Updates on the new VAT regime

The Sultanate of Oman introduced a VAT regime (including executive regulations) as from 16 April 2021. This was followed by a detailed VAT return filing guide published on 29 June by the Oman tax authorities, as well as a checklist to be uploaded with the VAT return when a taxpayer is claiming an input tax credit refund.

The first VAT return for the period 16 April to 30 June 2021 was due on 30 July 2021. Although some businesses struggled to meet the deadline, they did file returns and pay VAT as the Oman tax authorities did not allow any extensions. A VAT return filed on or after 31 July 2021 is automatically subject to a 1% additional tax per month of delay and a discretionary penalty that can go up to OMR 5,000.

VAT registration

VAT registration in Oman is mandatory for a business with annual supplies (i.e., standard-rated supplies, zero-rated supplies and supplies subject to the reverse charge) of at least OMR 38,500. As outlined in our article in the March 2021 issue of Indirect Tax News, registration for VAT was phased in, depending on the amount of the business’ annual supplies. Businesses with annual supplies exceeding OMR 1 million were required to register by 16 April 2021 and those with annual supplies between OMR 500,000 and OMR 1 million were required to register by 1 July 2021. Two groups of taxpayers still must register:

Businesses with annual supplies between OMR 250,000 and OMR 499,999 must register by 1 October 2021; and
Businesses with annual supplies exceeding OMR 38,500 will have to be registered by 1 April 2022.

Nonresident businesses must register for VAT purposes if they provide taxable supplies in Oman mainly to unregistered recipients, irrespective of the registration threshold limit. Nonresidents can appoint a local representative.

Resident businesses with annual supplies exceeding OMR 19,250 may voluntarily register for VAT purposes at any time.

Noteworthy updates

As VAT in Oman is still at a nascent stage and evolving, the authorities have been providing updates:

The initial list of 94 food and beverage items that are subject to the zero rate has been expanded to 488 items.
A list of medicines and medical devices subject to the zero rate has been published.
The Special Economic Zone in Duqm and the free zones in Al Mazyunah, Salalah and Sohar qualify as special zones for purposes of the VAT law, so that supplies of goods and services into, from or within the zones may be zero-rated if certain conditions are fulfilled.
The tax portal has been updated to allow the filing of applications for the postponement of import VAT until the VAT return is filed for the tax period in which the import takes place.
A list of bank accounts that taxpayers can use to pay VAT (and other taxes) has been published.
Businesses can issue a simplified VAT invoice provided certain requirements are met.
The Ministry of Energy & Minerals (MEM) published two letters on 13 April and 13 July 2021 to clarify issues relating to the zero-rating of certain taxpayers in the oil and gas sector. Article 93 of the executive regulations provides that upstream and midstream companies are entitled to a special zero rating. According to the MEM letters, suppliers to oil and gas operators in the upstream and midstream industry will continue to apply the 5% VAT rate, unless the Oman tax authorities publish anything different.

Ashish Athavale
ashish.athavale@bdo.com.om