Oman approves the implementation of VAT effective from 16 April 2021 and publishes VAT Law

Following the issuance of Royal Decree No. 121/2020, Oman published its new VAT Law in the Official Gazette on 18 October 2020 (“Oman VAT Law”). VAT will be imposed in Oman at the standard rate of 5% in accordance with the unified GCC VAT Agreement effective from 16 April 2021, making Oman the fourth GCC country to implement VAT after the United Arab Emirates (“UAE”), Kingdom of Saudi Arabia (“KSA”) and Bahrain.

According to the Oman VAT Law, the VAT regulations, which are expected to contain the detailed application of the law, will be published within six months of the effective date of the law (i.e. by 15 October 2021).

Key Features of Oman VAT Law

Under the Oman VAT Law, the key features of the VAT regime in Oman are as follows:

VAT Registration – Whilst the VAT Regulations will determine the mandatory and voluntary registration thresholds, it is expected that the registration thresholds would be based on the unified GCC VAT Agreement. Companies that exclusively make zero rated supplies may be excepted from the requirement to register.  Non-residents who make taxable supplies in Oman are required to register for VAT, irrespective of the threshold limits. The non-resident can also register for VAT by appointing a tax representative in Oman. Further, two or more persons may form a VAT group.

Zero Rated Supplies – Oman has followed the UAE’s and Bahrain’s approach with a broad list of supplies that will be zero rated.  Oman will zero-rate certain food items, the export of goods and services, international transportation of goods and passengers, the supply of investment grade precious metals, the supply of specified medicine and medical equipment and crude oil, oil derivatives and natural gas.

Exempt Supplies – Similar to the UAE, Oman will exempt the supply of financial services, the supply of bare land, local passenger transport and supply in relation to the lease of residential real estate. In addition, Oman will exempt the provision of healthcare, education, re-sale of residential real estate and imported goods which are exempt under the GCC Common Customs Law.

Transitional Provisions – Supplies of goods or services are considered to have been made after the effective date of the VAT Law where the delivery of goods or completion of the service takes place after either the VAT implementation date or the date of registration, even if an invoice has been issued or the consideration is paid for the supply before either of the two dates above. For continuous supplies made under contracts which were concluded prior to the VAT implementation date or date of registration, the portion of supply made after the VAT implementation date or registration date, as applicable, will be subject to VAT. The consideration mentioned in the contract will be considered inclusive of VAT, unless the contract specifically contains a clause relating to VAT.

VAT Returns and Refunds – VAT returns will be required to be submitted within 30 days following the end of a tax period. The VAT Regulations will specify the length of the tax period. Special refund schemes, such as refunds for tourists and non-Oman residents who are not taxable persons, will be made available.

Books and Records – Unlike UAE, KSA and Bahrain, books and records are generally required to be maintained for 10 years in Oman, whilst books and records relating to real estate in Oman are required to be maintained for 15 years.

Responsible Person Concept: According to the Oman VAT Law, a “responsible person” must be assigned by each taxable person. The Oman VAT Law has laid down certain obligations and restrictions for the responsible person.

How does it affect you?

Based on our experience of assisting clients with VAT implementation in the UAE, KSA and Bahrain, businesses typically require between three and six months in order to be ready for VAT. Given that there are approximately six months remaining for the implementation of VAT in Oman, businesses should begin their preparation for VAT immediately. The key areas that you need to focus on to implement VAT within your business are as follows:

1. Project Plan: budget for VAT implementation (e.g. consultants, training, resources, IT systems), set up VAT steering committee and assign responsibilities
2. Raise Awareness: educate and train employees on impact of VAT on accounting and reporting processes
3. VAT Impact Assessment: undertake VAT impact assessment, assess transitional provisions and classify and map VAT treatment of all business transactions
4. Cash Flow: assess cash flow impact and working capital requirements
5. IT Systems: analyse existing accounting systems capability for VAT reporting and consider upgrade or new system
6. Pricing: consider impact of VAT on pricing and demand
7. Contracts: review current contracts with suppliers and customers and include VAT clauses in new contracts
8. Processes: determine changes required to existing accounts payable processes and documentation including invoices and record keeping
9. Customer & Supplier Management: communicate with existing suppliers and customers to notify them of impact of VAT and negotiate with new suppliers and customers
10. Compliance: establish whether required or able to register for VAT and register on time

What should I do next?

Our award-winning Tax team are here to help. With their expertise and significant experience of VAT implementation in the UAE, KSA and Bahrain, across all industry sectors, they are well placed to assess the impact of VAT on your organisation and assist with your VAT requirements in Oman.

In the meantime, please do not hesitate to contact our Tax Team if you have any questions.

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Key contacts

Shiraz Khan
Head of Taxation
s.khan@tamimi.com

Ahmed Al Barwani
Head of Office – Oman
a.albarwani@tamimi.com

Janet Gooi
Associate, Tax
j.gooi@tamimi.com