His Majesty, Sultan Haitham Bin Tariq, approved Royal Decree No.121/2020 on 12 October 2020 for implementing much awaited Value Added Tax (‘VAT’) in Oman Relevant developments in brief:
In accordance with GCC Unified VAT Agreement and after the introduction of VAT in the Kingdom of Saudi Arabia, United Arab Emirates (both in 2018) and Kingdom of Bahrain (in 2019), Sultanate of Oman will be the fourth GCC State to implement VAT.
It expected that Royal Decree associated with VAT law to be published shortly. VAT will be made applicable within 180 days of the publication in the Official Gazette, which falls in April 2021. While VAT law shall spell out the VAT framework, the rules and procedures will be elaborated in the Executive Regulations, which are expected to be published close to the implementation date.
Standard rate of VAT is expected to be 5%, which shall cover all goods and services other than those which are either ‘zero-rated’ or ‘exempted’;
‘Zero-rated’ VAT is expected to be applicable on supply of select food items, medicine and medical equipment, certain transportation sector services, Oil & Gas sector supplies, supplies of investment grade gold,; and
VAT ‘exempt’ treatment is expected to be assigned to supplies made by the financial services sector, healthcare companies, supply of land, education sector services etc.
Approaches for implementation:
If Oman opts for one-shot implementation of VAT like that of United Arab Emirates, the time is very short to align technical positions, processes, systems and compliances; as registration is expected to go-live in January 2021.
If Oman opts for a phased-implementation of VAT like that of Kingdom of Saudi Arabia and Kingdom of Bahrain, it would result in large businesses requiring to register themselves first-up. However, it would be advisable that all firms, large or small, start preparing for VAT implementation well within time to avoid tax credit leakages and cost escalations.
VAT can provide additional source of revenues to government which it can utilize Sultanate’s economic development.
Here we also emphasis that VAT implementation would require careful planning as it would have implication on how usual business is done As it would alter some business processes specifically sales & procurement. Further, business must be aware if cash flow implications which would require better planning.
We would start providing training & assistance to businesses in order to make them VAT ready.
One of initiative would be for series of “Vlogs” which would explain all VAT concepts in a simple way.