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Value-added tax on imports of goods and services

3 Jan 2021

In VAT regime, import of goods will have a different treatment from import of services. 

When goods enter the Sultanate of Oman from outside the GCC, whether by land, air or sea, in order to be considered as imported under the value- added tax law, they must be cleared by the registered importer through customs authorities and not placed under the duty suspension regime. 

Whereas, for import of services, reverse charge mechanism (RCM) will apply wherein the VAT liability shifts from supplier to the customer residing in Oman. 

The import of goods need not be only a sale-purchase transaction. Even if a company transports goods from the head office to its branch in Oman, it will be considered as an import from VAT viewpoint. All goods imported into Oman are subject to VAT, unless they are specifically exempted.

The taxable value of imported goods is determined by the customs value specified in accordance with the Common Customs Act plus taxes, duties and other expenses related to the import process, transportation, packaging, storage, stocking and insurance charges. 

In cases where goods are temporarily exported outside the Sultanate of Oman for repair, completion of manufacturing, or other similar services, and then re-imported, VAT will be due, on the value added to the goods during export. 

For an example, when equipment or apparatus is temporarily exported from the sultanate to China for repair or supplement manufacturing. Once it is repaired or finished manufacturing, it is re-imported into Oman. The value of VAT on imports will be on the value added to the equipment or apparatus while it is in China, according to the customs law. 

It is very common for the supplier to offer discounts after importing the goods. 

The discount will not affect the value of the goods or the VAT obligation unless the customs value of the goods is adjusted due to this discount. If there are no adjustments to the customs value, there will be no change in the obligation of VAT to the importer.

There could be a situation, where the importer finds that the VAT on imported goods is incorrect, let’s say, due to an error in classification or value. In such cases, the importer must inform the General Administration of Customs before paying VAT on imports.

Sometimes, the importer may need to make an adjustment to the customs declaration even after the goods are cleared. If there are any modification leading to additional customs duties or VAT due, the amendment will prevail. Further, if any modification leads to overpayments of customs duties or VAT, the General Administration of Customs will amend the customs duties and VAT due. 

It is very important for the importers to verify all relevant documents at the time of clearing customs formalities. As a general rule, the importer must pay VAT due on the goods at the point of import to the General Administration of Customs, before releasing the goods. Most likely the Bayan systems will be linked with the VAT systems and the VAT will be paid along-with the customs duties. Any errors or mistakes leading to excess/short payment of VAT may lead to complications for the importer. 

 

(Reader questions can be directed to [email protected]

 

 

Taysir al Rawahi

The writer is director, tax advisory services at Crowe Oman

 

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