Selling across GCC borders: invoices, currencies and VAT treatment

Who is selling, and from where

The first question is which legal entity makes the sale. A company registered in the UAE that ships to Oman is exporting from the UAE. A branch or subsidiary registered in Oman that sells from local stock is making a domestic Omani sale. The tax, the documents and the currency all follow from that answer, so decide it deliberately, with your adviser, rather than letting it be decided by whichever office takes the order.

If you already run companies in more than one GCC state, our guide to multi-currency, multi-company accounting covers how to structure the books. This guide is about the trade itself.

VAT between GCC states

The GCC VAT framework agreement envisaged common rules for trade between member states, but VAT has not been introduced in every state, and the systems needed to apply the intra-GCC rules are not in place. In practice, each state that has implemented VAT generally treats the others as outside its VAT area for now. As general background:

• goods shipped from a VAT-implementing state to another GCC state are commonly treated as exports, which can be zero-rated if the conditions and evidence requirements are met;
• the buyer usually deals with import VAT, where the destination state has VAT, and customs duty on arrival;
• sales into Qatar and Kuwait, which have not implemented VAT at the time of writing, carry no VAT in the destination, though customs and other rules still apply;
• services are more complicated, and the place of supply depends on the type of service and the customer.

The rules differ by state and by transaction, and they will change if the intra-GCC system is activated. Confirm the treatment of each type of sale with your tax adviser before you invoice.

Keep the export evidence

Zero-rating an export usually depends on proving that the goods left the country within a set time. Typical evidence includes customs exit or export declarations, bills of lading or airway bills, and commercial documents that match the invoice. Agree with your adviser which documents you need, keep them with each invoice, and check monthly that every zero-rated export has its evidence. An export invoice without evidence is a VAT liability waiting to be assessed.

Customs between GCC states

The GCC customs union applies a common external tariff to most goods entering the region from outside, generally around 5% of the value, with exemptions. Goods moving between member states may still need customs declarations, certificates of origin and checks at the border, and some goods need permits. The importer of record should be clear on every shipment, and the agreed delivery terms should say who pays duty and clearance. Your freight forwarder or customs broker will know the current requirements for each route.

Which currency to invoice in

Most GCC currencies are pegged to the US dollar, and the Kuwaiti dinar is pegged to a basket of currencies, so exchange risk between GCC currencies is usually small. That makes the invoice currency a commercial choice:

• Your own currency keeps your receivables simple and moves the conversion to the customer.
• The customer's currency is easier for them to approve and pay, but your books must record the rate on each invoice and the difference when payment arrives.
• US dollars are common for larger trade and for customers who hold dollar accounts.

Whatever you choose, fix the rate on the invoice, use one rate source, and record bank charges and exchange differences in their own accounts rather than as discounts.

Credit control across borders

Collecting from a customer in another country is slower and harder. Set credit limits per customer, require approval to exceed them, and consider advance payment or documentary terms for new customers. Send statements in the invoice currency, and review cross-border receivables separately in your ageing report.

A checklist for each cross-border invoice

1. The selling entity and its tax registration are correct.
2. The customer's legal name, address and country are complete.
3. The VAT treatment matches the advice you were given for that route and product.
4. The currency and exchange rate are recorded on the invoice.
5. Delivery terms, the importer of record and the export evidence are agreed.
6. The delivery note matches the invoice and the shipping documents.
7. The customer is within its credit limit.

How NAQIX handles cross-border sales

In NAQIX each legal entity is a separate company with its own base currency, tax setup and numbering, so a UAE company in AED and an Omani company in OMR keep separate books, and users with access to both switch between them. Customers carry their country and address, and each invoice carries a tax treatment. When the customer's country differs from the company's, NAQIX sets the invoice to zero-rated and prints it as an export invoice; the user changes the treatment back to standard where the sale is not an export, as your adviser directs.

Sales invoices can be raised in AED, SAR, OMR, QAR, KWD, BHD and other currencies, with the exchange rate saved on the invoice and the ledger recording the base-currency amount alongside the foreign amount. Exchange rates can be synced from a public rate feed or entered by hand. Supplier bills are recorded in the company's base currency. Delivery notes, credit limits with approvals, customer statements and ageing reports support the sale and the collection.

NAQIX does not prepare customs declarations, track export evidence or decide the VAT treatment of a cross-border sale, and it does not post exchange differences automatically; your accountant records them by journal. The Sales & billing and Accounting & reports pages list the features, and the market pages for Oman, Bahrain, Qatar and Kuwait describe the local setup in each country.