Saudi Arabia Confirms GCC Unified VAT Agreement Updates

The Council of Ministers approved amendments to the GCC Unified VAT Agreement, enhancing cross-border VAT administration and allowing member states flexibility in setting VAT rates, while improving tax capture and cooperation.

The Council of Ministers has approved amendments to the GCC Unified VAT Agreement, which originally established harmonized VAT in the region (Saudi Arabia introduced VAT at 5% in January 2018, raised to 15% in July 2020 due to COVID-19 deficits).

Main changes:

• Cross-border goods: VAT will now be attributed to the country where goods are ultimately transported or consumed.
• Non-registered persons: If proof of VAT payment in the originating country is missing, the destination country may collect VAT at the point of entry.
• Rate flexibility: Each GCC country retains the right to set its own standard VAT rate under domestic law, provided it remains at or above 5% (unless exemptions or zero-rating apply).
• Transit goods: If goods enter one GCC country but are destined for another, VAT may be collected at the first entry point and later reconciled with the final destination.
• Registered businesses: VAT-registered businesses may account for import VAT directly through their VAT returns, depending on local implementation rules.
• Tax authority cooperation: New rules expand information exchange and access on intra-GCC transactions between member states.

The amendments refine administration of cross-border VAT and ensure proper tax capture across the region.