The Oman government is preparing for the introduction of the VAT in the country. As a result, the Tax Authority of Oman has published a brochure containing VAT information for business owners and individuals. At the moment, the Oman Government is in the process of drafting a local VAT Law and Regulations Bill. The TA has formulated legislative documents, created standard operating procedures and developed the required IT system to help taxpayers pay the required VAT. In this article, we will take a look at the VAT information supplied by the TA.
Legislative background
Following the approval of the Unified VAT Agreement, the Sultanate of Oman agreed to implement the VAT within its borders. The Agreement laws down the basic guidelines and regulations that member nations need to follow while implementing the VAT. The VAT information is a part of the taxation system of over 160 countries around the world. It is essentially an indirect tax charged on goods and services used in Oman, either through production or import. The tax is collected at every stage of the supply chain for the product and starts from the purchase of raw materials to the sale of the finished product.
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How does VAT work?
Businesses will collect VAT on the goods they sell while paying VAT for all their purchases. Hence, it is a dynamic form of taxation which uses an offsetting mechanism with the amount of VAT to be remitted being equal to the difference between the output and input tax paid. Individual businesses, since they deal with specific goods, will have to pay more tax, as the output tax is much lower than the tax paid. Meanwhile, certain businesses will enjoy a partial exemption due to the nature of the supplies and services it provides. The TA will provide more details regarding these business types at a later stage. However, in effect, the final consumers will bear the cost of VAT when they purchase the end-product.
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VAT Registration
As VAT is self-assessed, all businesses must continually assess and evaluate the need for VAT registration in Oman. Further information regarding the process of registration, the expected timeline and processing fee will be published in due course. But, in general, VAT registration is of two kinds;
- Mandatory registration: When the taxable individual exceeds an annual registration threshold, they will have to register under the VAT regime compulsorily.
- Voluntary registration. If a taxable person falls below the annual registration threshold, they can decide for themselves whether to register or not.
- Businesses and individuals who do not live in Oman, but generate income from the Sultanate will have to register as well.
For enquiries, call +971 45 570 204 / E-mail: [email protected]
How to determine whether to register for VAT?
- Backward Look: Has your turnover exceeded the VAT threshold limit in the last year?
- Forward Look: Do you expect your taxable turnover to exceed the mandatory VAT threshold in the coming year?
If the answer to either one of these questions is positive, you must register under the VAT system. Both these tests should occur every month to ensure that your business maintains compliance with Emirati laws.
For enquiries, call +971 45 570 204 / E-mail: [email protected]
What is the value of supplies?
When it comes to VAT registration, the value of supplies include the following:
- Value of taxable supplies other than capital assets.
- Amount of the supplies subject to the reverse charge mechanism.
- Value of Intra GCC supplies
All goods or services bought/sold/imported into Oman, except those exempted by the Treaty will be taxed under the VAT regime. Hence, businesses that deal only in exempted goods or services do not have to register for VAT. It is expected that the standard VAT rate in Oman will be the GCC-accepted rate of 5%. Furthermore, zero-rated goods and services are taxable but have a 0% rate of VAT. Hence, businesses dealing in such goods can deduct their input VAT and claim refunds for the same.
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For enquiries, call +971 45 570 204 / E-mail: [email protected]
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