Role and importance of VAT inthe GCC Countries

Role and importance of VAT inthe GCC Countries

August 6, 2019 7 By Buy On Social

The Cooperation Council for the Arab States of the Gulf (GCC) met its Finance Ministers on June 16 to discuss the value added tax (VAT) and the treaties related to the Consumption Tax.Although these treaties have been approved, in principle, certain administrative issues still need to be resolved, particularly the tax collection mechanism related to intra-GCC trade. The GCC Committee must issue its recommendation in late summer.

The expected start date for VAT in a number of GCC countries is expected to be January 2018, and the Consumer Tax in January 2017The planned system will be a standard VAT of 5% to compensate for the impact of oil depreciation on its general budgets. VAT will be applied in principle to importation and local supplies of goods and services, with exports expected to be subject to 0%.

The Value Added Tax (VAT) impacts everyone’s finances. If VAT Registration is not taken into account when opting for a corporate form or when negotiating conditions with customers and suppliers, it can have a negative effect on the flow of funds or even become a cost. This is the most widespread national tax in Argentina, since it is included in the price of everything we buy. As individuals we pay them in any product or service, without discrimination, so we tend to see it as part of the final price. In fact, it is a tax designed to be issued by final consumers, although it is collected at each step of the production chain, according to the “added value” in each link.

It is very important to learn to correctly calculate the VAT that you will have to charge your customers on the invoices and the percentage that you will have to pay quarterly after the development of your activity.

Also Read: Know About the Records You Should Maintain For VAT Auditing

VAT Supported:

It is the tax that we, as freelancers or entrepreneurs, “pay” for the purchase of material. For example, if we buy Computers for our work office, we must “bear” the VAT related to this purchase. And being a necessary purchase for the development of my business, I can deduct the Tax.

Another clear example would be the purchase of stocks or finished products that I will then sell to an end customer. This purchase from the supplier, which also carries a specific VAT, may be deductible to the Treasury.Therefore, we could say that the VAT supported is the VAT of purchases and expenses. The VAT that appears on our invoices received.

Output VAT:

Role and importance of VAT inthe GCC Countries

It is very important to be clear that the economic amount of VAT Repercutido is not ours, but we must return it to the Treasury.Therefore, once we subtract the total amount of VAT Repercutted on the VAT supported, the Autonomous or Entrepreneur may make the quarterly settlement before the Treasury.

What can happen?

If Supported VAT is greater than Repercutted VAT then as a freelancer or company, you have paid more VAT on your purchase and expenses invoices than that VAT obtained for issuing invoices to the final consumer.By paying more VAT, you can deduct this amount from the Treasury (That is, they will return that difference).If VAT Repercutted is greater than VAT Supported then as a freelancer or company, you have received more VAT for the invoices issued than the VAT you have paid on your purchase and expenses invoices.When charging more VAT, you must pay it to the Treasury. (Pay the differential).

And in the issuance of my sales invoices, how do I apply VAT?

At the time of issuing your invoices as Autonomous, you will charge an amount related to a specific VAT, which you must retain, to later liquidate the Treasury.In most cases and professional services activities VAT must be applied to the Invoices.It is important to note that VAT is applied on the Tax Base. That is, on what the Autonomous or Company really should charge for the product or service sold.