Oman Guide: What is VAT designated zones and its treatment in Oman?
Designated zones in Oman have special treatment under the VAT regime. For VAT purposes, these zones are interpreted as being located outside Oman and will be VAT-free. Oman has three free Zones Salalah Free Zone, Sohar Free Zone, and Al Mazunah Free Zone. Two Special Economic Zones Duqm Special Economic Zone and Knowledge Oasis. The zones and their borders and location are specified under the law.
The area shall have applicable procedures to control the movement of goods and their supply within or between them. It should be supervised and managed by the responsible operator. Not all transactions of Designated Zone need to be VAT-free. Under the VAT regime, the place of supply rule is vital to ascertain taxability.
What are the different scenarios in Designated Zones for VAT in Oman?
- The transfer of goods between two different designated zones in Oman will bear no duties. The value-added taxes under certain conditions like the goods are not altered or released during the transfer.
- The transfers from the mainland to Designated Zone or within the Designated Zone, the standard rate of VAT at 5% will be levied. For example, catering services, hotels, catering commitments, cultural, artistic, sports, educational, recreational services, all kinds of energy goods sold for use or consumption like the supply of water will be standard rated.
- The Designated Zone self-consumes goods and services, and then the place of supply will be Oman and will be taxable at the standard rate of 5%. However, the executive regulations will specify certain exceptions to the rule.
- In the case of transfer of goods to and from a Designated Zone in Oman there can be three possible VAT treatments; (a) supply of goods into a Designated Zone from outside Oman will be treated as outside Oman and will be VAT free; (b) supply of goods from the mainland into a Designated Zone will not be considered as export and standard rate will apply, and (c) movement of goods from a Designated Zone to the mainland will be treated as an import of goods to Oman.
It is vital for businesses established within the designated zones to realize that they have the same VAT compliance obligations and rights as non-Designated Zone businesses. They will have to register for VAT, account for VAT, file VAT returns in Oman, and pay VAT as per the law.
Documents kept for the transfer of goods to, within, or between designated zones. It is certified by the operator and supervisor of the special zone for the supply of goods. It also requires Certification by the General Customs Administration about the transfer of goods to the designated zone or from one area to another.
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