Under the GCC Unified Value Added Tax Agreement, the mandatory VAT registration threshold is SAR 375.000, or the equivalent of this amount in the other member states' currencies. This is one unified figure set out in the Agreement itself, which each member state used as the basis for its own domestic tax legislation.

The Unified Agreement's Text on the Mandatory Threshold

Article 50 of the Agreement provides that a taxable person is required to register for the purposes of applying the Agreement if resident in a member state and the value of their annual supplies in that state exceeds, or is expected to exceed, the mandatory registration threshold. The Agreement fixed this threshold at SAR 375.000, or its equivalent in the currencies of the GCC states, while giving the Ministerial Committee (the Financial and Economic Cooperation Committee of the GCC states) the authority to amend this threshold after three years from the start of application.

The Non-Resident Person and the Tax Representative

The Agreement distinguishes between residents and non-residents: a non-resident person in a member state is required to register there regardless of the size of their business, whenever they are liable to pay tax in that state under the Agreement, and may register either directly or by appointing a tax representative approved by the competent tax authority, who then stands in their place for the rights and obligations set out in the Agreement.

The Optional (Voluntary) Registration Threshold

Article 51 allows a person who is not required to register to request voluntary registration if the value of their annual supplies — or, in cases the member state determines, their annual expenses — reaches the optional registration threshold, which the Agreement fixed at 50% of the mandatory registration threshold.

Illustrative example: Since the stated mandatory threshold is SAR 375.000, and the optional threshold equals, under the Agreement's own text, 50% of it, this arithmetically means an optional threshold equal to half that amount (or its equivalent in the member state's currency); this resulting figure is calculated from the stated percentage and is not itself a number stated as such in the Agreement's text.

How Is the Value of Annual Supplies Calculated?

Under Article 52, the value of annual supplies — excluding exempt supplies — is calculated on one of two bases: either the total value of supplies made by the taxable person at the end of any month plus the preceding eleven months, or the total value of supplies expected to be made. This means the test is not confined to the calendar or financial year, but is reviewed on a rolling, continuous, month-by-month basis.

A Taxable Person Making Only Zero-Rated Supplies

The Agreement addressed the case of a taxable person who makes only supplies taxable at the zero rate, allowing such a person to request exception from the requirement to register, subject to the conditions and controls set by each member state.

Legal References

For questions about your specific situation, you can ask the Tax & Legislation Helper for your country on Helpers, or consult a licensed chartered accountant.