As of April 2021 Oman will be the fourth of the six Arab Gulf states (following behind Dubai, Bahrain and KSA) to introduce VAT. This was decreed by the Sultan of Oman, his Majesty, Sultan Haitham bin Tariq bin Taimur and is actually part of a 2016 VAT union agreement involving all the Gulf States.

Until recently it looked like Oman would postpone VAT due to COVID-19. However, this slowly changed as Oman cut public spending due to a government deficit of 16.9 per cent of gross domestic product (GDP). To add to this were adverse economic conditions and plummeting oil prices that finally pushed the VAT initiative to be put in motion.

To be fair, the intended rate of 5% VAT is very low in comparison to the 150 odd countries using VAT worldwide. Infect, Saudi Arabia recently tripled its VAT to 15%.

What does the new VAT entail?

Here are some key elements of the upcoming VAT:

The compulsory threshold for VAT registration is OMR 35,000
Voluntary registration is possible to apply for if it is above OMR 19,250
All Non-resident businesses with taxable supplies need to register for VAT
100% tax on energy drinks (Red Bull for example,) Alcohol, Tobacco, Beverages and Pork. 50% tax for Soft drinks
VAT paid by the end consumer. Business sector will be the tax collector claiming their tax back through the outlined process

Areas 5% tax will not apply.

The following categories will not be subject to 5% VAT:

Basic foodstuffs
Charity Supplies
Financial Services
Education and its connected services
Medicines and Medical equipment
Passenger Transport Divisions
All aspects pertaining to Disabled individuals
Under-developed land
Residential Property reselling
Rental Properties
Silver, Platinum and investment gold supply
Rescue, aid, aircraft and vessel supplies
The supply of crude oil, natural gas, petroleum and the subsequent derivatives

VAT Registration in Oman

Businesses can start applying for a VAT registration threshold as early as 1 January 2021.

Type of Information required on VAT invoices.

Here are some of the elements to be included on the VAT invoice.

Supplier details – Name, their address and VAT identification number (VATIN)
The invoice needs numbering
The words “Tax Invoice” should be visible
The Date
Customer information – Name and their address
Clear description of the goods such as physical description, the quantity of each and so on
Gross Value in OMR
VAT calculated correctly
The Net value of the order

Note: Some categories such as certain areas of Education, Financial Services and Exports may attract zero % VAT.

What is this action meant to achieve?

For Oman this introduction of VAT is expected to:

Improve the state’s general financial situation
Help maintain a high quality of public services
Reduce the reliance of Oil and other related sectors that are currently the main revenue earners
Assist in the development of upcoming infrastructures
Generate stable tax income

Despite the major cuts Oman had in its Investments, Security and Defense within the first half of the year it still suffered a huge deficit of over 820 million Riyals.

Mr. Malik, a reputable Financier went on to say: “Further fiscal adjustment – both revenue and expenditure – will be required from Oman going forward, especially as the funding requirement will remain high given the outlook for continuing government deficits and the rise in maturing debt from 2021. Revenue from VAT will likely be less than 2 percent of GDP once consumption stabilizes.”

Top VAT Consultants in Oman

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