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
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.”
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