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Oman VAT update: Sultan sets April 2021 launch date

Update – 18th October 2020

The Official Gazette of Oman has published the country’s VAT Law, confirming VAT will come into effect on 16th April 2021.

It included 106 articles across 13 chapters and covered regulations on everything from registration to zero-rated and exempt supplies, penalties and taxable value.

Among the key details contained within the VAT Law are:

  • Registration for VAT is mandatory for all businesses that record (or expect to record) a total value of supplies in excess of OMR 38,500 by the end of a month and in the immediately preceding 11 months.
  • Oman will demand a ‘responsible person’ is appointed by each taxable person; widely expected to be the owner or manager. The Responsible Person must adhere to certain requirements and restrictions.
  • Unlike other GCC countries that have implemented VAT, Oman will require businesses to maintain VAT records for a period of 10 years (15 years for those in the real estate industry).
  • Legislation will include provision for significant penalties for non-compliance, including fines and imprisonment. Late payments will be subject to a 1% levy.
  • Transactions will be liable for Oman VAT if the handover of goods or completion of services takes place after 16th April 2021, even if an invoice is issued or paid before this date.

Earlier this week (12th October), His Majesty the Sultan of Oman issued a royal decree in relation to the introduction of VAT in the country in April 2021.

It comes just weeks after reports that VAT would instead arrive in Oman in 2022, significantly reducing the time businesses trading in the nation have to ensure they implement and comply with the new tax.

What are the details?

In the aftermath of the Sultan’s royal decree, the Oman Tax Authority released some basic details of what VAT in Oman will look like. This included confirmation that almost all goods and services will be subject to a 5% tax, although there will be several exemptions, including:

  • Basic food commodities
  • Education services
  • Medical care services
  • Financial services
  • Supplies for charities
  • Undeveloped land
  • Resale of residential property

The inclusions and exemptions from Oman’s VAT proposal are very similar to the UK and Europe’s long-standing and world-leading VAT system.

What happens next?

The publication of the VAT Law is expected imminently and will reveal the major principles of the new system in accordance with the Unified GCC Agreement for Value Added Tax. It is anticipated the VAT Law will formally confirm April 2021 as the effective start date of the tax.

More specific details relating to various areas of the new law will be published in the VAT Executive Regulations, which are expected by December 2020.

What do businesses need to do?

Nathan Farmer, Commercial Director at Innovate Tax, offered the following advice for businesses:

“There will understandably be those who doubt whether VAT will really launch in Oman in just six months’ time. After all, the country first signed a GCC agreement to adopt a VAT system in 2016 and initially intended to introduce it in 2018 before delaying this until 2020, 2021 and most recently 2022.

“But this week’s announcement from the Sultan indicates a newfound sense of urgency. Six months is a short timeframe for implementing a system as wide-reaching and complex as VAT. Therefore, we believe businesses must act now.

“We saw the pain faced by businesses in failing to prepare in 2017 when VAT was introduced in the UAE and Saudi Arabia. In fact, we are still helping customers by correcting the poorly executed plans of software providers and consultancy teams from that time.

“Right now, many organisations trading with Oman simply aren’t set up to accurately determine, calculate and report VAT on potentially millions of transactions each year, so perhaps the most important step for many will be to invest in technology that allows them to do this while fully complying with the law.

“It’s also worth remembering the introduction of VAT is just the first stage. The tax legislation will change over time, processes will require supervision and your systems will need to be maintained. Our solution is designed to ensure all updates are made instantly and our clients benefit from them with immediate effect.

“Back in 2017, 18 businesses implemented our solution for the UAE and Saudi Arabia. We went live with them simultaneously on 1st January 2018 and delivered 100% compliance from Day 1 of VAT launching in those countries.

“I invite businesses currently planning for the adoption of VAT in Oman to get in touch to find out how we can help you achieve similar success with the Omani implementation and a lifetime of tax reporting based on optimum accuracy, efficiency and ultimately compliance.”