VAT Law in Oman
The Sultanate of Oman announced the implementation of Value Added Tax on 12 October 2020. The VAT Law was published through the Official Gazette of Oman on 18 October 2020 vide Royal Decree No. 121/2020. The VAT in Oman will be implemented 180 days from the date of publication of the Law in the Official Gazette i.e. 16 April 2021. The standard rate of VAT in Oman is 5%, and there are provisions for zero-rating and exemptions in the Oman VAT Law.
Zero-rating – The following supplies are zero-rated as per the Oman VAT Law, subject to the conditions mentioned in the Executive Regulations:
- Supply of certain food products specified by a decision from the Chairman.
- Supply of goods and services that are exempt from VAT in Oman and that are supplied to the territory outside of the GCC.
- Supply of specified medicines and medical equipment.
- Supply of investment gold, silver, and platinum.
- Supplies of international or Intra GCC transport of goods or passengers, and supply of services in connection with this transport.
- Supply of air, sea, and land means of transport that is designated for the transportation of passengers and goods for commercial purposes and the supply of related goods and services.
- Supply of rescue planes, and rescue and assistance boats.
- Supply of oil, oil derivatives, and natural gas.
- Supplies made outside GCC countries in specified cases, subject to certain conditions.
Exemption from VAT – The following supplies shall be exempt from VAT as per the Oman VAT Law, subject to the conditions mentioned in the Executive Regulations:
- Financial services.
- Healthcare services and related goods and services.
- Educational services and related goods and services.
- Undeveloped land (bare land).
- Resale of residential properties.
- Local passenger transport.
- Rental of properties for residential purposes.
- The Oman VAT Law also specifies certain imported goods that will be exempt from VAT such as returned goods, personal luggage, and others.
The registration process in Oman will be online.
- Mandatory registration – If the total value of supplies made at the end of a month, or expected to be made at the end of the month, in addition to the immediately preceding eleven months, exceeds OMR 38,500.
- Voluntary registration – VAT registration can be applied for voluntarily in case, the total value of supplies/expenditure made at the end of a month or expected to be made at the end of the month, in addition to the immediately preceding eleven months exceeds OMR 19,250.
- A Non-resident who makes supplies in Oman must also register for VAT as a non-resident taxpayer, irrespective of the threshold limits. The non-resident VAT registration can also be obtained through a tax representative in Oman.
- VAT Group registration – The Executive Regulations will contain details with conditions to be met to register as a VAT Group.
Mandatory registration threshold shall be determined and amended by a decision from the Oman Tax Authorities under the control of the chairman.
Tax returns and refunds
VAT returns filing frequency will be mentioned in the Executive Regulations, the Oman VAT Law details the content required in a VAT return, such as the value of imported goods, the value of the taxable and exempt supplies, value of output tax and input tax claimed and the value of tax due during the period.
The Oman VAT Law stipulates refunds in specific cases such as tourist refunds and others.
Input tax recovery
The taxable person can deduct and adjust recoverable input tax from the value of the output tax liability in a tax period. Subject to conditions mentioned in the Oman VAT Law and the Executive Regulations eligible input tax credit can be claimed by the taxable person within three years from the date of a valid tax invoice.
It is a unique feature of Oman VAT law in which a Taxable person must assign a Responsible Person, who will represent him in executing the obligations under the provisions of this Law. The Responsible person is usually the owner or the manager as the case may be. The Oman VAT Law lays down certain obligations and restrictions for the Responsible Person.
Generally, the record-keeping requirement is for 5-6 years. GCC countries that have implemented VAT this far, the record must be maintained for a period of 10 years and 15 years for business in the real estate sector but it has been kept to 10 years in Oman VAT Law.
Special Economic Zone (SEZ)
The transactions undertaken by the business based in the SEZ are recognized in The Oman VAT Law. No indication in the Oman VAT Law for the VAT treatment for the transactions in the SEZ to be determined in the Executive Regulations.
Oman VAT Law has provisions for significant penalties, both monetary and/or imprisonment can be levied for the breach of specific conditions. The late payment penalty is levied at 1% of the unpaid amount.
Out of scope supplies
The following supplies are included in Supplies outside the scope of the Oman VAT Law :
- Made by a non-taxable person.
- Made outside Oman.
- Not made in the course of economic activity.
- The taxable person transfers his activity to another person.
- Sales that take place from a place outside Oman to another place outside the Sultanate.
- Made between the insurer and the insured to settle insurance requirements of a taxable insurance contract will not be subject to VAT
The Executive Regulations will provide adequate clarification and guidance to implement the VAT Law. Clarification regarding the determination of the tax period, treatment of vouchers, list of the blocked input tax credit, rules for input tax recovery, conditions for tax group registration, invoice requirements, and many more.