Glossary Of Terms

This refers to Common VAT Agreement of the States of the Gulf Cooperation Council. As part of the objectives of The Charter of the Arab States of the Gulf Cooperation Council (GCC), a policy designed to strengthen regional cooperation, the GCC member states agreed to sign a Unified VAT Agreement to implement Value Added Tax; a tax on the consumption of goods and services. The tax is imposed on importation (exceptions may apply) and the transactions of goods and services at each stage of the supply chain. The tax is in line with the existing Unified Economic Agreement between GCC countries, an agreement that aims to develop economic ties to coordinate and standardize economic, financial and monetary policies. Closer integration will help to strengthen the GCC and continue working towards the establishment of a unified regional economy.

VAT was implemented on January 1, 2018

Administrative Penalties are amounts charged to a Person by the Tax Authority for a breach of the provisions of the VAT Law and Regulations.

Business-to-Consumer

Business-to-Business

Business-to-Government

B2C Supplies are supplies made by a VAT registered person to a VAT unregistered person (e.g. a private individual).

B2B Supplies are supplies made by a VAT registered person to a VAT registered person.

Consideration is something (the value) received either in money or kind in exchange for goods and services.

Customer is a person who receives goods or services.

Common Customs Law is the Common Customs Law of Member States of the GCC.

Capital Assets refers to business assets designated for long-term business use.

Capital Assets Scheme is a scheme by which initially recovered Input VAT is adjusted based on actual use of the capital assets during a specified time.

Charities are societies and associations of public welfare not aiming to make a profit.

Direct Export is an export of goods to a destination outside of the implementing state and where the supplier is responsible for the transport of the goods to its customer.

Economic or Business Activity is an activity that is conducted in an ongoing and regular manner including commercial, industrial, agricultural or professional activities or services or any use of material or immaterial property and any other similar activity.

Exempt Supply is the specific supply of goods and services where no VAT is charged and no VAT recovery on associated costs is allowed.

Export of Goods is the supply of goods outside of the country.

Fixed Establishment is any fixed place of business, other than the Place of Establishment, where a taxable person conducts his business regularly or permanently and where sufficient human and technology resources exist to enable the taxable person to supply or acquire goods or services, including the taxable person’s branches.

First Point of Entry is the first customs point of entry through which goods enter the GCC territory from outside of GCC in accordance with the Common Customs Law.

Final Destination Point of Entry is the final customs point of entry through which Goods enter the final destination State within the GCC Territory.

The acronym for the Gulf Cooperation Council

All countries that are full members of The Cooperation Council for the Arab States of the Gulf (i.e. Saudi Arabia, Bahrain, Kuwait, Qatar, Oman and the United Arab Emirates), each of which is referred to as a Member State.

Goods refers to material property or assets including water and all forms of energy such as electricity, gas, lighting, heating, cooling and air conditioning.

Government Entities are government institutions such as Federal and local ministries, government departments, government agencies, authorities and public institutions in the Member State.

Input Tax is the VAT (currently 5.0%) paid by a person on the purchase of goods and services. Generally, the input tax is recoverable against the output VAT on the supply of goods and services.

Intra-GCC Supplies are supplies of goods or services by a supplier who resides in a member state to a customer who resides in another member state.

Import of Goods is the entry of goods into the country.

Implementing States refer to GCC Member States who are implementing the VAT Law pursuant to the GCC Unified VAT Agreement.

Indirect Export is an export of goods to a destination outside of the country, where the overseas customer is responsible for the transport of goods from the supplier.

The VAT Law and any relevant regulations and legislations issued by each GCC Member State.

Legal Representative is a manager of a company or a guardian or custodian of a minor or incapacitated person, or any other Person appointed legally to represent another Person.

Mandatory Registration Threshold is the minimum limit of the value of actual supplies at which the taxable person becomes obligated to register for VAT purposes.

Nominal/ Deemed Supply is Assignment of goods forming part of assets for purposes other than economic activities whether with or without consideration, or Changing use of goods or services from taxable supplies to non-taxable supplies permanently or temporarily, or Retaining goods after cessation of VAT registration, or Supply of goods other than samples or commercial gifts or services, without consideration, or Use of the goods which form part of the assets of the business for non-economic activity purposes, or Supply of services for free.

Non-Resident is any person who does not own a Place of Establishment or Fixed Establishment in the State and usually does not reside in the State.

Output Tax is the VAT (currently 5.0%) charged to a person on the supply of goods and services.

Partial exemption is the method for determining recovery on non-attributable overhead expenses on mixed supply (taxable supply and exempt supply).

Place of supply is the location or country where the VAT will be accounted and reported to the relevant local tax authorities.

Place of Establishment is the place where a business is legally established, or where significant management decisions are taken and central management functions are conducted.

Place of Residence is the place where a Taxable Person has a Place of Establishment or Fixed Establishment, in accordance with the provisions of the Decree-Law. In the case of a natural person, if he does not have a Place of Establishment or Fixed Establishment, it will be his usual place of residence. If a taxable person has a Place of Residence in more than one Member State, the place of residence will be considered to be in the place most closely connected with the supply.

Person is natural or legal/ juridical person.

Reverse Charge Mechanism refers to purchase of service from outside of the country persons whereby the customer becomes liable to pay the tax due (i.e. Output Tax) on behalf of the supplier, but at the same time is allowed to reclaim the tax as input tax, thus producing a nil net effect. For United Arab Emirates, the scope of Reverse Charge Mechanism includes “imported goods and services”

Related Parties are two or more taxable persons where one has supervisory or direct control over the others to influence the business of the other persons from a financial, economic or regulatory aspect

Supply of Goods is the transfer of ownership of goods or the right to dispose such goods as the owner, or Nominal / Deemed supply of goods, or Disposal of goods under an agreement, or Compulsory Transfer of the ownership of goods for consideration based on a decision issued by the public authorities or by virtue of any law.

Supply of Services is any supply which is not a supply of goods and includes making available of facility or advantages or agreeing to performing activities/services.

Supplier is a person who supplies goods or services.

Services refers to anything other than Goods.

Standard Rate is the mandatory (currently 5.0%) VAT to be imposed on supply of goods and services.

A Taxable Person is a natural or juridical person who performs an Economic or Business Activity independently for the purpose of generating income, and who is registered or required to register for VAT.

Taxable Supply is supply which is subject to VAT and made by a taxable person in the conduct of business or economic activity.

Taxable Trader is a taxable person in any member state whose main activity is the distribution of oil, gas, water or electricity.

Tax Period is the period of time when the Net Output Tax or Input Tax must be accounted with the tax authorities.

Taxpayer is any person obligated to pay the VAT in the State, whether a taxable person or end consumer.

Tax Registration is a procedure whereby a taxable person or his legal representative registers for VAT purposes with the Tax Authorities.

Tax Evasion is the use of illegal means by a Person to lower the amount of VAT, or non-payment of the VAT, or a fraudulent refund of VAT.

Tax Invoice is a written or electronic document which contains the details of the taxable supply.

Tax Credit Note is a written or electronic document which contains any amendment to a taxable supply as per the tax invoice.

Tax Registration Number (TRN) or Tax Identification Number is a unique number issued by the Tax Authorities for each Person registered for VAT purposes.

Tax Group refers to two or more persons registered with the tax authorities for VAT purposes as a single taxable person in accordance with the provisions of the member’s state VAT Law.

VAT is a general tax on consumption of goods and services. It is an indirect tax and collected in a multi-staged process throughout the supply chain.

Voluntary Registration Threshold is the minimum limit of the value of actual supplies at which the taxable person may apply to register for VAT purposes.

Voucher is an instrument that gives the holder of the voucher the right to receive goods or services against the value stated in the voucher or the right to receive a discount on the price of the Goods or Services.

VAT Return is a summary of all the taxable supply and purchases during the period and the related input VAT and output VAT.

Zero-rated Supply is the supply of goods and services where VAT is charged at 0% and VAT recovery is allowed on associated costs.

Zero Rate is the mandatory 0% VAT to be imposed on supply of goods and services which are not subject to VAT nor are VAT-exempt.