Oman implements 5% VAT on goods and services

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Oman implemented a 5 per cent value added tax (VAT) on Friday, according to a statement by the Oman News Agency.

This comes after a six-month transitional period for the application of the tax on most goods and services in addition to goods imported into the Sultanate, with some exceptions specified in the law, the statement added.

The Oman government has expanded the list of goods subject to zero-rate VAT from 93 basic food commodities to 488. Food commodities subject to zero-rate VAT are vegetables, fruits, legumes, grains, dates, spices, oils, fish, red meat and poultry, among others, according to the statement.

Services such as education, health care and financial services will be exempt from VAT.

The tax will help the Sultanate generate about 400 million Omani riyals ($1 billion) in revenue annually, which is equivalent to 1.5 per cent of the total value of gross domestic product.

All six Gulf countries agreed to introduce a 5 per cent VAT in 2018 after a slump in oil prices hit their revenues. Saudi Arabia, the UAE and Bahrain have already introduced the tax, with Riyadh tripling it last year.

Oman’s economy was hit hard by the coronavirus pandemic and low oil prices. The sultanate’s economy likely shrank 6.4 per cent in 2020 but is estimated to make a modest recovery to 1.8 per cent growth this year, the International Monetary Fund said in February.

The country’s current account deficit is also estimated to have widened from 5.4 per cent of GDP in 2019 to 10 per cent in 2020, mostly because of lower hydrocarbon exports, according to the Washington-based lender.

Oman is also taking other measures to strengthen its balance sheet. Earlier this year, the country took a decision to remove electricity and water subsidies for Omanis and residents as well as for all government entities, private companies and industries. It also aims to diversify its economy away from oil and is offering long term residency permits for foreign investors.

Saud Al Shukaili, head of the tax authority, said all necessary preparations and requirements for the implementation of VAT have been completed. This includes issuing the legislation related to the tax, setting up accounting systems, training tax authority staff about the requirements of applying VAT, preparing a manual of VAT-related work procedures and drafting a guide on the registration procedures, the statement said.

Small establishments and companies were granted time to set up their accounting systems and other necessary procedures for tax compliance

Saud Al Shukaili, head of Oman Tax Authority

Mr Al Shukaili said all companies, irrespective of the value of their taxable supplies, were allowed to register for VAT from February 1 this year. Small establishments and companies were granted time to set up their accounting systems and other necessary procedures for tax compliance.

There will be a compulsory VAT registration threshold of OMR38,500 per annum and a voluntary registration threshold of OMR19,250.

Companies and individuals that need to register for tax are permitted to do so in a phased manner. Those with an annual value of taxable supplies above OMR1 million were required to sign up between February 1 and March 15, and are considered registered for VAT from April 16 onwards.

Those with taxable supplies between OMR500,000 and one million need to register between April 1 and May 31, with their VAT registration coming into effect from July 1. Similarly, taxable persons with supplies valued between OMR250,000 and OMR500,000 can register between July 1 and August 31. They are considered registered for VAT effective from October 1.

Companies with supplies between OMR38,500 and OMR250,000 need to sign up between December 1, 2021, and February 28, 2022. Their registration is active from April 1, 2022.

The Oman government will use the tax revenue to develop infrastructure, provide rebates and fiscal benefits to worst-hit industries and offer relief to pandemic-hit businesses

Anurag Chaturvedi, managing partner, Chartered House Tax Consultancy

“Implementing VAT is the right move for Oman to sustain growth for its pandemic-hit economy. VAT will bring significant revenue to the Oman government in the range of OMR4 billion to OMR5 billion per year and this will grow by 5 to 10 per cent every year,” Anurag Chaturvedi, managing partner at Chartered House Tax Consultancy, told The National.

He said that the Oman government will use the tax revenue to develop infrastructure, provide rebates and fiscal benefits to worst-hit industries and offer relief to pandemic-hit businesses.

Taxpayers have the right to object to the tax assessment within 45 days. They have the right to appeal against the decision before a grievance committee within 45 days from the date of notification, Mr Al Shukaili said.

The taxable person must display the VAT registration certificate in a prominent place at the company headquarters, while the tax identification number along with the registration certificate should be recorded in all correspondence, invoices or documents the company or individual issues, and on declarations and notifications submitted to the Oman Tax Authority.

Consumers can report violations of the provisions of the law either to the tax authority or to the Consumer Protection Authority, the statement added.

The National

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