Introduction to Oman VAT

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Pratibha Devasenapathy | Updated on: March 2, 2022

Introduction - VAT in Oman

Oman will introduce a value added tax (VAT) system aligned with the GCC VAT Framework with effect from April 2021 at a standard rate of 5%, with limited zero-ratings but the highest number of exemptions that we have seen so far in the region. Oman becomes the fourth Gulf Cooperation Council (GCC) member state to implement VAT, following the UAE, Kingdom of Saudi Arabia and Bahrain.

VAT implementation in Oman

Tax Authority (TA) announced the start of VAT Registration as of 1st February 2021 until 15th March 2021 for taxable persons with annual supplies exceeding or expected to exceed One million (OMR). The voluntary registration will also be available for taxable persons with annual supplies or expenses exceeding or expected to exceed (19.250) OMR. The registration must be made through Oman’s official Tax Authority's Online Portal.

In the implementation of Value Added Tax Law, the Taxable Persons must register with the Tax Authority according to the following:

Category

Registration Due Date

Effective Date of Registration

If the value of annual supplies exceeds or is expected to exceed 1,000,000 Omani Rials

From February 1, 2021 to March 15, 2021

April 16, 2021

If the value of annual supplies is between 500,000 and 1,000,000 Omani Rials

From April 1, 2021 to May 31, 2021

July 1, 2021

If the annual value of supplies is between 250,000 and 499,999 Omani Rials

From July 1, 2021 to August 31, 2021

October 1, 2021

If the annual value of supplies is between 38,500 and 249,999 Omani Rials

From December 1, 2021 to February 28, 2022

April 1, 2022

Oman VAT implementation date

The person who may voluntarily register for VAT may apply for registration with the Tax Authority at any time starting from February 1, 2021. VAT law comes into force in Oman from April 2021 following Royal Decree No. 121/2020. The country will apply VAT at the standard rate of 5%. Oman becomes the fourth Gulf Cooperation Council (GCC) member state to implement VAT, following the UAE, Kingdom of Saudi Arabia, and Bahrain.

VAT system in Oman

With VAT being implemented across Oman on April 2021, businesses have a limited time to get ready for VAT. Businesses in Oman will be required to self-assess their VAT registration obligation in Oman. Businesses in Oman will need to keep VAT records for a minimum of ten years from the end of the year to which they related. These records will need to be made available for review at any time.

VAT returns must be filed with the tax authority electronically. It's expected that the VAT period will be a minimum of one month, and VAT payments and returns should be filed within 30 days of the end of the tax period. Transactions with non-VAT-implementing GCC states will be treated the same as transactions with non-GCC states. Businesses must comply with the guidelines right from registration to invoicing to filing returns, else hefty fines will be levied.

VAT law in Oman

The VAT Law will set out the general principles for the application of VAT in Oman in line with the Unified GCC Agreement for Value Added Tax (VAT). The VAT was published in the Official Gazette on 18th October 2020 with an effective date for the introduction of VAT in April 2021. Authorities are working in full swing to implement VAT seamlessly across the country. Various initiatives like knowledge sharing guides on VAT, educative/informative sessions, etc are conducted by TA for a smooth transition.

With VAT being on the verge of implementation, it is extremely crucial for a business to become tax compliant. As a business owner, you would obviously want to avoid paying an additional cost in terms of penalties due to non-adherence to these new tax regimes. Business owners must be well-prepared with a complete view of their business transactions, take stock of the supplies they make, determine the value of supplies and be aware of the registration timelines, in order to stay compliant with VAT laws. Take a free demo of TallyPrime today and find out how business management software will help you stay VAT compliant!

Legislative implementation of VAT in Oman

Here are some of the key VAT guidelines in Oman:

VAT framework

The Oman VAT law follows the Gulf Cooperation Council (GCC) VAT Agreement framework, however isn't identical to what has been implemented in Bahrain, the Kingdom of Saudi Arabia (KSA), and United Arab Emirates (UAE). The standard VAT rate will be 5% on the go-live date, with zero-rating and exemptions applying to some supplies.

VAT in Oman will be applied on most goods and services and importation of goods and services. 

Exemption

The VAT law exempts certain supplies like financial services, healthcare and education, bare land, renting or resale of residential property and more. 

Zero-rating

Zero-rating will be applied to:

  • Specific food produces like, dairy products, fruits and vegetables, fresh eggs, water, tea and coffee beans, sugar, salt, bread, grains, baby food products, fish, meats
  • Medicines and medical equipment
  • Investment in metals like gold, silver and platinum
  • Crude oil, oil derivatives, and natural gas
  • Transport like aircraft, vessels
  • Exports of goods and services

Based on the GCC VAT Agreement, the various sorts of registrations include:

  • Mandatory registration: Businesses reaching the GCC set mandatory registration threshold of OMR 38,500 of taxable turnover in a specific year would be required to register.
  • Businesses making zero-rated supplies are likely to get relief. They would have an option to get an exemption from registration, subject to the approval of TA.
  • Voluntary registration: Businesses that do not reach the compulsory registration point will have the option for voluntary registration

What are the administrative aspects of VAT in Oman

The Oman VAT law states that for eligible businesses, the mandatory VAT registration threshold will be OMR 38,500, which will be accompanied by a voluntary registration threshold of OMR 19,250. The evaluation of if or not a taxable person has surpassed the registration threshold will be basis the current month's supply values plus 11-month' look-forward' and 'look-back' tests (i.e. 12 months in total) counting taxable supplies, including reverse charge transactions. Businesses making zero-rated supplies will be getting tax registration exemption.


Non-residents will be obligated to enlist for taxable supplies in Oman in specific conditions from the first OMR 1 of sales, along with self-employed merchants, with direct registration and compliance possible and the utilization of a tax representative discretionary. This choice will be welcomed by non-residing merchants who faced troubles with the registration and compliance process in different states.

VAT enlisted people will be likewise be given a Tax Identification Number Number (TIN) and will be expected to record occasional VAT returns by the 30th day of the month following the tax period, albeit the standard VAT time frame length will be affirmed through the Regulations. The Oman VAT Law takes into account citizens to amend previously recorded returns and for the corrected return of tax the place of the initially documented return, something which isn't possible, for instance under the UAE VAT system. The change should be filed within 30 days of identifying the mistake. This will allow easier revision of errors by citizens, particularly when the system is new.

Under the VAT Law, residents have a specific 3-year window inside which to deduct VAT on purchases, with a 5-year legitimate time limit for audit purposes and an extensive period of 10 years in the event of later registration. This is a critical extension of the recall time frame available to the tax authorities and of importance to businesses.

The specific VAT invoice content requirements and timeline for issuance will be affirmed inside the guidelines; however, we don't expect these to wander excessively far from what we have seen across the other Gulf states. The law has affirmed, notwithstanding, that any currency might be utilized on the VAT receipt once the tax sum is displayed in Omani Riyals utilizing Central Bank of Oman daily rate.

Citizens will be obliged to retain normal VAT records for a standard time of 10 years and a drawn-out period of 15 years for real estate capital resources, with additional subtleties on regulatory prerequisites to be given inside the VAT legislation.

Organizations can expect a few teething issues once the VAT registration portal opens, as has been the situation in other GCC states which have effectively carried out VAT. We often see a usual to and fro in deciding the correct information and documentation expected for registration, particularly in cases including non-residents, intending merchants and international organizations.

How to Get Started with Oman VAT using TallyPrime

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