GCC countries: From tax havens to global business hubs

The Gulf Cooperation Council (GCC) is currently going through its most significant fiscal transformation since its formation.

For years, the region has attracted multinational corporations with a ‘zero taxation’ regime, leading to the perception by businesses and governments globally that companies are moving to the region with a view to profit shifting to minimise tax burdens.

Now, a global minimum corporate tax rate of 15 per cent, championed by the OECD and embraced by more than 140 countries, is seeking to dismantle this practice.

Under the proposed tax regime, which is being legislated in several countries including the GCC, large Multinational enterprises (MNEs) with global turnover over EUR 750m equivalent in two out of four previous years will operate under greater transparency. They now have to pay their fair share of taxes at a minimum rate of 15 per cent, regardless of which country they operate in or have legal presence. For example, a company headquartered in London, with operations spanning Dubai and Manama, can no longer exploit the low tax regime of UAE and Manama to reduce overall group tax liability.

The regional response

In response to these global standards, the UAE implemented a 9 per cent corporate tax rate starting June 2023 for businesses with profits over Dhs375,000. Crucially, these reforms are not scorched-earth taxation: the UAE offers a complete exemption for SMEs with turnover under Dhs3m, besides other exemptions and incentives such as free zone relief at zer per cent tax rate.

The introduction of these measures helps the UAE align with international tax standards while preserving its competitive advantage through strategic exemptions and maintaining its position as a global business hub, alongside established financial hubs such as Singapore (headline tax rate of 17per cent) and Hong Kong (headline tax rate of 16.5 per cent).

While the UAE has taken the lead by implementing its corporate tax law and announcing plans for additional global tax measures, other GCC nations are progressively adapting to global tax initiatives. Kuwait has matched the global standard with a 15 per cent tax rate on local and foreign businesses, Qatar maintains 10 per cent tax rate while planning global minimum tax reforms, and Bahrain’s new global minimum tax regulations take effect in 2025.

Saudi Arabia and Oman are likely to follow suit with similar measures since they have also signed up to the OECD BEPS global minimum tax measures, creating a regionally coordinated approach to taxation.

Since 2018, the GCC has implemented value-added tax (VAT) in phases. The UAE and Saudi Arabia were first movers, with Bahrain and Oman following suit. While there is no formal announcement, Qatar and Kuwait could soon implement VAT in the next two to three years. While most countries started with a 5 per cent rate, Bahrain and Saudi Arabia have since increased it to 10 per cent and 15 per cent respectively, demonstrating sovereignty over tax rates.

GCC nations: Future outlook

Research demonstrates that a well-implemented corporate and international tax system positively impacts economic growth through increased employment, stimulated business expansion, and attracting new investment. Furthermore, additional tax revenue enables governments to invest in infrastructure and services.

While Oman considers personal income tax for high earners, the GCC’s zero personal tax policy remains a crucial differentiator. This strategic decision maintains the region’s edge over competing financial hubs, where personal tax rates often exceed 20 per cent. Regional recruiters report sustained interest from global talent.

The UAE and other GCC nations are moving on from being passive recipients of global capital to becoming active, strategically minded economic players on the global stage.

After Saudi Arabia recently transitioned to electronic invoicing (e-invoicing), the UAE is following suit with mandated e-invoicing for B2B and B2G transactions by July 2026. This initiative represents a strategic move toward digitalising tax infrastructure and enhancing transparency.

The real-time generation, exchange, and storage of electronic invoices aims to minimise human error, reduce fraud risk, and improve overall system efficiency.

E-invoicing offers SMEs access to sophisticated invoicing practices to enhance operational efficiency and competitiveness.

For larger businesses, it presents an opportunity to modernise operations, reduce costs, and build stronger relationships with regulators.

The initiative reinforces the UAE’s position as a regional leader in economic innovation and digital transformation.

Short-term adjustments are inevitable as businesses will see immediate impacts on their bottom line. However, the long-term vision is clear: a more robust, diversified, and resilient economic environment that attracts quality investments and talent.

The introduction of digital tax administration, including e-invoicing, signals the region’s commitment to technological innovation. With the introduction of corporate tax and global minimum tax law, coupled with e-invoicing and increased digitalisation, this isn’t just about collecting taxes. It is about creating a transparent, efficient economic ecosystem that can compete on the global stage.

The writer is the senior managing director and head of Tax ME, FTI Consulting.