Qatar's VAT implementation 2025 potential

This week, Finance Minister H E Ali bin Ahmed Al Kuwari acknowledged that although tax reforms continue to be a key focus in the Arab Gulf state, the potential inflationary cycle might impede the launch of tax reforms in 2022 or 2023. Qatar had previously postponed the introduction of a VAT regime amid the COVID pandemic when petrol prices experienced a decline.

Among the six states in the Gulf Coordination Committee, Qatar stands alongside another member as the only two states that haven't proceeded with a VAT union.

Qatar has been actively gearing up for the implementation of Value Added Tax (VAT). Their preparations involve:

1.Updating the tax authorities' IT infrastructure to support forthcoming changes.

2.Circulating draft implementing legislation to a restricted audience for review and feedback.

It's anticipated that the eventual VAT registration threshold will hover around QAR 364,000 per annum (approximately €88,600; $100,000). Regarding VAT reporting, Qatar is leaning towards a monthly reporting period, although they retain the flexibility to consider quarterly reporting, especially for smaller businesses.

The expected tax landscape involves:

•A standard VAT rate of 5% covering most goods and services.

•Zero rating applied to exports, international transport, and medicines.

•Exemptions for financial services, health, residential property and land, and education.

Speculation surrounds Kuwait's potential introduction of VAT in 2023, but resistance from parliamentary quarters remains substantial. Among the Gulf Cooperation Council (GCC) states, Kuwait stands apart as the only one yet to implement VAT, while Saudi Arabia, UAE, Bahrain, and Oman have already integrated their VAT regimes as part of a GCC VAT and customs union agreement.

Saudi Arabia notably raised its VAT rate from 5% to 15% in 2020 due to the oil demand downturn amid the COVID-19 crisis.

All six GCC states have signed the VAT Framework Agreement, mandating the introduction of VAT within agreed-upon parameters. This framework stipulates a unified standard rate of 5%, alongside zero-rating and exemption provisions.