Oman Guide: FAQs on VAT in Oman
Oman has finally introduced the Value Added Tax (VAT) following the other three GCC and more than 180 countries globally. The royal decree number 21/2020 published on 18th October 2020 becomes the basis of effective law for VAT implementation in the country.
Our VAT experts have been receiving a number of queries on the implications and compliance regulations on VAT in Oman. We have compiled a list of frequently asked questions on VAT in Oman for you to get the best of the information available.
What are the Effective Rates and Effective Dates of VAT in Oman?
VAT in Oman will be applied at a rate of 5% as agreed upon in the GCC executive committee by all member states. The effective date for VAT in Oman falls on 16th April 2021.
Who will have to Register for the Oman VAT?
Every business entity in the Sultanate of Oman that meets the criteria of threshold turnover OMR 19,250 Voluntary registration basis or OMR 38,500 compulsory registration basis.
How to File for the Oman VAT Law?
All entities subject to the payment of VAT will file the returns with the tax authority of Oman. The payment mechanism and registration process will soon be announced in detail.
What will be the Effective Transaction Date for VAT calculations?
The effective date will be the transaction date for VAT calculations.
Will the non-resident Entity of Oman have to Register for The VAT?
Yes, any non-resident entity conducting business in Oman will have to register for VAT.
Which Services and Goods will be subject to Oman VAT?
All goods and services imported, traded, or manufactured in the Sultanate of Oman will be subject to VAT. Exempted and zero-rate goods and services will not be liable to VAT.
What is the difference between Exempted and Zero-Rate supplies under Oman VAT Law?
A business entity handling Zero-Rate supplies will be eligible for input tax claims on the reverse charge basis, whereas there is no such agreement for exempted supplies for VAT.
How will the Partial Exemption for VAT work?
Input tax can only be deducted in full if the business entity makes full purchases of taxable supplies. In the case of supplies with the taxable and exempted mix, the business can only deduct input tax proportionally.
Will an entity doing business in Exempt or Zero-rate supplies have to Register for Oman VAT?
An entity doing business in supplies that fall under the zero-rate category will have to register for VAT. It will enable them to claim the VAT refunds on a reverse charge basis. Any entity doing business in exempt supplies only does not need to register for VAT.
Which Supplies Are Zero-rated Based?
Following supplies will be considered on zero-rating bases for Oman VAT:
- Exports of goods and supplies
- Basic Food Supplies
- Supplies for Medical use and medicines
- Resale of residential property
- Supplies of International Transport
- Supplies for Rescue organizations including planes, boats, etc.
- Crude oil and Gas
- All investments in gold, silver, etc.
Which Supplies Are Exempted from Oman VAT Law?
Following supplies are exempted from VAT:
- Medical and healthcare supplies
- Supplies for Educational Services
- Unused land or barren land
- Financial Services
- Local public transport
- All imports for Armed forces and security agencies
- Imports of goods for diplomats, counselors, and embassies
- All supplies for people with disabilities
- Supplies for Charities and International organizations
What are the out of scope supplies for VAT?
According to Oman VAT Law, Out of Scope Supplies include :
- All supplies made by a non-taxable entity
- Supplies outside Oman
- In case the transfer of ownership happens
- Any trade transactions that take place outside Oman
- Any insurance claim settlements
Will Oman VAT affect the Self-employed Persons?
Only if the self-employed person meets the threshold annual turnover of OMR 19,250 voluntary basis or OMR 38,500 on a compulsory basis.
Will The Tourists and Visitors have to pay VAT?
VAT will be included on all purchases they’ll make but visitors and tourists can apply for a VAT refund at the airport. The refunds will be subject to certain conditions.
How long do Businesses need to maintain the Records for VAT?
Businesses in real Estate need to maintain all accounting records for Oman VAT for 15 years, all other businesses to maintain the records for 10 years.
How Groups can pay Oman VAT?
Subsidiaries and group entities can apply for jointly registering for VAT under certain provisions. However, each group member will have to bear the responsibility of VAT liability.
How Group transactions will be valued under Oman VAT Law?
Any supplies made between subsidiaries and group companies will be valued at the market value of supplies.
Will VAT be charged in full for discounted priced items?
No, as per Oman VAT Law the effective price will be the net price after the discount.
How is the Place of supply in Oman determined?
The place of supply is in Oman if the imported or manufactured goods or services are used inside the Sultanate of Oman.
Can Foreign Businesses Claim VAT Refunds?
Yes, foreign Businesses can claim VAT refunds from Oman Tax Authority subject to fulfilling the requirements.
How VAT amount will be calculated for Foreign Currency Invoices?
The FC invoice amounts will be converted to OMR currency on the day VAT becomes due. The rates will be based on Oman Central Bank issued.
Can businesses maintain Accounting Records in Foreign Currency?
All business entities need to report accounting records for VAT purposes in the local currency of OMR only.
Will Oman VAT apply to the Real Estate Sector?
Yes, only residential use of the property is exempted from VAT.
Will VAT apply to Education Sector?
Oman VAT Law has a significant impact on all the sectors of the economy, however, Educational Services and supplies meant for a direct educational purpose will be exempted from VAT Law.
Will VAT apply to Gifts and Giving?
No, gifts are exempted.
Will VAT apply to Entities in the Special Economic Zone?
The information offered in the Oman VAT Law so far is unclear on SEZ transactions.
How will VAT refunds be adjusted?
All entities paying both input tax (VAT on purchases) and output tax (VAT on sales) can combine the net VAT effect. Any excessive amount paid as VAT will be refunded by the Tax Authority of Oman.
What are the Penalties and Fines for the non-filing of VAT?
For deliberately non-filing of VAT, the penalties will be:
- OMR 5,000 – 20,000 and imprisonment of one year – three years or both
For deliberately delaying the VAT payment, the penalties will be:
- OMR 1,000 – 10,000 and imprisonment of two months – one year or both
Can an Entity apply for objections and grievances?
All taxable entities can file objections with the head of Tax authority within 45 days of tax notification.
A tax grievance committee will oversee the cases appealed against the decisions of the head of Tax authority. Further, an appeal can be made with the primary court against the grievance committee decision too.
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