How to calculate VAT in Bahrain
February 8, 2022
How to pay Vat In Oman
February 18, 2022How to calculate VAT in Oman
The budget year 2022 is being created in conformity with the Tenth-Five-Year Development Plan’s objectives (2021-2025). Oman Vision 2040’s initial strategy aims to achieve financial sustainability while diversifying the economy.
The 2022 budget incorporates all government actions targeted at raising non-oil income and cutting public spending on government units to achieve fiscal sustainability, as approved by His Majesty Sultan Haitham bin Tarik. The budget for 2022 aims to increase investment, allow the private sector to play a larger role in driving economic growth, and increase job possibilities.
The Medium-Term Fiscal Plan was taken into account while estimating public income and expenditures for VAT in Oman in 2022. (2020 to 2024). The goal is to keep expenditure on necessities including education, health care, housing, and social assistance at current levels. Furthermore, the budget for 2022 intends to strengthen the business climate and expand public-private partnership (PPP) initiatives.
VAT Calculation in Oman.
Because VAT is an indirect tax, it will be levied at the transactional level. To put it another way, when you make a taxable supply, you must compute the VAT at 5%. From April 16, 2021, all registered firms in Oman are doing just that. To compute VAT in Oman, you must first determine the taxable amount on which the 5% VAT may be calculated. The taxable value, according to Oman’s VAT law, is the value of the consideration before VAT, but it also includes all additional expenses/costs paid by the provider, as well as any fees and other taxes.
To put it another way, the taxable value will be the net value shortly before the VAT is calculated.
Making VAT payments in Oman.
On the lawfully stipulated days, the Taxable Person for VAT in Oman shall pay the VAT due on the tax return, adjustments to tax returns, or assessments or adjustments imposed by the Authority, using one of the following methods:
- Bank checks under the Authority’s name.
- Depositing the sum owed in the Authority’s account set up for this purpose. As long as you produce a certified copy of the bank’s deposit receipt.
- Issuing a formal order to transfer VAT from the Taxable Person’s account to the Authority’s account and inform the Oman Tax Authority. The consideration of VAT owed is only paid if the complete amount is credited to the Authority’s bank.
- Any other method that the Authority deems appropriate.
Non-payment of VAT due on the legally defined date will be recovered using the administrative enforcement processes of Oman’s System for Collection of Taxes, Fees, and Others for VAT. The funds are payable to the State Administrative Apparatus Units.
On the other hand, the application for further VAT exemption in Oman must be submitted to the Chairman with specifics, and the Authority must decide on the exemption application within thirty days. Otherwise, the request will be considered for rejection. The Oman VAT Authority may revoke the exemption decision if erroneous information or deceptive justifications are discovered. Initiate the appropriate processes to recover the overdue VAT.
The budget deficit is equal to 15% of revenues and 5% of GDP.
The budget deficit in 2022 of VAT in Oman is expected to reach RO 1.55 billion, up 27% from the actual deficit of RO 1.2 billion based on preliminary findings for 2021. The deficit in 2022 is expected to be covered by a combination of foreign and domestic borrowing (74%), as well as the use of reserves (26 percent ).
Budget 2022 in comparison to the tenth five-year plan’s forecasts for 2022
Oil and gas revenues in the budget 2022 are expected to be greater than in the tenth five-year plan since oil prices are forecast to be US$ 50 per barrel, up from US$ 45 per barrel in the tenth five-year plan. Only the gas procurement expense has changed significantly since the foundation of EDO, due to a change in the technique for acquiring gas from PDO Block 6 after the establishment of EDO, and the gas transportation expenditure has increased due to an increase in the amount of gas. The RO 1.55 billion budget deficit in 2022 is similar to the RO 1.66 billion deficit in the Tenth Five-Year Plan.
Revenue is expected to fall by 3.3 percent in 2021, compared to preliminaries.
Oil and gas income provides for 68 percent of the government’s overall revenue.
Oil and gas revenues are projected at RO 7.2 billion, up 34% from the RO 5.4 billion budgeted for 2021, albeit they are still 12% below the RO 8.2 billion revenue forecasted in the preliminary results for 2021. Gas revenues, on the other hand, are estimated at RO 2.7 million, up 5% from the preliminary findings of RO 2.6 billion for 2021. Oil revenues are falling, since the budget for 2022 forecasts an oil price of US$ 50 per barrel, which is lower than the average price of US$ 61 per barrel in 2021.
This reflects a cautious stance adopted in the 2022 budget, given the uncertainty surrounding oil prices as a result of the Covid-19 epidemic and other causes. While the world economy and demand improve, the current strain of the Covid-19 epidemic, “Omicron,” continues to cause volatility in energy markets. The increased money will be used to lower the deficit and repay debts if the oil price surpasses the budget projection.
Revenues from sources other than oil and gas account for 32% of overall government revenue.
Non-Oil and Gas revenues are budgeted at RO 3.3 billion, up 4% from the previous year’s budget of RO 3.2 billion and up 21% from the revenue forecasted in the preliminary results for 2021, which was RO 2.76 billion. The government’s goal of lessening its reliance on oil earnings is shown in the large growth in non-oil and gas revenues. VAT in Oman and Excise Tax revenues are expected to climb by 29.5 percent in 2022, reaching RO 535 million, compared to the planned amount of RO 413 million in 2021, according to the 2022 budget. When compared to the 2021 budget, corporate income tax collections are expected to grow by 16 percent to RO 465 million in 2022. The Oman Investment Authority (OIA), which holds all government interests in Petroleum Development Oman, is another substantial source of revenue for the government (RO 800 million) (PDO).
Expenditure is expected to fall by 0.3 percent in 2021 compared to early figures.
Gas purchases and transportation costs were reduced by 9%.
The cost of purchasing and transporting gas is expected to be RO 1.6 billion, up RO 820 million from the budget for 2021 but 9% less than that of the cost of RO 1.8 billion based on early data for 2021. The large increase in cost compared to the 2021 budget is mostly because the technique for acquiring gas from PDO Block 6 has changed with the foundation of Energy Development Oman (EDO).
As a result, the cost of procuring gas has increased dramatically, from RO 650 million in the 2021 budget to RO 1.4 billion in the 2022 budget. However, compared to the budget for 2021, this has resulted in an incremental rise in gas income.
Spending on development has been decreased by 18%.
Development spending is projected at RO 900 million, which is per the 2021 budget but 18 percent less than actual spending, which is estimated to be RO 1,100 million based on early findings for 2021. This is the amount expected to be paid during the year based on actual work in progress for development projects that have been re-prioritized in terms of urgency, cost, and economic and social returns utilizing the Ministry of Economy’s Matrix of Projects approach.
Expenses for servicing government debt have increased by 21%.
Expenses for servicing public debt are projected at RO 1,294 million, up 8% from the previous year’s budget of RO 1,200 million and up 21% over the preliminary findings of RO 1,070 million for 2021.
Revenue
Actual aggregate revenue for 2021 grew by 27%, to RO 10.9 billion, compared to the planned revenue of RO 8.6 billion, according to early figures. This is owing to a significant increase (51%) in Oil and Gas revenues of RO 2.8 billion, despite a decrease of RO 459 million in non-oil income (14 percent ). The following factors have contributed to the increase:
– Net oil revenue increased by 56%, owing to a higher average oil price of USD 61/bbl than the USD 45/bbl envisaged in the 2021 budget.
– Gas revenue climbed by 40% as a result of rising oil prices, which drove up gas prices, and an increase in LNG export volume.
— However, despite the government’s efforts to promote the private sector, non-oil revenues fell by 14% due to the ongoing effects of the Covid-19 outbreak on commercial activity.
Expenditure
Based on preliminary findings, actual public spending for 2021 saw a rise of 12% (or RO 1.3 billion), bringing the total to RO 12.2 billion. The reason for this rise in VAT in Oman is mostly attributable to the following reasons:
– The government’s continuous assistance in providing coverage Expenses incurred in the oil and gas industry (RO 987million) until EDO has done the necessary legal work. Procedures were established, and funding for the company’s activities began.
– An increase of RO 200 million in development spending includes, among other things, payment settling costs that have been delayed from earlier years to deal with the aftermath of Cyclone Shaheen
– An increase in existing civil ministry spending as well as defense and security forces
– A rise in payments and other expenditures due to the settlement of last year’s water subsidy. Additional costs were incurred as a result of the epidemic.
However, despite a 12 percent increase in spending (RO 1.3 billion) over anticipated levels, Oman recorded its lowest spending in 2021 when compared to the previous five years beginning in 2017.
Following Oman Vision 2040, the government implemented a variety of programs and policies in 2021 to stimulate the national economy, provide social protection, VAT in Oman, and ensure budgetary sustainability. The government’s most important policies and efforts are summarized here.
– Economic Stimulus Plan (ESP): On March 9, 2021, the ESP was implemented to offset the effects of the epidemic on the national economy. Intending to support economic recovery efforts, enhance economic performance, and attract more foreign investment, the ESP addresses five key areas: banking, labor market and employment, small and medium enterprises (SMEs), business environment and investment climate, and tax incentives (lower tax rate, tax rebates, etc.).
– Digital Transformation Initiative: This program, which encompasses 53 government departments, intends to build innovative e-government that offers smart services by laying out a comprehensive plan for digital transformation. The goal of the initiative is to put 80 percent of the major government operations and actions online.
– SMEs Development Initiatives: The Authority for Small and Medium Enterprise Development has taken many steps to help SMEs grow, including making it easier to get credit and repay it, as well as waiving loan repayments. Launching specialized and quality incubators in the creative industries, on-the-job training and counseling programs for SMEs, and a specific program for entrepreneur preparation to create an entrepreneurial culture are among the other measures.
– Social Protection Initiatives: These initiatives were launched on April 8, 2021, to improve public finance efficiency and stabilize the labor market, as well as encourage effective private sector participation in contributing to the economy’s growth in line with Oman Vision 2040. Providing financial facilities and granting exemptions for some individuals and SMEs in repaying loans, expanding the list of food items subject to 0% VAT, extending the duration of Job Security System benefits, and bearing the cost of VAT in Oman imposed on electricity and water services are among the initiatives.
– Improving the Performance of Government Enterprises: The OIA has established a variety of projects and programs to help government companies develop and improve their performance, including:
– Rawabet program: A program to guarantee that OIA associated enterprises (i.e. all government companies except EDO/PDO) have uniform rules and corporate governance systems in line with Oman Vision 2040.
– Governance charter: Aims to control OIA-affiliated enterprises’ actions and align their strategies to long-term growth objectives.
– In-Country Value Program: Assists in the growth of local industry, which in turn stimulates the economy.
– National Fund for Emergency Preparedness: Aims to cope with the consequences of Tropical Cyclone Shaheen and to be prepared for future natural disasters.
– Investor Residency Program – This program allows prospective investors to reside in Oman for a term of five to 10 years, with the possibility of an extension.
The government is taking a variety of steps to fulfill the economic and social development goals outlined in the Tenth Five-Year Plan (2021-2025) and Oman Vision 2040.
– Ejadah – Set to go into effect in January 2022.
This tries to improve human resources by tying incentives and rewards to productivity levels.
– Digital transformation projects – A variety of digital projects, including a single guide for government services, initiatives, space exploration operations, and a national platform for recommendations and complaints, are expected to be introduced.
– SME expansion – Drafting a SMEs law, introducing funding regulations, introducing Riyada Card regulations, announcing incubator-related regulations and Sanad center regulations, launching group financing platforms, and supporting the craft and one-person industries are all examples of measures to boost the SME sector.
– Government Financial System (Maliyah) – This will serve as an information technology platform for the implementation of public finance management rules, policies, processes, and activities.
– National Register of Government Assets – The register is a centralized, integrated system that aims to account for all government assets and develop a strategy to optimize returns.
– Fee Setting Policy Handbook – It is a uniform framework for standardizing the price of government services that may be used as a guideline by government agencies.
– Pension Fund Merger: A civil pension fund for the public and private sectors will be formed under the name “Social Security Fund” under Royal Decree number 2021/33 on retirement and social security systems. This is in addition to the creation of the “Military and Security Services Retirement Fund” for military and security personnel.
– Central Government Procurement – This program aims to find a central organization that would be responsible for unifying government procurement and contracts across all government agencies. It becomes more feasible for paying VAT in Oman.
– Supply Chain Financing (SCF) plan – The Ministry of Finance is collaborating with a group of banks, most of which are headquartered in Oman, to offer a simple and effective financing option to suppliers under contract with various government entities. The goal is to provide suppliers with an alternative to entering a financing agreement with a bank to get their invoices paid on time helping them with VAT in Oman.
– Thakur platform – An e-platform aimed at promoting community engagement between government and society by gathering ideas, proposals, and solutions that would aid in improving public financial management and achieving fiscal sustainability.
With additional COVID-19 variations and swings in oil prices throughout the year, the globe continues to face a worldwide health catastrophe in 2021. These two causes have continued to have a large economic impact and business disruption throughout the world, which is projected to take a long time to recover from. Oman, like the great majority of countries, tried to contain the spread of COVID-19 by imposing phased lockdowns, travel restrictions, and temporary company closures, all of which resulted in a significant halt in economic growth.
Despite the pandemic’s economic depression, substantial improvements to the country’s corporate, legal, and tax systems occurred in 2021, representing a continuation of development measures taken in previous years to accomplish, among other things, objectives, fiscal sustainability & economy diversification.
