GCC adopts several fiscal measures to offset COVID-19 impact

Qatar has exempted food and medical items from customs duties for six months

E TENSIVE fiscal measures have been put in place across the GCC, with a view to offsetting the impact of the coronavirus (COVID-19) on individuals, businesses and the broader economy, Oxford Business Group (OBG) has said in its latest report.

Measures have primarily been aimed at stimulating economic activity in the private sector and supporting entities that are struggling to manage their cash flows and tax compliance.

Emergency tax measures introduced in the region include the extension by several months of due dates for filing tax returns, the reduction or elimination of penalties for the late submission of tax returns, and the introduction of tax payments in installments, the report said.

While such changes are not specifically tailored to the smaller, more vulnerable businesses in the region, the report said, they will play a key role in keeping many small and medium-sized enterprises (SMEs) afloat.

“Most of these measures do not differentiate between large and small businesses. However, they usually have a greater positive impact on SMEs than on big corporations,” KPMG’s Wadih Abou Nasr told OBG.

In Qatar, several commodity classes including food and medical items have been exempted from customs duties for six months.

A similar relaxation of Customs duties has been seen in Oman, where it is also possible for donations made towards fighting the COVID-19 pandemic to be treated as a tax-deductible expense during the 2020 tax year.

Meanwhile, the UAE has introduced a 20 percent refund on customs fees on imported products sold in Dubai.

Saudi Arabia has also put in place several tax measures aimed at easing the burden for the local business community, among them, extending the deadline for filing tax returns, amending fines

on all late payments and waiving various expatriate levies.

However, in a significant regional divergence, Saudi Arabia announced in early May that it would be increasing the VAT rate from 5 percent to 15 percent as of July 1.

The GCC originally agreed to introduce a 5 percent VAT rate in 2016, with the UAE and Saudi Arabia the first to introduce the tax in 2018. To date only Bahrain has followed suit, introducing the tax in 2019.

The original 2016 agreement came amid pressure from international bodies such as the IMF to reduce state largesse and implement new fiscal mechanisms to broaden revenue streams across the region.

This latest decision by Saudi Arabia once again coincides with significant turmoil in global oil markets as a result of the coronavirus pandemic, with muted demand coming up against oversupply.