Oman Guide: What are Capital Assets and their treatment for VAT in Oman?
Capital Assets are tangible and intangible assets that form part of the business assets of a Taxable Person, allocated for long-term use as a business instrument or means of investment. Include acquisition or purchase of the land, building, or both land and buildings and constructed buildings.
What is the Input tax treatment for Capital Assets in Oman?
Input tax previously deducted by the Taxable Person concerning the Capital Assets shall be adjusted over ten years for Long term Capital Assets or five years in respect of other Capital Assets. The Capital Assets Adjustments in Oman start from the beginning of the tax year during which the Capital Assets are purchased, obtained, or constructed. The Input Tax incurred by a Taxable Person at the time he purchases a Capital Asset shall be deducted.
What is the Adjustment for Input tax for Capital Assets in Oman?
The input Tax is adjusted at the end of each Tax Year. It falls within the adjustment period according to the following:
Adjusted Tax =Total input tax on Capital Assets X (Initial Recovery Percentage – Annual Recovery Percentage)
- The Initial Recovery Percentage will be the recovery percentage used for the Capital Asset purchased. If the Taxable Person incurs Input Tax on the Capital Asset over more than one Tax Year to make it ready for use, the Initial Recovery Percentage will be calculated as follows: (rounded to three decimal places)
(The total amount of deductible Input Tax in all Tax Years)/ (The total amount of Input Tax incurred in all Tax Years)
The Taxable Person in Oman may apply to the Authority to obtain its approval to calculate the Initial Recovery Percentage on the basis determined by the Authority.
- The first year of the Capital Asset Input Tax adjustment shall be the Tax Year in which the asset was first used or became available for use.
- The annual deduction percentage is the overall input tax recovery percentage for the specific Tax Year in the Adjustment Period, taking into account all the activities of the Taxable Person in that Tax Year.
- The Adjusted Tax shows a Negative Amount representing further right for a deduction. The amount can be reclaimed as additional Input Tax in the first Tax Period following the end of that Tax Year.
- The Adjusted Tax shows a Positive Amount representing additional restriction of the right for a deduction. The Positive Amount must be adjusted as Input Tax in the first Tax Period following the end of that Tax Year.
If the Capital Asset is not used to make any taxable supplies in any Tax Year, the Initial deduction Percentage and the annual deduction percentage shall be zero percentage.
What is the treatment on disposal of Capital Assets in Oman?
Where a Taxable Person sells, disposes of, or surrenders a Capital Asset or ceases to be eligible to be registered for Tax during the Adjustment Period, a Final Adjustment as follows:
[Input Tax Incurred at the time of Capital Asset Purchase X the number of years remaining for Adjustment Period X (Final Adjustment Percentage – Initial Recovery Percentage)]/Number of Years of Adjustment Period
Where the Final Adjustment Percentage shall be:
- One hundred percentage if the disposal of the capital asset was liable to Tax.
- Zero percentage if exempt or the Taxable Person ceases to be eligible to be registered for Tax.
- Sale, disposal, or surrender that results in both Taxable and Exempt Supplies. The adjustment is calculated based on the ratio of the taxable values to the total values.
- No Final Adjustment if the Capital Asset is lost or damaged beyond reasonable repair before the end of the Adjustment Period provided meeting the conditions of Regulations.
In all cases, the adjustment shall be carried out in the period within which the capital asset was disposed, or a Taxable Person is no longer eligible to be registered. The adjustment shall be carried out in the final return for the tax period.
What is the treatment on the transfer of Capital Assets in Oman?
Taxable Person making Capital Asset Adjustments transfers his assets as part of his activity. It leaves or joins a Tax Group he shall make a tax Adjustment on the day before the transfer of the asset, joining, or leaving a Tax Group.
The new owner of the Capital Asset and the representative member of the Tax Group or the Taxable Person leaving the Tax Group shall be liable for all the outstanding and continuing Capital Assets Adjustments under these Regulations until the end of the Adjustment Period.
For enquiries, E-mail: firstname.lastname@example.org