Under the GCC Unified VAT Agreement, if a taxable supplier resident in one member state provides a service to a taxable customer resident in another member state, the place of supply is the customer's place of residence, not the supplier's, and the customer is the one required to self-account for the tax through the reverse charge mechanism.
The General Rule: Residence Determines the Place of Supply
Article 15 of the Agreement provides that the place of supply of a service made by a taxable supplier is the supplier's place of residence. This is the default rule that applies unless the Agreement provides otherwise.
The Exception: Supply Between Two Taxable Persons (B2B)
Article 16 carves out an exception to this rule for a service supplied by a taxable supplier to a customer who is also a taxable person: in this case the place of supply is the customer's place of residence, not the supplier's. This exception is the basis on which consultancy, professional, and administrative services between businesses operating in more than one Gulf state are treated.
The Reverse Charge Mechanism
Article 9 provides that where a taxable person in a member state receives taxable goods or services from a person resident in another member state, they are treated as if they had supplied those goods or services to themselves, and this supply is subject to tax under the reverse charge mechanism. The same mechanism applies where a taxable person resident in a member state receives services from a person who is not resident in the territory of the GCC states at all (i.e. from outside the GCC). In practice, this means the customer, not the supplier, is the one who calculates and declares the tax due, instead of placing the burden of registration in the customer's state on the non-resident supplier.
What If the Customer Is Not a Taxable Person?
The exception in Article 16 is explicitly limited to a supply made to a customer who is also a taxable person. If the customer is not a taxable person (such as a final consumer), the general rule in Article 15 applies instead, and the place of supply is the supplier's place of residence, not the customer's. This means the customer's status — taxable or not — is what determines which of the two articles governs the transaction.
Transferring Goods Between Two Member States
Article 6 of the Agreement addresses an analogous case for goods rather than services: a taxable person who transfers goods forming part of their assets from one member state to another is treated as having made a supply of goods, unless the transfer is temporary under the temporary admission conditions of the Common Customs Law, or forms part of another taxable supply in the other state.
Legal References
- GCC Unified Value Added Tax Agreement (annexed to Bahrain Decree-Law No. (47) of 2018) — Article (9): Reverse Charge
- GCC Unified Value Added Tax Agreement — Article (15): Place of Supply of Services (General Principle)
- GCC Unified Value Added Tax Agreement — Article (16): Place of Supply of Services Between Taxable Persons
- GCC Unified Value Added Tax Agreement — Article (6): Transfer of Goods from One Member State to Another
For questions about your specific situation, you can ask the Tax & Legislation Helper for your country on Helpers, or consult a licensed chartered accountant.
