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The GCC is well known for its dominance in the oil market, making up over a third of the world’s supply.
However, as the planet is turning towards alternative energy sources, demand is slowly decreasing, which is why the GCC has chosen to recover more money through a VAT system.
Back in 2016, all six GCC member states signed the Common VAT Agreement, committing them to implement VAT at a rate of 5%. The UAE and Saudi Arabia were the first nations to introduce VAT in 2018, with Bahrain following suit a year later.
However, as oil prices plummeted in April 2020, Saudi Arabia offset uncertainty by increasing VAT to 15% – just two years after implementing it.
Oman is the next member state due to implement VAT. And with the deadline set for 1st April 2021, businesses have just 180 days to prepare for the go live.
When reading the legislative updates, one of the things that jumped out to me about the Omani VAT laws is the ‘responsible person’ concept.
All businesses will be required to have a responsible person who oversees VAT compliance; this person is liable to any penalties for failures to comply. This is similar to the UK’s Senior Accounting Officer concept, where this person can be fined up to £5,000 for not taking appropriate actions to stay compliant.
In Oman, the responsible person can personally be fined up to 10,000 OMR (nearly £20,000) with a prison sentence of up to one year. The fine can be doubled and the jail sentence doubled for repeat offenders. Any late submissions are subject to a 1% fine on the owed tax every month.
The severity of the punishments put the responsible person under considerable pressure to get things right. In a complex business, multiple users make VAT decisions, often with minimal VAT training and if you are relying on others to input data correctly it’s imperative they do it correctly as the consequences of non-compliance are life changing.
If I were in this position, I would be doing everything in my power to achieve full compliance by using the best resources and tax technology available to me.
One of the most effective ways to mitigate the possibility of non-compliance is to minimise the risk of human error. For large businesses this means automating their VAT determination.
Most enterprise level businesses will be processing thousands of transactions a day, so human error will naturally occur when choosing tax codes, especially as VAT is a new concept in the country and wider region.
We can help…
VAT will be live in Oman in less than 180 days, so now is the time to explore tax technology. With everchanging VAT laws, it’s safe to say that investing in an automated solution will take pressure off your finance team and put the responsible person’s mind at ease.
At Innovate Tax, we fully automate AP and AR and have implemented our pre-configured VAT solution to multiple GCC clients in a variety of different industries. Get in touch to find out more.
