The implementation of a 5 per cent value-added tax (VAT) in Oman from April 2021 is expected to generate additional revenue of RO300mn for the sultanate this year, according to the budget statement released by the Ministry of Finance.
The value-added tax is an indirect tax on consumption so that the final consumers will ultimately bear the cost of VAT. The tax will be imposed on goods and services in Oman starting from April 2021, with exception of the education and health sectors and some basic commodities.
‘The financial impact of measures and initiatives taken under the Medium Term Fiscal Plan (2020-2024) has been estimated at RO3.5bn in 2021, with an increase in revenue by RO565mn resulting from VAT which is expected to generate RO300mn, government investments to yield up to RO195mn, excise tax of RO20mn, and taxes at RO50mn,’ the Ministry of Finance’s statement said.
The excise tax and VAT revenue are expected to stand at RO413mn in 2021, increased by threefold when compared with budgeted figure of RO100mn in 2020, the ministry’s statement added.
The corporate income tax revenue is estimated at RO400mn in 2021, a decrease of 27 per cent as compared with 2020 budget. This decline is mainly due to consequences of the COVID-19 pandemic, the statement said.
According to the Royal Decree (121/2020), a six months grace period has been granted for the taxpayer to register, and prepare their internal system to implement the VAT.
The Ministry of Finance said that the VAT rate of 5 per cent to be applied in Oman is among the lowest rates at the international level. Therefore, it is expected that the impact of VAT on the cost of living in Oman will be minimal.
‘The VAT will have a positive impact on the economic and social development and the international competitiveness of Oman. The financial resources obtained from this tax will contribute to building a sustainable economy for future generations, and it will also contribute to improving public services and continuing the development of infrastructure in future,’ the ministry’s statement added.