The VAT Law was published in the Official Gazette of Oman on Sunday, October 18, 2020, after the issue of Royal Decree No. 121/2020. The VAT Law is made up of 106 articles grouped into 13 chapters that handle registration, taxation, and other topics. Taxable value, exempt and zero-rated supplies, invoices, fines, and transitional provisions are all covered. By the end of the year, the Executive Regulations should be available.

Background

On October 12, 2020, Oman announced the implementation of Value Added Tax (‘VAT’). By Royal Decree No. 121/2020, the VAT Law was published in the Official Gazette of Oman on Sunday, October 18, 2020. VAT in Oman will be implemented on April 16, 2021 (180 days after the date of publication of the law in the Official Gazette). The normal rate of VAT in Oman is 5%, which is in line with the GCC Unified Agreement, and the Oman VAT Law includes provisions for zero-rating and exclusions. By international standards, the 5% VAT rate is one of the lowest in the world. VAT online registration is not yet available, although it is expected to begin in January 2021.

The Oman VAT Law, which consists of 106 articles grouped into 13 chapters, is based on the principles given out in the Unified GCC Agreement on VAT. Below is a quick rundown of the important sections of the Oman VAT Law.

The following supplies are zero-rated under VAT in Oman Law, subject to the restrictions set out in the Executive Regulations:

• Supply of specific food goods as determined by a Chairman’s decision.
• Providing specific medications and medical equipment.
• Investment gold, silver, and platinum are in short supply.
• Supplies of international or intra-GCC products or passenger transportation, as well as supplies of services related to this mode of transportation
• Supply of specified air, sea, and land modes of transportation for the movement of Passengers and commercial products, as well as the delivery of connected goods and services.
• Rescue planes, as well as rescue and support boats, are available.
• Oil, oil derivatives, and natural gas supply
• Supplies made outside of the Gulf Cooperation Council (GCC) under specific circumstances are subject to certain limitations.
• Providing products and services that are exempt from Oman’s VAT and are sent to a jurisdiction outside the GCC.

Exemption from VAT – The following supplies are exempt from VAT under Oman VAT Law, subject to the restrictions outlined in the Executive Regulations:

• Services in the financial sector.
• Healthcare services, as well as goods and services associated with healthcare.
• Educational services, as well as commodities and services associated with education.
• Land that has yet to be developed (bare land).
• Residential real estate resale.
• Passenger transportation on a local level.
• Property rental for residential reasons.
• The Oman VAT Law additionally stipulates which imported products are VAT-free, such as returned goods, personal baggage, and so on.

Except for those listed above, all deliveries of goods and services in Oman will be subject to VAT at the normal rate of 5%, subject to the Oman VAT Law’s place of supply regulations.

Registration is required if the total worth of supplies purchased at the end of a month, or projected to be purchased, exceeds a certain amount. If the total amount due at the end of the month, including the previous eleven months, exceeds OMR 38,500, VAT registration is required.

Voluntary registration – VAT registration can be requested voluntarily if the total value of the goods and services sold is above a certain threshold. Supplies/expenditure purchased or expected to be purchased by the end of the month. Regardless of the threshold restrictions, the Oman VAT Law states that a non-resident who makes supply in Oman must also register for VAT as a non-resident taxpayer. It is also possible to get a non-resident VAT registration by designating a tax agent in Oman.

The Oman VAT Law also provides for VAT Group registration, and the Executive Regulations will define the parameters that must be followed for a VAT Group to be registered. The required registration level in Oman is decided and altered by a decision of the Chairman of the Oman Tax Authorities, according to the Oman VAT Law. In addition to the past eleven months, this month’s total exceeds OMR 19,250. The registration process will be conducted entirely online.

Recovering input taxes

Subject to the circumstances set out in the Oman VAT Law and the Executive Regulations, a taxable person can deduct and adjust recoverable input tax from the value of the output tax due during a tax period (yet to be published). The taxable person can claim an eligible input tax credit within three years after the date of a valid tax invoice, subject to the limitations outlined in the Oman VAT Law and Executive Regulations (yet to be published).

Refunds and tax returns

While the Executive Regulations will specify the frequency of filing VAT returns, the Oman VAT Law specifies the content required in a VAT return, including the value of taxable and exempt supplies, the value of imported goods, the value of output tax and input tax claimed, and the value of tax due during the period. The Oman VAT Law also specifies refunds in specific cases, such as tourist refunds.

Transitional provisions

Even if an invoice is produced or the consideration is paid for the delivery before the effective date (16 April 2021) or before the date of registration, transactions involving the handover of products, or completion of services after the VAT go-live date will be subject to Oman VAT.

Any deliveries made after the effective date will be subject to VAT, at the applicable VAT rate, for contracts entered into before the effective date; the consideration indicated in the contract will be deemed inclusive of VAT unless mentioned otherwise.

Record keeping – Interestingly, unlike the other GCC nations that have adopted VAT so far, records for businesses in the real estate industry must be kept for a period of 10 to 15 years. The record-keeping requirement is usually 5-6 years, however, in Oman, it has been increased to 10 years under the Oman VAT Law.

Special Economic Zone (SEZ) – The Oman VAT Law recognizes transactions carried out by businesses located in SEZs. The Oman VAT Law, on the other hand, makes no mention of the VAT treatment for transactions in the SEZ being established by the Executive Regulations.

Penalties – Under the terms of the Oman VAT Law, considerable penalties, both monetary and/or in the form of jail, can be imposed if certain prerequisites are not met. A late payment penalty of 1% of the outstanding amount is also imposed.