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Jun 25, 2022

Qatar will wait for ‘right time’ for VAT introduction: Minister

Foreign Affairs News Correspondent
Image credit Government Communications Office.
Image credit Government Communications Office.

Qatar is expected to introduce Value Added Tax (VAT) in the near future.

“We will look at the right time to apply such (VAT) taxes which are part of our reformation plans,” said Qatari Finance Minister Ali bin Ahmed Al Kuwari in an interview to Bloomberg Television during a sideline business at Qatar Economic Forum in Doha the other day.

“Qatar isn’t isolated from global tailwinds,” stressed Minister Al Kuwari.

VAT is a broad-based tax as it also covers the value added to each commodity by a firm during all stages of production and distribution. It is a modern tax system to improve the collection of taxes, to increase efficiency and to lessen tax evasion.

Currently, Qatar operates a territorial taxation system which means an individual is taxable in Qatar if one has generated qualifying Qatar-source income, regardless of one’s tax residence.

But income tax is not imposed on employed individuals’ salaries, wages, and allowances.

Qatar and Kuwait are two Arab economies in the Gulf region without value-added tax. These Gulf nations have not imposed VAT or sales tax on operations in their countries.

Though both are under a common Gulf Cooperation Council (GCC) framework which over half a decade have signed the agreement, paving the way for the introduction of VAT that requires all six members (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) of the GCC.

Saudi Arabia will charge 15% VAT from 2020 to bolster state revenue whereas the UAE began collecting 5% VAT starting January 1, 2018.

A standard rate of 10% Value Added Tax (VAT) has been applied in the Kingdom of Bahrain with effect from January 1, 2022.

The 5 % VAT law comes into force in Oman from April 16, 2021.

A value-added tax, known in some countries as a goods and services tax, is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer.

Qatar hasn’t yet chosen when to go ahead and was wary of adding an extra burden on consumers. But as per the KPMG report, Qatar was expected to impose a 5% VAT during 2022.

Among the biggest beneficiaries from higher energy prices the gas-rich tiny nation Qatar is on track to run a large budget surplus could be the reason the wealthy nation is not approaching the urgency of introducing VAT.

There is no VAT in the British Virgin Islands. There is no VAT in Brunei. There is no VAT in the Cayman Islands.

In Nepal,13% VAT was introduced on November 16, 1997. This tax was levied in place of the Sales Tax, Hotel Tax, Contract Tax and Entertainment Tax.

However, it could not be implemented fully until FY 1998/99 due to political instability and strong opposition from the business community.

VAT replaces the old Sales Tax, Contract Tax, Hotel Tax and Entertainment Tax. It has been designed to collect the same revenue as the four taxes it replaced. Since the collection of both customs duties and income tax depends, to a great extent, upon the effectiveness of VAT, it is expected to help enhance revenue collection.

VAT is also regarded as the backbone of the income tax system of the country.

Bahamas doesn’t charge any income tax to its residents. Endowed with breathtaking beaches and a fast-growing economy, Bahamas is one of the most livable nations in the world. The no income tax policy is the cherry on the cake.