Our experienced consulting team has considerable financial expertise in and experience of VAT implementation in the UAE, KSA and Bahrain, across all industry sectors. They can help you to assess the impact of VAT on your organisation and to assist with your VAT requirements in Oman.
We have deep experience both with Dynamics 365 Finance and Operations and with Infor Sunsystems
On Monday 12 October 2020, His Majesty, the Sultan of Oman, Sultan Haitham bin Tariq bin Taimur, issued Royal Decree No.121/2020 in relation to implementation of VAT in Oman from April 2021. announced the implementation of Value Added Tax (‘VAT’) on 12 October 2020. The VAT Law was published in the Official Gazette of Oman on Sunday, 18 October 2020. The date of implementation of VAT in Oman is 16 April 2021 (i.e.180 days from the date of publication of the Law in the Official Gazette). The standard rate of VAT in Oman is 5% and consistent with the GCC Unified Agreement, and there are provisions for zero rating and exemptions in the Oman VAT Law. By global standards, 5% is one of the lowest VAT rates implemented in the world. The online registration for VAT is not yet live but is likely to commence from January 2021.
Oman’s Tax Authority has been granted up to six months after the tax comes into force to issue the Executive Regulations. This effectively means that the Tax Authority has until October 13, 2021, to issue the Executive Regulations The Oman VAT Law is expected to come into force with effect from around April 16, 2021, which marks 180 days from its publication in the Official Gazette. The latter event happened on October 18, 2020, effectively providing businesses covered by the remit of the new tax with a six-month timeframe to get their accounting and IT systems in readiness for the implementation of VAT.
As with other tax related statutes, the VAT Law too enshrines relatively stiff penalties for defaulters. The new VAT Law prescribes prison terms of not less than two months and not exceeding one year or fines ranging from RO 1000 to 10,000 or both. The penalty is doubled for repeat offences, although the prison term may be increased by no more than half of this limit.There are different types of offences or other forms of non-compliance that are liable to attract the penal provisions of the law. Liable to be penalised are taxable entities that, among other things, deliberately fail to identify the “responsible person” – the company’s designated point of reference on tax matters.
• Similarly, legal action may be initiated if “the responsible person deliberately fails to notify the Oman Tax Authority and obtain its consent to appoint another responsible person during the period of his absence for a period of more than 90 days”,
• Examples include: unauthorised ‘fudging’ of data, failure to submit tax returns, failure to maintain tax invoices and documents in the prescribed order, failure to respond to a summons, and submission of inaccurate data in order to secure a refund.
• Belated tax payments will attract an additional tax at rate of one per cent of the tax due for every month or part of the month the tax remains due. To deter tax evasion, the Tax Authority is empowered to take necessary action in cases where it is proven that a taxable entity has committed fraud, according to the multinational professional services firm. Action may also be taken if the primary objective of any transaction effected, or activity carried out, before or after the effective date, is to avoid the tax due for any tax period, in full or in part.
The Oman VAT Law is based on the principles laid down in the Unified GCC Agreement for VAT, comprising 106 Articles which are divided into 13 Chapters.
A brief summary of the key provisions of the Oman VAT Law is given below.
• Zero rating – Subject to the conditions mentioned in the Executive Regulations, the following supplies are zero rated as per the Oman VAT Law:
• Supply of certain food products specified by a decision from the Chairman.
• Supply of specified medicines and medical equipment.
• Supply of investment gold, silver, and platinum.
• Supplies of international or intra GCC transport of goods or passengers, and supply of services in connection with this transport.
• Supply of air, sea and land means of transport that are designated for the transportation of passengers and goods for commercial purposes and the supply of related goods and services.
• Supply of rescue planes, and rescue and assistance boats.
• Supply of oil, oil derivatives and natural gas.
• Supplies made outside GCC countries in specified cases, subject to certain conditions.
• Supply of goods and services that are exempt from VAT in Oman and that are supplied to the territory outside of the GCC.
• Exemption from VAT – Subject to the conditions mentioned in the Executive Regulations, the following supplies shall be exempt from VAT as per the Oman VAT Law:
• Financial services.
• Healthcare services and related goods and services.
• Educational services and related goods and services.
• Undeveloped land (bare land).
• Resale of residential properties.
• Local passenger transport.
• Rental of properties for residential purposes.
o The Oman VAT Law also specifies certain imported goods that will be exempt from VAT such as returned goods, personal luggage, etc.
• All supplies of goods and services in Oman, except those mentioned above will attract VAT at the standard rate of 5%, subject to the place of supply provisions mentioned in the Oman VAT Law.
• Registration
o Mandatory registration – If the total value of supplies made at the end of a month, or expected to be made at the end of the month, in addition to the immediately preceding eleven months, exceeds OMR 38,500, then VAT registration is mandatory.
o Voluntary registration – VAT registration can be applied for voluntarily in case, the total value of supplies/expenditure made at the end of a month or expected to be made at the end of the month, in addition to the immediately preceding eleven months exceeds OMR 19,250.
o The registration process will be online.
o The Oman VAT Law specifies that a non-resident who makes supplies in Oman must also register for VAT as a non-resident taxpayer, irrespective of the threshold limits. The non-resident VAT registration can also be obtained by appointing a tax representative in Oman.
o The Oman VAT Law also stipulates VAT Group registration and the Executive Regulations will contain details around conditions to be met in order to register as a VAT Group.
o The Oman VAT Law mentions that the mandatory registration threshold shall be determined and amended by a decision from the Chairman of the Oman Tax Authorities.
Steps to take now
With the release of the Oman VAT Law, businesses must start preparing and ensure that they are ready to comply with the VAT requirements by 16 April 2021. The mandatory registration threshold shall be determined and amended vide a decision from the Chairman of the Oman Tax Authorities.
T
he concept of a ‘Responsible Person’ is unique to Oman and the other three GCC countries that have implemented VAT thus far do not have such a concept. The Oman Tax Authority is expected to release sector specific guides to help business in various sectors prepare for the VAT implementation.
With a very limited frame, before VAT goes live in Oman, business must immediately:
– identify team members for their VAT implementation projects (whether external or inhouse),
– assess their transactions and the applicable VAT treatment,
– assess their IT systems readiness and review their contracts to ensure a seamless VAT implementation.
Businesses need to give due consideration to transition and cut-over planning.
important VAT issues based on our experiences assisting clients in the region in relation to a VAT regime’s introduction:
• Importance of contracts and appropriate VAT clauses
• Ascertaining correct VAT treatment
• VAT registration and gathering TRN information from customers
• VAT recovery issues and VAT grouping
• VAT litigation avoidance strategies
Summary of key to focus on to implement VAT within your business:
1. Project Plan: budget for VAT implementation (e.g. consultants, training, resources, IT systems), set up VAT steering committee and assign responsibilities
2. Raise Awareness: educate and train employees on impact of VAT on accounting and reporting processes
3. VAT Impact Assessment: undertake VAT impact assessment, assess transitional provisions and classify and map VAT treatment of all business transactions
4. Cash Flow: assess cash flow impact and working capital requirements
5. IT Systems: analyse existing accounting systems capability for VAT reporting and consider upgrade or new system
6. Pricing: consider impact of VAT on pricing and demand
7. Contracts: review current contracts with suppliers and customers and include VAT clauses in new contracts
8. Processes: determine changes required to existing accounts payable processes and documentation including invoices and record keeping
9. Customer & Supplier Management: communicate with existing suppliers and customers to notify them of impact of VAT and negotiate with new suppliers and customers
10. Compliance: establish whether required or able to register for VAT and register on time.
Experienced resources will soon be in high demand, and it is best to take early guidance.
Contact us now to book a web half day briefing and assessment workshop to and to benefit from our experience.
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