Saudi Arabia has approved amendments to the GCC Unified VAT Agreement aimed at strengthening cross-border VAT rules, improving import VAT collection, enhancing refund mechanisms, and expanding tax information exchange across Gulf Cooperation Council member states.
Saudi Arabia’s Council of Ministers has approved amendments to the GCC Unified VAT Agreement on covering cross-border supplies within the Gulf, VAT recovery mechanisms, import VAT collection, and the sharing of tax information between member state authorities.
The GCC Unified VAT Agreement establishes a common legal framework for VAT across Gulf Cooperation Council states, covering goods and services supplies. Saudi Arabia formally approved it via Royal Decree (m/51, H3/5/1438), with the agreement published in Um Al-Qura issue 4667.
The Common VAT Agreement of the GCC States is a unified legal framework designed to establish a general tax on consumption across the member states: the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar, and Kuwait. The agreement aims to advance economic integration and develop similar financial legislation to promote the GCC economy.
Core tax principles and rate
The agreement mandates the imposition of Value Added Tax (VAT) at a standard rate of 5% on the import and supply of goods and services at each stage of production and distribution. VAT is broadly applied to taxable supplies made by a taxable person within a member state’s territory, the receipt of services from non-residents via a Reverse Charge Mechanism, and the importation of goods.
Place of supply rules
The determination of the place of supply is essential because it identifies which member state has the right to levy VAT. For goods, the place of supply is generally where the goods are located when made available to the customer if no transport is involved, or where transport begins if goods are shipped. In the case of intra-GCC supplies to taxable persons, the place of supply is shifted to the state where the transport ends.
For services, the general rule is that the place of supply is where the supplier is established. However, in B2B transactions between taxable persons, this rule changes, and the place of supply becomes the customer’s place of residence. Certain sectors follow special rules, such as real estate (based on the property location), transportation (based on where transport begins), and telecommunications (based on actual use or enjoyment).
Registration and compliance
The framework sets out clear VAT registration thresholds. Mandatory registration applies when a resident taxable person’s annual taxable supplies exceed SAR 375,000 or its equivalent in local currency. Voluntary registration is permitted for businesses whose supplies or expenses exceed 50% of the mandatory threshold, i.e., SAR 187,500.
Taxable persons are also required to maintain proper records, including tax invoices, accounting books, and related documentation for at least five years. For real estate-related transactions, the retention period is extended to fifteen years, reflecting the longer-term nature and higher compliance risk in this sector.
Special tax treatments
While the standard VAT rate is 5%, the system provides for preferential treatments to support economic and social objectives. Zero-rated supplies include exports outside the GCC, international and intra-GCC transport, investment-grade precious metals (gold, silver, platinum with at least 99% purity), as well as medicines and medical equipment.
Member states retain discretion to exempt or zero-rate certain sectors such as education, healthcare, real estate, and domestic transport. In addition, financial services provided by licensed institutions are generally exempt, although individual states may adopt different treatment approaches depending on policy choices.
Intra-GCC cooperation
To support consistent implementation and enforcement, the agreement emphasises strong administrative cooperation and information exchange among member states. The GCC Secretariat General is responsible for establishing a centralised tax information system and electronic platform to monitor intra-GCC transactions.
This system records key data such as Tax Identification Numbers (TINs), invoice details, and transaction values. The objective is to improve transparency, prevent tax evasion, and ensure accurate reporting across member states.
