VAT is on its way to the GCC

It is not clear when VAT will finally be introduced or the exact terms of how it is to be implemented but it is understood that there is a GCC-wide initiative to introduce VAT by 2019. The anticipation is that the tax will come into effect during 2018 with the GCC states having until 1 January 2019 to fully implement a VAT regime. Whenever the VAT regime comes into force those in the construction industry on long lead projects need to be thinking about it now.

In the GCC Contractors and Consultants are often requested to take the risk for any change in law during the project by excluding the right to increase the contract price for a change in law. For some, this is not acceptable, for others it is an acceptable risk to take in order to win new business. Those willing to take the risk should exclude the impact of the new VAT regime from their obligations, particularly where it has not been confirmed when the new regime will come into effect, the rate of VAT, and the full impact of the new regime is not understood.