Value-added tax unlikely to be applied for essential food items

The Gulf countries, in a bid to better balance their annual budgets, have mooted the idea of collecting Value Added Taxes (VAT) from residents.

However, market insiders say that VAT is unlikely to be applied to essential food items and socially-sensitive sectors such as healthcare and education, The Peninsula reported.

The GCC-member countries have agreed in principle to introduce VAT across the region from January, 2018. It means that the countries and business enterprises operating in them will face a tight timeline of 18 months to prepare for the opening phase of VAT implementation.

It is expected that the rate will be low, Marmore Mena Intelligence, a research subsidiary of ‘Markaz’ has said.

The complete details of the process are not yet public, and it is not fully clear whether all the member states will introduce the tax on January 1, 2018. As a general consumption tax, VAT will apply to the majority of commercial transactions in goods and services.

When VAT goes into effect, it will mean that businesses will be responsible for diligently documenting their revenue and costs and related VAT charges.

Businesses that meet a certain minimum annual turnover specification will have to register for VAT. Small businesses will not have to face the rigorous documentation and reporting that a tax regime like VAT needs. The businesses that offer goods and services that are not subject to VAT, will not have to register with the government.

Meanwhile, market enquires revealed retailers and traders in Qatar are largely oblivious of the proposed tax.

On the question about VAT and its ramifications on their businesses, most of the top executives of leading hypermarkets in Qatar seemed to have been caught off-guard. Others were not sure which department would deal with tax issues.