How VAT works between GCC states in 2026
The GCC planned an EU-style VAT system, but in practice trade between member states is taxed as exports and imports. Here is how it works today, and what the May 2026 amendments would change.
A single market on paper, export and import in practice
The GCC states signed a Unified VAT Agreement in 2016 designed to work like the EU's VAT system: supplies between registered businesses in different member states would be zero-rated by the supplier and taxed by the customer, an electronic services system would track cross-border transactions, and VAT would end up in the country of consumption. That system depended on all six states having VAT and on a shared electronic platform. Neither condition has been met: Qatar and Kuwait have not introduced VAT, and the electronic services system has not been implemented.
Each implementing state therefore applies transitional rules: until the system is in place, other GCC states are treated as non-implementing states, and supplies between them are taxed as international exports and imports. In practice, VAT between Saudi Arabia, Bahrain, the UAE and Oman works exactly as it would with a country outside the Gulf.
One framework, four rates, two gaps
| State | Standard VAT | Since |
|---|---|---|
| Saudi Arabia | 15% | Raised from 5% in July 2020 |
| Bahrain | 10% | Raised from 5% in January 2022 |
| UAE | 5% | January 2018 |
| Oman | 5% | April 2021 |
| Qatar | No VAT | Signed the agreement, not implemented |
| Kuwait | No VAT | Signed the agreement, not implemented |
The original agreement set a 5% standard rate; the different rates now in force are one reason the framework needed amending.
Goods and services
Goods leaving a VAT state
Zero-rated as an export by the supplier, with evidence that the goods left within the prescribed period.
Goods arriving in a VAT state
Import VAT charged at the border on the customs value plus duty, paid by the importer of record and recoverable if registered.
Goods to Qatar or Kuwait
Zero-rated as exports from the VAT state; no VAT on arrival, but customs rules apply.
Services to a GCC business
Generally zero-rated by the supplier as an export of services if the conditions are met, with the customer accounting for VAT under the reverse charge in its own state.
Services to GCC consumers
Often taxed in the supplier's state unless specific rules move the place of supply; digital services may require registration in the customer's state.
Non-resident registration
A business making taxable supplies inside another GCC state, such as DDP deliveries, must register there under that state's rules.
Saudi Resolution No. 887 of 19 May 2026
In May 2026 the Saudi Council of Ministers approved amendments to the GCC Unified VAT Agreement by Resolution No. 887 of 19 May 2026, amending five articles. They address intra-GCC supplies of goods, supplies to individuals and non-registered customers in another member state, the standard rate, recognising that member states may apply a rate of not less than 5%, import VAT, allowing VAT on goods to be collected at the first point of entry and settled with the destination state, and information sharing between tax authorities. Each member state must ratify and implement the amendments through its own law.
The direction is clear: VAT is to be allocated to the country of consumption, authorities are to share more data, and goods entering through one hub, such as Dubai, for distribution in another state could eventually have their import VAT handled once, with settlement between states. But the intra-GCC rules remain suspended until implemented, so the export and import treatment continues. Businesses should note the direction, check how their systems would handle it, and change nothing in their current filings until national rules change.
Even before the full intra-GCC rules start, closer data exchange between tax authorities makes inconsistencies more visible: a zero-rated export in one state with no matching import in another is the kind of gap that sharing is designed to reveal.
When VAT is paid in a state where you are not registered
A business that incurs VAT in another GCC state where it makes no supplies, for example on exhibition costs, hotels or local services, may be able to reclaim it under that state's refund scheme for non-resident businesses, subject to conditions including reciprocity and minimum claim amounts. The UAE, Saudi Arabia and Bahrain all operate such schemes. A business that makes taxable supplies in another state cannot use the refund route and must register there instead.
For groups trading across the Gulf, the practical result is a registration map: which entity is registered where, which supplies are zero-rated exports, which are local supplies requiring registration, and where refunds can be claimed. That map is worth maintaining centrally, because each state's authority sees only its own part.
One sale, three treatments
A UAE software and equipment company makes three sales in a month. It sells servers to a Saudi company, shipped from Dubai: an export, zero-rated in the UAE with export evidence, with the Saudi customer paying 15% import VAT. It sells an annual software support contract to a Bahraini company: an export of services, zero-rated in the UAE if the conditions are met, with the Bahraini customer accounting for 10% VAT under the reverse charge. And it sells servers to a Qatari company: zero-rated in the UAE as an export, with no VAT in Qatar but Qatari customs procedures on arrival.
If the GCC amendments are implemented in the future, the Saudi and Bahraini sales could move to an intra-GCC mechanism with closer reporting, and a sale to an unregistered Saudi customer could be handled differently. For now, all three are exports, and the company's evidence and invoice wording must support that.
Selling into the GCC's non-VAT states
Supplies from a VAT state to Qatar or Kuwait are the simplest case for VAT: the supplier zero-rates the export with evidence that the goods left, and there is no VAT to pay on arrival because neither country has introduced the tax. Customs is another matter. Both countries apply the GCC customs union rules, so goods on which duty was paid at the first point of entry elsewhere in the GCC should not be charged again if payment is proven, while goods arriving from a free zone or from outside the union are charged on entry. Qatar also levies excise tax on specific goods, including a sugar-based model for sweetened drinks since its 2026 amendment.
The absence of VAT does not mean an absence of paperwork. Qatar is preparing e-invoicing legislation, approved in draft in May 2026, and both countries expect accurate customs declarations, certificates of origin where preferences are claimed, and conformity documents for regulated goods.
What makes a zero rate stick
Export evidence
The exit customs declaration and transport documents linking the goods on the invoice to the shipment that left the country, within the prescribed period.
Invoice wording
An invoice that identifies the customer and its country, describes the goods or services, shows the zero rate and refers to the export.
Services
Evidence that the customer is outside the supplier's state and not present there when the service is performed, plus the contract describing the service.
Reconciliation
Matching exports in the VAT return to customs data and to the accounts; authorities now cross-check them, and will share more under the 2026 amendments.
A zero rate is a claim the supplier must be able to prove. Where the evidence is incomplete, the tax authority treats the supply as local and charges the standard rate, which on Saudi or Bahraini supplies is a significant cost that the customer will rarely accept retrospectively.
Five things to keep current
A registration map showing which entity is VAT-registered in which state and why; a flow map of goods and services between states with the treatment of each; export evidence filed by shipment; a list of refund claims for VAT incurred abroad; and a watch list of national implementation of the 2026 amendments. Groups that keep these five current find VAT audits in any one state far easier, because the answers to the other states' questions are already prepared.
Three practical steps
Keep applying the export and import treatment, tighten export evidence because authorities will share more data, and ask your ERP provider how it would handle intra-GCC supply codes and import VAT settled at first entry, so that implementation, when it comes, is a configuration change rather than a project.
Questions we get asked first
How is VAT applied to trade between GCC states?
Under transitional rules, as international exports and imports: goods leaving a VAT state are zero-rated with evidence of export, and import VAT is charged in the destination state.
Which GCC states have VAT?
Saudi Arabia (15%), Bahrain (10%), the UAE (5%) and Oman (5%). Qatar and Kuwait have not introduced VAT.
What did Saudi Resolution No. 887 of 2026 do?
It approved amendments to five articles of the GCC Unified VAT Agreement on intra-GCC supplies of goods, supplies to non-registered customers, rates, import VAT and information sharing. The intra-GCC rules remain suspended until implemented.
Are services between GCC businesses subject to VAT?
Generally they are zero-rated by the supplier as exports if conditions are met, with the customer accounting for VAT under the reverse charge in its own state.
Can I reclaim VAT paid in another GCC state?
Often yes, under that state's refund scheme for non-resident businesses, if you make no taxable supplies there and meet the conditions.
Should I change my VAT treatment because of the 2026 amendments?
Not until each state implements them in national law. Monitor the changes and check that your systems could adapt.
A common agreement, treated as international trade
Despite the GCC VAT Agreement, trade between Saudi Arabia, Bahrain, the UAE and Oman is taxed as exports and imports, with zero-rating on departure and VAT on arrival. The 2026 amendments point toward a coordinated system with more data sharing, but they are not yet in force. Keep export evidence, register where you supply, and watch for national implementation.
Trading across several GCC states?
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This article is general information, current as of 2026, and is not advice for any specific situation. Confirm current rules with the MOIC, the NBR or the relevant authority before acting.