Value Added Tax VAT in Qatar: Everything You Need To Know

Value Added Tax (VAT) is a type of tax that is levied on the price of a product or service at each stage of production (or import), distribution, or sale to the end consumer. The ultimate cost of VAT is borne by the final consumer.

As it is expected that VAT in Qatar would be implemented soon, this article takes a look at how it would impact business entities and common people.

As of 2021, Qatar has not implemented Value Added Tax in the country. However, it is expected that Qatar would impose the tax soon.

History of VAT in Qatar

In November 2016, Qatar signed the Gulf Cooperation Council (GCC) value-added tax (VAT) Framework Agreement along with all other GCC member states. The Framework requires all Member States to introduce VAT and establish national legislation, within the agreed parameters.

The Framework is a treaty, not a law, however, it provides a clear overview of how the VAT system is intended to be implemented in the region.

It acts as the basis for the domestic VAT legislation in each Member State by stipulating certain principles, which must be followed by all members, while allowing the countries to opt for different VAT treatments concerning some supplies.

Current status of the Framework

  • Three GCC states (Saudi Arabia, UAE and Bahrain) have now implemented VAT, with the remaining three due to implement by 2022. Saudi Arabia hiked VAT rates to 15 per cent in May 2020.
  • Oman has recently confirmed that it will introduce a VAT system aligned with the GCC VAT framework with effect from 16 April 2021.
  • Kuwait and Qatar are the only two remaining GCC member countries that have delayed the implementation of the VAT system.

Implementing VAT in Qatar

While there have been no official announcements about the implementation of VAT in Qatar, financial experts expect the State to implement VAT within a year.

The government and independent financial zone authorities continue to make progress with their regulatory legislative drafting. Qatar’s General Tax Authority (GTA) is also continuing with its ongoing preparations including the introduction of the state’s new tax administration system, Dhareeba.

What is the Dhareeba tax portal?

It is an integrated digital platform for managing tax transactions in the State of Qatar, utilizing the latest technology (SAP Global Business Management System).

It connects the General Tax Authority with its partners such as taxpayers and relevant government organizations. The portal helps users manage, calculate, review the different types of taxes, and receive updates about tax transactions.

What rate will VAT be charged in Qatar?

The anticipated rate of VAT in Qatar is 5%.

VAT is calculated as a percentage of the sale price of goods and services. As per the Framework, one of two rates will apply, depending on the type of goods or services being sold – either 5 per cent (standard rate) or 0 per cent (zero tax rate).

Impact of VAT in Qatar on Business

The introduction of VAT in Qatar will have a big impact on businesses and private individuals, in particular:
• Consumer and industrial products
• Technology, media and telecommunications
• Financial services
• Real estate

The exact details about the industries affected will be only available once the law is announced.

Impact on Cost of Living

Though the VAT rate is minimal compared to other countries in the world, it will surely affect the overall cost of living in the region.

There will be a minimal rise in the cost of living depending on the lifestyle and spending preferences of the individual.

The principal advantage of VAT is that it brings additional revenue for the government to better the public services.

Exemptions to VAT in Qatar

Some goods and services (e.g. some financial services and supplies in the real estate sector) will be exempt, which means that VAT will not be charged when they are sold. It needs to be seen if essential items like basic food and medicines are exempted.

VAT-registered businesses will be able to claim credit for VAT paid on their expenditure, relating to their taxable business activities.

According to expert financial consultants, businesses must plan to implement VAT as soon as possible, as it is likely that there will not be a lot of time between the publication of the local law and the go-live date.

References:

KPMG, Deloitte, PWC, Pinsentmasons


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