The Cooperation Council for the Arab States of the Gulf ( مجلس التعاون لدول الخليج), known as the Gulf Cooperation Council (GCC), is a regional intergovernmental political and economic union consisting of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
The GCC nations have been concerned with an excessive reliance on oil income and are looking into the tax as an additional revenue source. VAT is on the table to be implemented by 2018, but income, business tax and even taxes on foreign workers’ profits are being considered too.
Until now, the GCC countries’ tax systems suffer a very limited personal and corporate income tax (primarily focused on non-GCC nationals business and professional activities), and the IMF has recommended balancing the implementation of new taxes to develop an organic tax system.
In the indirect tax front, the Excise Tax and VAT treaties will regulate how the GCC countries will implement both taxes by 1st of January 2017 and 1st of January 2018, respectively. No doubts that VAT will have the highest impact and the proposal is to start in 2018 at 5% and progressively increment it up to 10%.
The incorporation of taxes to a traditionally tax-free area has its risks. For sure it will improve the GCC economy by diversifying a heavily oil base economy. However, there is the short-term danger of preventing qualified international workforce to join GCC at a competitive salary, because a tax-free element is an essential factor in any salary package.