In November 2016, Qatar signed the Gulf Cooperation Council (GCC) Value-Added Tax (VAT) FrameworkAgreement (the Framework) along with all other GCC member states. The Framework requires all member states to introduce VAT and establish national legislation, within the agreed parameters.

Explaining the VAT concept  :

VAT is a consumption tax levied on the sale of goods and services within (or imported into) a country. The ultimate cost of VAT is borne by the final consumer. Many jurisdictions allow businesses to offset the tax they incur when procuring goods and services, that are then used to create goods and services which they sell to their customers. This means that for businesses, VAT will not necessarily bring additional costs if controlled efficiently.

How does it work? 

All VAT registered traders are given a VAT number. They must provide customers with an invoice that shows how much VAT has been charged. Thus, the customer knows how much VAT they have paid. If they are a registered trader, they can then deduct this amount from the VAT they collected, paying the rest to their national tax authority. 

With this system, double taxation is avoided, and tax is paid only on the value added at each stage of production and distribution. The final VAT paid is thus the sum of VAT paid at each stage. 

Value added tax VAT introduction in Qatar :

Value Added Tax (VAT) was expected to be introduced in Qatar on July 1, 2024. The standard VAT rate is expected to be 5%, but there will be some goods and services that will be exempt from VAT or subject to a 0% VAT rate.

Exempt goods and services (expected):

• Education and healthcare services
• Financial services
• Real estate transactions
• Basic food items
• Exports and international transportation

Goods and services subject to a 0% VAT rate (expected):

• Goods and services exported outside the Qatar
• International transportation
• The supply of crude oil/natural gas
• The first supply of residential real estate
• Some specific areas, such as health care and education

VAT registration:

Businesses with taxable supplies of goods or services that exceed QAR 375,000 per annum shall be required to register for VAT. There shall also be a voluntary registration threshold of QAR 187,500 per annum. Non-resident businesses making supplies on which the Qatar VAT is required to be charged shall also be required to register for VAT.

An example of VAT in GCC :

Retail sales: When a customer buys a smartphone for AED 1,000 in the UAE, with a 5% VAT rate, they pay AED 1,050 (AED 1,000 + AED 50 VAT). The retailer then remits the AED 50 VAT to the government.

Qatar hasn’t implemented VAT yet. It is expected in 2025 since it wasn’t applied in April as expected . In the project, the estimated tax rate of 5% is indicated,since it is the rate in most countries that have signed an agreement with the GCC Single Commission.

Businesses in Qatar may need to prepare by registering for VAT, updating accounting systems, and possibly training staff to manage VAT-related documentation. VAT-registered businesses will be able to reclaim VAT paid on purchases related to their taxable activities, similar to how VAT is handled in other GCC countries, including Saudi Arabia and the UAE. The new VAT regulations are expected to bring increased compliance requirements and adjustments in pricing structures across many sectors.

Join Walvis , your partner for a streamlined bookkeeping, to have more informations about bookeeping and taxation.