Oman Guide: What is the VAT impact on Retail sector in Oman?
Oman, on 16th April 2021, became the fourth nation to deploy VAT in the GCC, following Bahrain, the UAE, and KSA. Of course, retailers should be aware of the changes that are likely to come up in their respective businesses after this development. Implementing this standard 5% Vat in Oman reflects the country’s adherence with the Common VAT Agreement of GCC. Notably, it was since February 2020 that Oman has been bracing its businesses up, prompting the firms to register for VAT in Oman.
VAT for retails sector in Oman: What it means for retailers?
Oman’s government has exempted medical goods, basic food commodities, and educational services from VAT. However, some non-essential products, luxury goods, and several elastic services and goods would be subjected to this tax. Check out what’s new about VAT for retails sector in Oman.
Pricing
From 16th April, 2021 onwards, retailers supplying taxable goods and services need to collect 5% value-added tax on each sale. If possible, they have to pass this VAT on to their customers, enhancing the original price by 5%. This would increase the purchase price by 5% for the end-user. Alternatively, retailers need to reduce their profit margin in Oman by the same percentage to shell out the tax. The product prices should be printed as inclusive of tax. Therefore, adding the VAT after printing the price would not be allowed.
Invoicing
All supplies should be issued with tax-compliant invoices in English or Arabic. In case the tax authority requests, a translation in Arabic should be provided. For supplies under 500 Omani Rial, retailers can go for simplified invoicing. However, retailers need to approach the tax authorities for approval.
Advance payments
For retailers, the VAT would be due on the respective date of supply. This data is the earliest of:
- Tax invoice issuance
- Providing goods and services
- Partial/full payment for the received amount
Therefore, an advance payment would require the retailer to issue an invoice and account for VAT for the received amount of advance payment.
Zero rate or standard rate
Some of the food items, published on the tax authority’s website, are subject to zero VAT rate. Therefore, retailers dealing with food items should check this list out and find out whether this rate applies to them.
Vouchers, discounts, and loyalty schemes
- In case retailers undertake certain promotional activities like free products, offering discounts, loyalty schemes, or vouchers, the VAT treatment would be complex. The discounts need to be offered on the base price of the product, on which the VAT is implemented.
- Gifts and samples are not accepted as supplies, given that these remain in a particular financial threshold.
- Oman VAT legislation has made a distinction between multipurpose vouchers and single-purpose vouchers. For the former, the VAT has to be paid when the voucher is redeemed. In case of single-purpose vouchers, they would be paid during the voucher issuance.
Non-resident businesses
Non-resident retailers who are selling merchandise to customers in Oman should consider if they should register for VAT.
Transitional norms
In case a retailer has sold services before April 16, 2021, should think if they need to account for tax for services delivered after this date. Examples: Insurances, warranties, memberships, and subscriptions.
Conclusion
The government looks forward to gaining around 1.5% of their GDP from Vat in Oman. Approximately, this amount is estimated to be $1.04 worth of revenue, which would prove valuable amidst the pandemic. Notably, in 2020, Oman’s economy performed adversely, witnessing a drop of 6.4%. Imposing the VAT on the retail sector, along with other sectors, is likely to heal the country’s economy back to health. However, business owners would be wary about the VAT for retails sector in Oman that are likely to hit their dealings.
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