Banks and other financial service providers in Qatar will need to think carefully about their procurement processes, operating models and systems to prepare for the upcoming introduction of value-added tax (VAT), said KPMG’s global head (indirect tax-financial services sector) Gert-Jan van Norden.
Van Norden was in the country to address senior professional at a seminar organised by KPMG in Qatar to provide insight into how the introduction of VAT will affect the financial services sector. The seminar was the latest in KPMG’s ‘Freshly Brewed’ series, which brings together banking CFOs to discuss industry trends and topics.  
Last month, most GCC (Gulf Cooperation Council) countries signed a framework agreement to introduce VAT at a rate of 5%. Individual member states will now draft domestic legislation in the coming months, with implementation scheduled to start on January 1, 2018. Countries, which may not be ready by the scheduled launch date, may be granted an extension to January 1, 2019 at the latest.
While the draft framework and legislation have not yet been published, Qatar’s legislation is likely to mirror global best practice. It is probable that the country’s financial services providers will feel the impact of VAT more than other sectors, as elsewhere in the world, financial services providers are exempt from charging customers VAT on margin related activities (such as interest on loans), but are liable to pay VAT on goods and services procured.
This differs from most other sectors, which are able to charge customers VAT and offset VAT that they pay when procuring goods and services.
On this, Norden said, “Banks will have to think carefully about how to manage the potential increase in costs as a result of unclaimed VAT.”
Qatar has long been considered an attractive low-tax environment, especially for businesses looking to invest in the GCC region. Generally, the introduction of a broad based consumption tax at a low rate is unlikely to deter investment into Qatar, or the GCC region.
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