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VAT regulations issued, ready for implementation

14 Mar 2021

With Value Added Tax (VAT) coming into effect in Oman starting April 16, 2021, regulations governing its implementation have been issued by the Tax Authority. 

On Sunday, the authority issued executive regulations that include procedures related to the general provisions contained in the VAT law, registration procedures, tax payment and collection as well as invoicing, objection and grievance procedures. The document contains 13 chapters that have been subdivided into 211 articles. 

“All of the necessary preparations and requirements to launch VAT have been completed in terms of issues relating to taxation, preparing the necessary computer equipment, setting up online links to the bodies that govern taxation in Oman, and providing training on VAT to the workers at the Tax Authority,” said H E Saud bin Nasser bin Rashid al Shukaili, chairman of Tax Authority.  

He added that VAT will generate approximately 1.5 per cent of the value of GDP. “RO400mn is expected to be collected annually from the application of this tax.”  

H E Shukaili informed that the Tax Authority had opened registration process for companies to register in the special tax system in February; companies have been given the necessary time to prepare their accounting systems and other measures for tax compliance. 

The introduction of VAT, which was introduced via Royal Decree No 121/2020 on October 12, 2020, will serve as the foundation for the sultanate’s revenue-raising framework by introducing a broad-based indirect tax. 

With its implementation, Oman will join over 150 other countries that impose VAT and experts say the tax is expected to provide an additional source of support to Oman’s treasury. The move is also in line with the sultanate’s commitment to the Oman Vision 2040 programme, which aims to diversify the economy away from oil towards non-oil sectors such as manufac- turing, logistics and tourism. 

According to Joanne Clarke, tax director at Pinsent Masons Middle East, it has “undoubtedly been a difficult decision for Oman to press ahead with VAT implementation; however, there is no doubt that VAT has an important part to play in the sultanate’s journey towards stabilising and diversifying state income”. 

Joanne said that it is likely that this will be the first of many significant tax changes to be implemented over the coming 24 months, as Oman has indicated it may also choose to introduce an income tax regime with effect from 2022 while taking particular care to ensure that low income families are protected. “This would make Oman the first GCC country to implement a fully-fledged income tax system.”  

According to the authority, 94 food items are exempted from VAT including milk, meat, fish, poultry, fresh eggs, vegetables and fruits, coffee and tea, olive oil, sugar, nutritional products for children, bread, bottled drinking water and salt. 

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