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Oman’s VAT Law

Royal Decree Number 121/2020: Oman’s VAT Law

The Sultanate of Oman is all set to implement its VAT regime, with effect from 1st April 2021. This makes Oman the fourth GCC country to introduce VAT, following UAE, the Kingdom of Saudi Arabia and Bahrain, as per the GCC VAT agreement that was signed by the GCC states in 2016.

The VAT shall be chargeable at the rate of 5% or 0% (also known as zero-rated tax), the VAT Law also lays down a list of goods and services that have been exempted from the tax regime.

With the introduction of VAT, it becomes important for businesses to assess their contracts, to determine the application of the tax on their goods and services. This treatment of VAT can be determined by identifying the time when the supply of goods and services become effective. To accurately determine the treatment of VAT, the contract must be assessed concerning the type of goods and services being supplied and the time at which the supply becomes effective.

Upon reading the VAT Law, businesses can further determine what kinds of goods and services are exempted from VAT and whether any special rules are to apply to the same. Further, they should also take into account the reverse charge that may be applicable in case of goods being imported. Any person carrying on a business within the territory of Oman shall mandatorily register themselves for VAT purposes and file periodical VAT returns.

With respect to electronic services, VAT shall be applicable on all such goods and services, the recipient of which resides in Oman. B2B supplies of goods and services (in case of e-services) are subject to a reverse charge mechanism, which implies that the burden of tax is on the supplier of such goods.

Omani businesses should take steps in assessing the structure of their contracts and supply chains so that they can identify any risks and how future contracts can be amended to accommodate the VAT regime.

Therefore, it becomes imperative for businesses to apply the VAT Law correctly to avoid any inconvenience in the future. The VAT Law contains provisions concerning fines and penalties that may be applicable in case of wrong treatment. In case of non-compliance, fines range from OMR 1,000 to OMR 20,000. Further, a higher degree of non-compliance may attract imprisonment of up to three years.