How To Manage VAT Compliance Across Different GCC Countries

Different countries have specific VAT compliance regulations. And businesses are expected to stay up to date with these compliance requirements.

Moreover, compliance rules also change from time to time. And businesses that do not update their taxation systems with new requirements may end up paying penalties.

For instance, the Gulf Cooperation Council (GCC) region has undergone a significant transformation in its tax landscape since the implementation of Value Added Tax (VAT) began in 2018.

What started as a unified vision under the Common VAT Agreement has evolved into a complex web of varying rates, implementation timelines, and compliance requirements across member states.

For enterprises and SMEs operating across GCC, understanding these nuances is important for maintaining compliance and optimizing tax strategies.

In this blog, we discuss VAT compliance across GCC and how your business can navigate these rules.

Let’s get started!

What is VAT?

Value Added Tax (VAT) is a consumption levy imposed on goods and services at each stage of the production and supply chain. In contrast to direct taxation methods that target individual or corporate earnings, VAT operates as an indirect tax mechanism that captures value enhancement at multiple transaction points. Within the business ecosystem, VAT operates through a dual-component framework:

Input tax credits

Companies pay VAT on their business acquisitions, including raw materials, equipment, and professional services. VAT-registered entities possess the right to recover these input taxes through a credit system, ensuring that businesses act as collection intermediaries rather than bearing the tax burden themselves.

Output tax

Companies collect VAT from their customers when delivering goods or providing services. These collected amounts constitute output tax liabilities that must be remitted to the relevant tax authorities, completing the VAT cycle and fulfilling regulatory compliance requirements.

Current VAT implementation status across GCC states

To begin with, let’s start with the basics - the current VAT implementation status in the different GCC countries.

United Arab Emirates (UAE)

The UAE was among the first GCC states to implement VAT on January 1, 2018, maintaining the original 5% standard rate. The Federal Tax Authority (FTA) oversees VAT administration with mandatory registration for businesses with annual taxable supplies exceeding AED 375,000. Voluntary registration is available for businesses with turnover between AED 187,500 and AED 375,000.

Saudi Arabia

Saudi Arabia launched its VAT regime on January 1, 2018, initially at 5%. However, in a significant policy shift during the COVID-19 pandemic, the Kingdom tripled its VAT rate to 15% effective July 1, 2020, making it the highest rate in the GCC region. The Zakat, Tax and Customs Authority (ZATCA) administers the system with a mandatory registration threshold of SAR 375,000.

Bahrain

Bahrain implemented VAT on January 1, 2019, starting at 5%. The country later increased the rate to 10% on January 1, 2022, as part of its fiscal consolidation efforts. The National Bureau for Revenue (NBR) manages VAT administration with registration required for businesses exceeding BHD 37,500 in annual taxable supplies.

Oman

Oman was the most recent to join the VAT regime, implementing a 5% rate on April 16, 2021. The Tax Authority of Oman oversees compliance, with mandatory registration for businesses with annual taxable supplies exceeding OMR 38,500.

Kuwait and Qatar: pending implementation

As of 2025, Kuwait and Qatar remain the only GCC states yet to implement VAT. Kuwait has repeatedly delayed implementation, with political resistance and economic considerations affecting the timeline. Qatar, which was initially expected to launch VAT in 2024, continues to defer implementation amid changing economic priorities.

Key VAT compliance requirements by country

Each GCC state has established specific registration thresholds that determine when businesses must register for VAT, with detailed procedures and documentation requirements varying significantly across jurisdictions. Here’s a table with GCC VAT registration requirements.

Country

Mandatory registration criteria

Voluntary registration

Registration timeline and process

Required documentation

UAE

Annual taxable supplies exceeding AED 375,000 in the past 12 months or expected to exceed this threshold in the next 30 days.

Non-UAE resident businesses making taxable supplies if no other party is obligated to pay VAT.

Businesses importing goods from outside the GCC where import value exceeds the threshold.

Available for businesses with annual taxable supplies between AED 187,500 and AED 375,000.

Beneficial for businesses with significant input VAT that can be recovered.

Cannot deregister for at least two years after voluntary registration.

Must register within 30 days of exceeding the mandatory threshold.

Online registration through the Federal Tax Authority (FTA) portal.

Processing time typically 20-30 working days.

VAT certificate issued upon successful registration.

Valid UAE trade license

Memorandum and Articles of Association

Audited financial statements (if available)

Emirates ID copies of authorized signatories

Bank account details and bank certificate

Lease agreement for business premises

Additional documents may be required based on business activity

Saudi Arabia

Annual taxable supplies exceeding SAR 375,000 in any 12-month period

Expected to exceed the threshold within the next 30 days

Non-resident businesses making taxable supplies in Saudi Arabia

Available for businesses below the mandatory threshold

Particularly advantageous for businesses with substantial input VAT

Minimum registration period of two years applies

Registration required within 30 days of exceeding threshold

Online application through ZATCA (Zakat, Tax and Customs Authority) portal

Processing typically takes 15-20 working days

Integration with e-invoicing requirements mandatory from registration

Valid commercial registration certificate

National address registration

Articles of Association and bylaws

Financial statements (last two years if available)

Bank account opening letter

Authorized signatory documentation with Saudi ID/Iqama

VAT grouping documents (if applicable)

Business activity licenses specific to the sector

Bahrain

Annual taxable supplies exceeding BHD 37,500 in the previous 12 months or expected to exceed this amount in the next 12 months

Non-resident businesses making taxable supplies in Bahrain

Businesses importing goods from outside the GCC above the threshold

Available for businesses with annual supplies below BHD 37,500

Minimum registration period of two years

Cost-benefit analysis recommended before voluntary registration

Must register within 30 days of liability arising

Application through National Bureau for Revenue (NBR) online portal

Processing time generally 15-25 working days

Regular compliance training sessions available from NBR

Commercial registration certificate from Ministry of Industry, Commerce and Tourism

Memorandum and Articles of Association

Audited financial statements (where applicable)

CPR (Central Population Registry) cards of authorized persons

Bank account certificate

Lease agreement for registered address

Power of attorney (if using tax agent)

Sector-specific licenses where required

Oman

Annual taxable supplies exceeding OMR 38,500 in any 12-month period

Expected to exceed threshold within 30 days

Non-resident businesses making taxable supplies

Available for businesses below mandatory threshold

Particularly beneficial for export-oriented businesses

Two-year minimum registration period applies

Registration within 30 days of exceeding threshold

Online application through Tax Authority portal

Processing time typically 20-30 working days

Post-registration compliance briefing sessions available

Valid commercial registration from Ministry of Commerce

Articles of Association and company bylaws

Audited financial statements (if available)

Civil ID copies of authorized signatories

Bank account opening certificate

Municipal license for business premises

Professional licenses (where applicable)

Group structure documentation (for corporate groups)

VAT filing and payment frequencies

Most GCC states operate on quarterly VAT return periods, though monthly filing may be required for larger businesses or in specific circumstances. The standard filing deadlines are typically 28 days after the end of each tax period.

Record-keeping requirements

All implemented VAT regimes require businesses to maintain comprehensive records for a minimum of five years, including:

Tax invoices and supporting documentation
Import and export records
VAT registration certificates
Accounting records showing VAT calculations

Cross-border VAT compliance challenges

Supply chain complexity

Businesses operating across multiple GCC states face unique challenges in managing supply chains with varying VAT rates and exemptions. A product journey from Saudi Arabia (15% VAT) through the UAE (5% VAT) to Bahrain (10% VAT) requires careful documentation and compliance at each stage.

Digital services and eCommerce

The rise of digital services has created additional complexity, with each jurisdiction developing specific rules for digital supplies. The UAE introduced amendments to its VAT Executive Regulation in 2024 to address digital marketplace transactions, while Saudi Arabia has implemented comprehensive e-invoicing requirements through ZATCA.

Transfer pricing implications

With varying VAT rates across the region, businesses must ensure their transfer pricing policies account for VAT implications to avoid creating artificial advantages or disadvantages in different jurisdictions.

Recent VAT regulatory developments

There have been many recent developments in 2024 and 2025 that have continued to shape the GCC VAT landscape.

United Arab Emirates: Effective January 1, 2025, the provision of space for retail or promotional stands is no longer considered an exempt supply, regardless of rental period. Such supplies are now subject to VAT at the standard rate for VATable persons.

Saudi Arabia: The Kingdom has enhanced its e-invoicing requirements and continues to refine ZATCA's digital compliance framework, with ongoing updates to technical specifications for businesses.

Regional Coordination: The GCC states have been working toward greater harmonization of VAT rules, though significant differences in rates and specific provisions remain.

Best practices for multi-jurisdiction compliance

While each GCC country has its own VAT compliance regulations, many companies operate between two or more countries. VAT compliance becomes complicated for these companies. However, there are solutions to manage and streamline it. Here’s how:

Technology solutions

Implementing integrated VAT compliance technology becomes essential for businesses operating across multiple GCC states. Automated systems can handle varying rates, exemptions, and filing requirements while maintaining audit trails across jurisdictions.

Centralized compliance management

You must establish a regional tax function with expertise in each jurisdiction's specific requirements. This will help maintain consistent compliance standards while adapting to local nuances.

One way to do so is to partner with tax management solutions providers, such as Timber. Timber not only provides AI tax management technology, but also vetter tax accountants who understand tax compliance in different regions and can guide and assist you navigate tax management.

Regular review and updates

Given the evolving nature of GCC VAT regimes, you must establish processes for regularly monitoring regulatory changes and updating compliance procedures.

How Timber can help with VAT compliance and management

The tax landscape across the GCC continues to evolve rapidly, presenting both challenges and opportunities. To streamline your VAT compliance processes, you can partner with the AI-powered financial management solutions provider, Timber.

Timber provides a hybrid approach, combining advanced AI-based tax management features with the strategic expertise of human tax accountants. This comprehensive solution not only simplifies complex VAT and taxation processes via automation, it also provides businesses with personalized guidance from experienced professionals who understand nuanced compliance requirements.

Timber helps with VAT registration, tax registration, tax filing, tax compliance, and more. Here are some Timber features that can make VAT compliance a breeze for you:

Automated tax processing
Deadline management
Tax record management
Financial planning based on taxation
Human expertise support
Multiple subscription plans based on budget and requirement

Timber brings the best of both worlds—AI and human intelligence—together to help businesses in the GCC with comprehensive tax management solutions.

Explore Timber for your business!