VAT and Indirect Tax in the GCC - Deloitte US · VAT and Indirect Tax in the GCC. 10. Indirect tax....
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VAT and Indirect Tax in the GCC December 2015 1
Transcript of VAT and Indirect Tax in the GCC - Deloitte US · VAT and Indirect Tax in the GCC. 10. Indirect tax....
VAT and Indirect Tax in the GCC
December 2015
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Introduction to Indirect taxWhat is an indirect tax?
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OtherHotel/Tourist tax, environmental tax
Customs & Excise dutiesDuties on
imported goods
Sales TaxSingle-stage
general consumption tax
VATMulti-stage
general consumption tax
Indirect TaxAn indirect tax is a tax levied on the consumption of goods and services rather than on income or profits.
VAT and Indirect Tax in the GCC
How important are Indirect taxes?Statistics tell the story
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Source: OECD
% Average share of total revenue
36
31 32 3331 31 31
86 5 6 6 5 5
2630 30
2725 25
24
2
911
1719 19 20
9
8 88 10
8 9
1213
1619 20 20 2024
18
1613 11 11 11
0
5
10
15
20
25
30
35
40
1965 1975 1985 1995 2005 2010 2011
Consumption taxes – total
Personal income tax
General consumption taxes…of which VAT
Specific consumption taxesCorporate income taxes
Property taxes
VAT and Indirect Tax in the GCC
Overview of Indirect tax in the GCCCurrent Indirect Tax situation
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Qatar• No VAT• No Sales Tax• Customs duties (GCC)• Excise duties (GCC)• Other
Bahrain:• No VAT• No Sales Tax• Customs duties (GCC)• Excise duties (GCC)• Other
Saudi Arabia• No VAT• No Sales Tax• Customs duties (GCC
with some higher rates)
• Excise duties (GCC)• Other
Oman:• No VAT• No Sales Tax• Customs duties (GCC)• Excise duties (GCC)• Hotel/Restaurant Tax• Other
UAE:• No VAT• No Sales Tax• Customs duties (GCC)• Excise duties (GCC)• Hotel/Tourist Tax• Other
VAT and Indirect Tax in the GCC
The Tax Reform DebateWhat drives decision makers in the Middle East
• Growth in the top line to balance budgetsor generate surpluses
• Helps to responsibly fund historic or planned deficits Debt
• Provide for counter cyclical spending
• Hydrocarbon values notoriously volatile
• Replace ineffective/inefficient fiscal measures
Revenue stability
• General trending towards convergence
• Zero tax does not mean no tax burden
• Revenue loss can be to another country
International pressure
Demographics • Planning for an education hungry, older, future state with long term illness a feature of longer lives
5VAT and Indirect Tax in the GCC
Relative share of oil and non-oil revenues of GDP (%)
4733
5464
49
28
5367
4636
51
72
0
10
20
30
40
50
60
70
80
90
100
SaudiArabia
UnitedArab
Emirates
Qatar Kuwait Oman Bahrain
Oil Non-oil
119.
2
52.3
101.
6
71.1
86.1
74.3
116.
4
53.3
107.
5
77.6
90.7
73.3
Bah
rain
Kuw
ait
Om
an
Qat
ar
Sau
di
Ara
bia
Uni
ted
Ara
b E
mir
ates
Fiscal breakeven 2014/15
Source: IMF, Bloomberg Business Week Source: Financial times, OPEC
The Tax Reform Debate (Contd.)Revenue stability
6VAT and Indirect Tax in the GCC
4733
5464
49
28
5367
4636
51
72
0
10
20
30
40
50
60
70
80
90
100
SaudiArabia
UnitedArab
Emirates
Qatar Kuwait Oman Bahrain
Oil Non-oil
Where is Indirect tax heading in the Middle EastRevenue stability
Source: Bloomberg
$35
9
$825,946M$901,970M
$102
119.
2
52.3
101.
6
71.1
86.1
74.3
116.
4
53.3
107.
5
77.6
90.7
73.3
Bah
rain
Kuw
ait
Om
an
Qat
ar
Sau
di
Ara
bia
Uni
ted
Ara
b E
mir
ates
VAT and Indirect Tax in the GCC
VAT & GST Globally150+ countries have a VAT/GST
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Asia26
Oceania7
19 Countries In the Carribbean, Cenral & North America
11 Countries In South America
Africa44
Europe53
Americas30
VAT and Indirect Tax in the GCC
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Cons Pros
Overview of Indirect tax in the GCC (Contd.)Why VAT?
VAT and Indirect Tax in the GCC
Indirect taxes - Mechanics of VATVAT - A simple worked example
Forester
Cuts trees and sells to
AED10,000 + VAT
Makes table and sells to
AED30,000 + VATPayment of AED1,500
VAT
• Assuming a standard VAT rate of 5%
• Private customer bears the VAT cost
Glossary:
• Input VAT
• Output VAT
• VAT Return
• VAT Exemption
• Zero rate supplies
• VAT liability
• VAT refundPrivate
customer
Furniture manufacturer
Tax authority
10VAT and Indirect Tax in the GCC
Indirect taxComplications“Beyond the everyday world, both counsel have explained to us, lies the world of VAT, a kind of fiscal theme park in which factual and legal realities are suspended or inverted.”
11VAT and Indirect Tax in the GCC
Status of VAT in the GCCWhat we know
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6GCC Countries
3Year implementation from date of total
agreement 2 Year implementation in UAE
94Food items relieved from VAT
2Sectors broadly relieved from VAT
(healthcare and education) 5% is one of the
suggested rates for the GCC by the IMF
VAT and Indirect Tax in the GCC
• Strong likelihood of VAT implementation by at least some of the GCC countries
• Reasonably standard VAT model would be expected
• To be seen if a multi-country or single/dual country initial move
• Businesses likely to be given plenty of advanced warning (approximately two years)
• Other tax reform measures being expected from some of the GCC countries
− e.g.: Kuwait has already issued some Ministerial statements regarding the potential introduction of a uniform corporate tax on both foreign and local companies.
SummaryKey points to consider
13VAT and Indirect Tax in the GCC
Speaker biosIndirect tax contacts
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Stuart HalsteadDirector – Head of Indirect Tax Deloitte LLPUAE – Dubai Telephone: +971 (0) 45 064 700Email: [email protected]
Deloitte – Head of Indirect Tax
Andreas AgapiouAssistant Manager – Deloitte LLPUAE – Dubai Telephone: +971 (0) 45 064 852Email: [email protected]
Deloitte
VAT and Indirect Tax in the GCC
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