will be possible to
‘VAT group’ entities across GCC member
states (e.g. grouping a KSA and a UAE
entity), however we do expect the majority
of member states to adopt local VAT
grouping provisions as best practice.

06
VAT FAQ | Answering your VAT questions

Taxable transactions
Taxable transactions
Which supplies will be subject to interpretation of which services qualify The customer's VAT number in the
standard rate? under this rule may differ from country to destination is required, along with suitable
The standard rate of 5% VAT will be country. It is hoped that countries will evidence that the goods have been
applied across all six of the countries. This broadly follow the EU model, but they may shipped to that location - and the
is expected to apply to substantially all of in practice consider other factors, such as customer self-accounts for local VAT in
the domestic supplies made in the normal where the services are carried out or the the country of receipt.
course of business. location of a beneficiary.
Export of goods (outside of the GCC)
Applicable exemptions and zero rates Use and enjoyment for ESS Again this is expected to operate along the
Various exemptions and zero rates will Use and enjoyment provisions exist for the lines of goods being exported outside of
apply but individual GCC members have supply of electronically supplied services the EU, with the sale of exported goods
a degree of flexibility as to whether to (ESS) and telecoms. It is hoped in most being zero-rated (with the right to input
standard rate, exempt or zero rate. These instances VAT on B2B ESS will be reverse VAT recovery). Suitable evidence that the
areas broadly include education, real chargeable by the recipient. goods have been exported/shipped would
estate, healthcare, financial services, and need to be retained.
transport. The rules released for the UAE Purchase of international services
and KSA show that member states will take The purchase of international services Intra-GCC cross-border purchase of
differing views on exemptions and zero- (both intra GCC and from outside the GCC) goods
rates; so it is important that businesses are to be treated as reverse-chargeable. Where there is an intra-GCC cross-border
confirm the final rules in each member This is broadly expected to operate in the sale of goods, VAT will be accounted for
state. same manner as the EU system with a fully under the reverse-charge in the GCC
taxable customer charging output VAT and member state of destination (again, akin
GCC international services to a taking an (equal and offsetting) input VAT to the EU rules).
taxable customer credit in its VAT return.
The place of supply of intra-GCC Where the customer is not a taxable
international services (excluding Branch to head office (or branch to person there will be distance selling rules
exceptions for services closely connected branch) transactions that apply once the local VAT registration
to the country of performance or to land Branches of the same legal entity would threshold is exceeded requiring the
and buildings) to a taxable (business) not be viewed for VAT purposes as distinct supplier to account for VAT in the
customer will be the location of the legal entities. Consequently, supplies of destination country, before that, the place
recipient of the service, with the recipient services between a head office and of supply will be the destination country.
in another GCC member state required to branch, or between different branches of For suppliers not exceeding that threshold
reverse-charge local VAT. The customer’s the same legal entity should (in principle) of distance sales, the place of supply will
VAT number in their member state of be disregarded for VAT purposes (i.e. no be in the supplier’s country.
establishment must be shown on the VAT supply).
invoice to evidence the taxable status of
the customer in their member state. Intra-GCC cross-border sale of goods
(taxable customers)
Export of services outside of the GCC The sale of goods transported from one
(taxable customer) GCC member state to another is expected
This is an area where the GCC Agreement to operate along the lines of the EU, with
is light on detail. The supply of services to no VAT being charged on a cross-border
recipients not established in the GCC will sale.
be zero-rated in principle, but the

07
VAT FAQ | Answering your VAT questions
Forms, reporting, etc

Forms, reporting, etc


Is there a specific form for the tax submission of VAT returns could be payable. Conditions for actually receiving a
invoice? applicable to large taxpayers and cash refund (versus a carry-forward credit)
Based on the GCC Agreement, each quarterly submission of VAT returns to may vary by GCC member state. For the
member state must determine the form small and medium taxpayers. An UAE that may be in the form of ticking a
of the tax invoice, the period of time for its additional annual return is not expected box on the return asking for a VAT refund
issuance and the invoice’s contents. Each to be required (although this is ultimately (although the exact position is still to be
of them may allow the issuance of for each individual GCC member state to finalized).
simplified invoices under specific terms determine).
and limitations. To be valid, a tax invoice
issued by a taxable person should include Does the VAT framework specify any
specific information as requested by each other aditional reports? For instance,
member state. For example, based on intra-GCC sales/purchases listing?
international practices this may include: Not explicitly, but given the desire to share
• Date of issuance; information between member states, it is
• Name, address of the supplier and likely that businesses performing
customer and their tax identification transactions within the GCC will have to
number references; report and complete additional form(s).
• A description of the goods delivered or Further guidance may be provided by
services rendered and the each member state in this respect.
corresponding quantity;
• The VAT rate applicable and the VAT Filing of returns
amount payable in the currency of the Returns are expected to be filed online via
member state where the place of supply populating the various data through an
is located. online filing platform. It is not expected
that an XML upload, or SAF-T type file will
Is VAT to be charged in local currency be required, although such a requirement
only? What about GBP or US$ billing? may be introduced in due course (but
Even if the suppliers issue their invoices in in any case not for go-live on 1 January
different currencies, it is expected that a 2018).
tax invoice will contain the VAT amount in
the local currency. Filing will have to be Information required in VAT returns
done in the local currency. This information is not expected to be
published until later in the year and may
What will be the VAT return filing vary by GCC member state. The UAE is
requirement? Will it be expected to have boxes for sales to each
monthly/quarterly? of the seven Emirates.
Each GCC member state will specify this
under the local VAT regulations but our VAT repayment
expectation is that it will be on a monthly Where a taxpayer’s input tax exceeds
or on a quarterly basis. Monthly output tax, a VAT refund is, in principle,

08
VAT FAQ | Answering your VAT questions

Financial services
Financial services
Will the exemption be only for UAE has stated that the standard
interest-based products? Or will apportionment method should be the
certain fee-based services be exempt? ratio of recoverable input tax to total input
The GCC Agreement foresees that tax incurred.
financial services performed by banks and
certain financial institutions shall be VAT Further guidance should be provided by
exempt. It is expected in both the UAE each member state at a later stage
and KSA that fee-based financial services regarding the above and also in respect of
will be taxed but margin-based products the use of other apportionment methods
are likely to be exempt. However, the rules if they are fair and agreed with the tax
could be different in other GCC countries authority.
and further guidance will need to be
provided at a later stage in that respect, Can input VAT be recovered on
indicating the products and services that 'specified financial services'?
could potentially benefit from a VAT The GCC VAT Agreement does not
exemption. explicitly state that input VAT can be
recovered on “specified financial supplies”
Will Islamic banking transactions be (i.e. certain financial services provided to
treated on par with conventional non-GCC resident customers). However, it
financial transactions for VAT - is conceivable that some member states
e.g. the buy and sell of underlying will permit input VAT recovery on specified
commodities will be taxable supplies financial supplies especially when one
and input tax creditable? considers that the GCC VAT Agreement
To ensure that there are no envisages exported services will be
inconsistencies between the VAT zero-rated.
treatment of standard financial services
and Islamic Finance products, the VAT Will insurance be taxable?
treatment of Islamic Finance should be It is expected that insurance may well be
aligned with the treatment of similar taxable, with the possible exception of life
standard financial services. Each member insurance (which is likely to be exempt in
state may provide further guidance in due the UAE and KSA, for example).
time.

What input recovery mechanisms will


be available for financial services?
Businesses will be expected to apportion
partially recoverable input tax between
the taxable and non-taxable supplies.
Member states are entitled to direct the
apportionment method. For example, the

09
VAT FAQ | Answering your VAT questions
Electronically supplied services

Electronically supplied services


Does the GCC VAT Agreement clarify Saying that, although unlikely at the
as to whether electronically supplied beginning of the VAT implementation, it
services (ESS) by offshore providers is possible that member states could
are subject to VAT in the GCC? attempt to expand the scope of the use
Based on the GCC Agreement, use and and enjoyment provisions when they
enjoyment provisions should apply to implement their own domestic VAT
electronically supplied services. It will be legislation. This is something that will need
up to each GCC member state to define to be checked once the domestic VAT
those services in more detail. The place legislation for each GCC member state
of supply will be the GCC member state has been released.
where the ESS is used and enjoyed. If
the customer is a VAT registered taxable Furthermore the zero-rating for exported
person, it may be able to self-account for services may be limited to those services
the VAT due under the reverse-charge not effectively used and enjoyed locally,
mechanism. However, if the customer for example.
is not VAT registered (e.g. an individual
consumer), then the offshore provider will
likely have to register for VAT in the GCC
member state where the service is used
and enjoyed, so it can charge VAT.

Is there any risk of use and


enjoyment (UE) beyond electronic
services?
Based on the GCC VAT Treaty the use
and enjoyment provisions only apply
to the supply of wired and wireless
telecommunication services and
electronically supplied services. It will be
up to each GCC member state to define
those services in more detail and draft
appropriate VAT legislation to implement
the GCC Agreement correctly.

10
VAT FAQ | Answering your VAT questions

Imports and exports


Imports and exports
Are imports subject to VAT? Will there be any deferral of import
Import VAT will be payable in addition VAT?
to any customs duty due on movements It is our expectation that, in line with
of goods into the GCC. However, if the international practice, there will be a
importer of record is VAT registered, it is possibility to defer import VAT in several
likely that there will be a reverse-charge of the GCC member states.
mechanism available in the UAE to allow
the importer to ‘pay’ and ‘recover’ the Are indirect exports (ie. exports by
import VAT at the same time, mitigating customer) zero-rated?
any cash flow impact. KSA has indicated it Based on the GCC Agreement, exports
may also allow payment of import VAT should be subject to the zero rate.
through the VAT return in some cases, and However, it is up to each member state
other GCC countries to determine what qualifies as an export
may have similar mechanisms in their and the conditions that need to be met.
domestic laws to reduce the cash flow KSA and UAE have indicated that indirect
burden for importers. exports may qualify for the zero-rate, but
the exact conditions - and indeed the
What about goods in transit between rules in other countries will need to be
GCC member states? confirmed in due course.
If goods are imported by a taxable person
from outside the GCC and then goods are Exports are subject to the zero rate;
then moved to another GCC member does it mean that I can refund what
state, VAT will be payable at the first point I have paid previously as VAT?
of import. This VAT will be recoverable only Where a VAT-registered business
in the destination country, however. performs zero-rated activities (e.g. export
of goods), the VAT charged on any
If you have a customs duty corresponding expenses should be
exemption, will there be VAT on recoverable in full, provided these relate
import? to those zero-rated supplies. Further
We understand that certain customs duty guidance can be provided by each
exemptions (e.g. diplomatic exemption) member state in this respect.
may apply to VAT on import. However
there may be some which may not be Is there any provison planned for
included; we would recommend local law simplified triangulation?
be examined once available. The GCC Agreement does not foresee any
provision for the simplification of
triangular transactions. Further guidance
may be provided by the Executive
Regulations at a later stage in this respect.

11
VAT FAQ | Answering your VAT questions
Free trade zones

Free trade zones


Are there any special economic/ Will a company in the free trade zone
export zones? be required to register for VAT?
Yes, the UAE has a number of free trade It is widely believed that a distinction will
zones (FTZs). These FTZs confer a number be made between fenced free zones and
of benefits to those that operate within non-fenced zones. If that is the case then,
them. It has yet to be confirmed how VAT the non-fenced zones would not benefit
will interact with these FTZs. There may be from any rules deviating from the normal
a difference in the application of VAT in regime. Supplies in the fenced zones
the FTZs depending on the type of FTZs would presumably be treated as outside
and the type of supply being provided. It of the UAE for VAT purposes. The UAE
has been the subject of considerable Ministry of Finance is expected to provide
lobbying. The rules for free zones are more detail in this respect. As a
expected to be finalized within a two- to consequence, whether a company in a
three-month timescale. free trade zone is required to register for
VAT or not may depend also on other
transactions made.

12
VAT FAQ | Answering your VAT questions

Transitional issues
Transitional issues
What about advance payments How will VAT apply on transactions
received prior to services performed involving any GCC states which have
or invoices issued if payments were not yet introduced VAT?
made in 2017 for services performed In cases where GCC states have not yet
in 2018? introduced VAT locally, it is expected that
When receiving advance payments in these states will be treated as third
2017 prior to services being performed countries - for the purpose of the rules on
or when issuing invoices for services intra-GCC trade - until they have
performed in 2018, the advanced implemented a domestic VAT system.
payment or issuance of a tax invoice may Transitional rules applying in each country
create a tax point in 2017 (i.e. prior to the should be confirmed in due course.
implementation of VAT) depending on the
time between the receipt of payment and
the services being performed/invoice
issued. We recommend the legislation
with regards to tax point and any
transitional provisions are reviewed in due
course by affected taxpayers, as there
may be transitional provision in place to
ensure that businesses do not ‘artificially’
shift the tax point to avoid a VAT liability.

How about VAT on contracts which


are effective from the pre VAT period
to the post VAT period?
Where there is no VAT clause (or other tax
clause dealing with VAT) in existing long-
term contracts, the basic principle is that
the price specified in the contract is
inclusive of VAT and the supplier will have
to bear the VAT. There may be transitional
provisions in each country's domestic VAT
law to deal with long-term contracts
entered into after a particular date
(indeed, the UAE and KSA Regulations are
expected to include such provisions), but
these should be confirmed in each
country in due course.

13
VAT FAQ | Answering your VAT questions
Reverse charge and special rules

Reverse charge and


special rules
What is the difference between Is a reverse charge only applicable for It is important to note that these special
reverse charge and a normal import? B2B transactions or is a B2C cases are not compulsory for member
In principle, when any registered person transaction also within the scope? states to implement into local VAT law.
imports, acquires or buys goods or The reverse charge can only be Therefore, there could be differences in
services from abroad, that person must performed by a VAT-registered person. treatment between each member state.
pay any VAT that is due. The mechanism Therefore, cross-border B2C supplies For example, the Ministry of Finance in the
for this depends on whether the goods or cannot be subject to the reverse charge. UAE has confirmed it is going to
services are received from the GCC and implement specific VAT refund schemes
the specific rules in each member state. Do branch offices in the GCC need to (except for farmers and fishermen, where
account for reverse charge where there will be no special arrangement).
Reverse charge is a mechanism under they receive a service from a branch
which VAT is required to be paid outside the GCC? Who defines the status as a charity?
for the goods or services by the recipient In principle, supplies made within the Will a UK charity automatically
instead of the supplier when the supplier same legal entity (e.g. between a branch qualify as a charity in the GCC?
is not a resident in the member state and head office) will be outside the scope It is unclear what the domestic definition
where the supply takes place. When the of VAT - but individual countries may have of ‘charity’ will include in each country.
reverse charge is applied, the recipient of special rules to require VAT to be charged Based on our general understanding, we
the goods or services makes the in some cases. expect any entity defined as a charity
declaration of both their purchase (input under the relevant local rules and
VAT) and the supplier’s sale (output VAT) Are supplies to government regulations to be considered as a charity
in their VAT return. In this way the two subject to VAT? for VAT purposes.
entries cancel each other from a cash Under the GCC Agreement, member
payment perspective in the same return. states have the discretion to exclude Is gas, water etc. considered as
certain categories from paying VAT or supply of goods?
Imports are goods brought into the state create a special VAT refund scheme for We confirm that, in conformity with
from outside the GCC. As a general rule, them. These are referred to as special international practice, our expectation is
imported goods are liable to VAT at the cases and include: that gas and water will be treated as a
point of entry into the state. In most • Government bodies designated by supply of goods for VAT purposes.
cases, a registered taxpayer can reclaim each member state;
the VAT paid on the goods they have • Charities and public service Will there be a second-hand margin
imported as input tax. The taxpayer will establishments designated by each scheme?
need the import VAT document to show member state; The GCC Agreement envisages that there
that import VAT has been paid. • Companies exempted as per the will be a margin scheme system available
international event hosting agreements; to member states. We expect the UAE and
Individuals and non-registered persons • Citizens of member states when KSA to implement such a system and it
must also pay VAT on imported goods, but constructing homes for private use; seems likely the other GCC countries will,
will not be able to recover this as input • Farmers and fishermen who are not but this is currently unclear.
tax. required to register for VAT.

14
VAT FAQ | Answering your VAT questions

VAT reliefs
VAT reliefs
Are textbooks (education) zero-rated? In our view, it is more likely that any zero-
Under the GCC Agreement, there is no rate in other countries will be restricted to
specific zero-rating provision for printed the production and supply of oil and gas
matter. However, the member states have itself, in line with the UAE approach, rather
the discretion to implement a zero rate than being applicable to other suppliers,
or a VAT exemption for the education such as engineering consultants.
sector. The GCC Agreement does not However, it is possible that some member
define what supplies fall within the states could widen the scope of the zero
education sector and it will be up to rate to include broader services in the oil
each member state to do this. For sector.
example, the UAE has already confirmed
that education will be zero-rated. What is the VAT treatment of gold?
Therefore, it is certainly possible that the The GCC Agreement requires silver, gold
supply of student textbooks could fall and platinum to be zero-rated where it is
within the scope of a VAT relief for bullion standard. Jewellery would still be
education in some member states. subject to the standard rate of VAT.
However, the VAT law of each member
state will need to be reviewed to confirm
whether the supply of textbooks is subject
to a zero rate or not. The UAE has not yet
confirmed whether the zero rate for
education will extend to textbooks.

Is there a zero rate for the oil & gas


sector?
Under the GCC Agreement, the member
states have the discretion to subject their
oil, oil derivatives and gas sector to the
zero rate according to the terms and
limitations set by each member state.
Therefore, it is up to each member state
to define the scope of any zero rate that
could apply to the oil sector. The UAE law
includes a zero-rate for unrefined oil and
gas and a broader reverse charge for B2B
transactions in the sector, whilst KSA has
not included any zero-rate for the sector
in its laws.

15
VAT FAQ | Answering your VAT questions
Appeals

Appeals
Will there be an overriding GCC However, there does not appear to be
court/abitrator to deal with an intention to establish a GCC-wide VAT
complexities and disputes? Court or overarching GCC arbitrator for
Under the GCC Agreement, the member disputes with the tax authorities (such
states agree to share information as the CJEU in the EU). This would mean
regarding the application of VAT and each that neither domestic tax authorities nor
member state should establish domestic taxpayers will have recourse to refer
appeal courts. Appeals will ultimately be domestic appeals to a GCC regional
handled through the general court court for clarification on the application
system (as opposed to a specialist tax of VAT law.
court). For the UAE the process of appeal
is expected to work along the following In the future, such a GCC court, or a
lines: mechanism for referring VAT questions
1) Request reconsideration of a position at a GCC level, may be introduced,
adopted by the tax authority; particularly if member states interpret
2) Appeal committee; the GCC VAT Treaty differently and it
3) Court system. creates a distortion of competition
across the GCC. However, there is
The member states also agree to work currently no legal basis for this under
together to settle any disputes amongst the GCC VAT Treaty.
themselves, or enter into arbitration if
agreement cannot be reached on any
aspect of the VAT implementation.

16
VAT FAQ | Answering your VAT questions

Input tax
Input tax
Input VAT Will input tax be offset against output
The documentation required to support tax on the VAT return?
an input VAT claim will be a valid VAT Input tax is usually recovered through the
invoice or customs documentation (for tax return itself by offsetting it against the
imported goods). VAT on employee output tax declared, and if the amount of
incurred expenses should, in principle, be input tax being recovered exceeds the
recoverable (subject to having appropriate amount of output tax being declared, the
documentation, such as invoices, etc.), but taxable person shall, in principle, be
this is unlikely to be specifically covered in entitled to a refund. The conditions and
individual member states’ VAT law. This timeframes for payment of refunds to
may be an area that just plays out over taxpayers will be determined by member
time. states as a matter of administrative
practice.
Can non-resident enterprises recover
input VAT?
Non-residents of the GCC territory may
be allowed to apply for refund of VAT
incurred in the UAE and KSA if the
following conditions are met:
• They do not supply goods or services for
which they are liable to pay VAT in the
refunding country;
• They are registered for VAT/GST in their
country of residence or they would be if
such a system were in place;
• The VAT has been paid by those persons
in the course of carrying out their
economic activities.

It is not clear whether refunds will also be


allowed to such persons for VAT incurred
in other member states.

17
This publication has been written in general terms and therefore cannot be relied on to
cover specific situations; application of the principles set out will depend upon the particular
circumstances involved and we recommend that you obtain professional advice before acting
or refraining from acting on any of the contents of this publication. Deloitte & Touche (M.E.)
would be pleased to advise readers on how to apply the principles set out in this publication
to their specific circumstances. Deloitte & Touche (M.E.) accepts no duty of care or liability for
any loss occasioned to any person acting or refraining from action as a result of any material
in this publication.

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Deloitte & Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is
a leading professional services firm established in the Middle East region with uninterrupted
presence since 1926. DTME’s presence in the Middle East region is established through its
affiliated independent legal entities which are licensed to operate and to provide services
under the applicable laws and regulations of the relevant country. DTME’s affiliates and
related entities cannot oblige each other and/or DTME, and when providing services, each
affiliate and related entity engages directly and independently with its own clients and shall
only be liable only for its own acts or omissions and not those of any other affiliate.

Deloitte provides audit, tax, consulting, and financial advisory services through 25 offices in
14 countries with more than 3,300 partners, directors and staff. It is a Tier 1 Tax advisor in the
GCC region since 2010 (according to the International Tax Review World Tax Rankings). It has
also received numerous awards in the last few years which include best Advisory and
Consultancy Firm of the Year 2016 in the CFO Middle East awards, best employer in the
Middle East, the Middle East Training & Development Excellence Award by the Institute of
Chartered Accountants in England and Wales (ICAEW), as well as the best CSR integrated
organization.

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