On 12 October 2020 a Decree related to the implementation of the Value Added Tax (VAT) was announced and on 18 October 2020 Royal Decree No. 121/ 2020 formally enacting the VAT was published in the Official Gazette of the Sultanate of Oman.
The Royal Decree provided a 180-day timeline from the date of publication of the Royal Decree to the date VAT is expected to be applicable. This means that VAT will be ‘live’ in Oman beginning in mid- April 2021 (in other words, from 16 or 17 April 2021). Though the VAT law has been published (the published version is in Arabic), the Executive Regulations are expected to be released at a later date. Based on the experiences in other Gulf Cooperation Council (GCC) countries that have introduced VAT, the Executive Regulations can be expected to be released just a few months before the implementation date. As a result, businesses in Oman have limited time to align their processes and systems with the requirements of VAT.
The introduction of VAT was a tough decision, given that the economy is suffering because of low oil prices and many businesses are reeling under the impact of COVID-19. However, the standard rate of VAT will be 5%, making it one of the lowest rates in the world. As well, there are notable zero-rated categories under Oman VAT law, including for the supply of certain food items, crude oil, oil derivatives, natural gas, medicines and medical equipment, and certain transport services. In addition, VAT exemptions are extended to the supply of financial services, healthcare and associated supplies, education and related supplies, and certain real estate transactions.
Given that VAT will be applicable soon, businesses should be looking for ways to try to minimise its impact by, for example, revisiting their supply-chain models, plugging input tax leaks, and curbing tax costs wherever possible.
Ashish Athavale
ashish.athavale@bdo.com.om
Tushar Kashikar
tushar.kashikar@bdo.com.om