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0 per cent VAT on supplies of goods and services in Special Zones

27 Apr 2021

The Special Economic Zone at Duqm (SEZAD) and free zones in Salalah, Sohar and Al Mazunah are classified Special Zones and zero-rated of the value-added tax (VAT), Oman’s Public Authority for Special Economic Zones and Free Zones (OPAZ) announced on Tuesday.

A statement issued by OPAZ said that SEZAD, SoharFreezone, Salalah Free Zone and Al Mazunah Free Zone are classified as ‘Special Zones’ in accordance with the provisions of Article 102 of the Executive Regulations of VAT, issued in the Decision No 53/2021.

‘This announcement comes post the coordination with the Tax Authority in regard to the implementation of VAT. In accordance with the conditions specified in the Article 103 of the Regulations, all these Special Zones are subject to zero per cent tax,’ OPAZ said.

OPAZ declared that the provisions of Article 54 of the VAT Law (Royal Decree No 121/2020) stipulates that supplies of goods or services to or from the Special Zones, or within them, may be zero-rated, following the conditions laid down in Articles of (101), (102), (103), (104), (105), (106) and (107) of the VAT Executive Regulations.

‘Therefore, OPAZ calls on all companies, enterprises, businesses and establishments operating in these zones to comply with the conditions stipulated in the VAT Executive Regulations, until the Tax Authority of Oman publishes detailed procedures for the purposes of applying VAT at a rate of zero per cent in the Special Zones. These conditions include VAT registration and VAT administration,’ the authority said.

In accordance with the Executive Regulations of VAT, companies, establishments, enterprises or persons working in the Special Zone (whether SEZAD or free zones) and whose entire supplies of goods or services are taxable at the zero rate, must apply to the Tax Authority for authorisation and VAT registration.


Supplying or transporting goods

For supplying or transporting goods to or within the Special Zones, Article 103 of the VAT Executive Regulations stipulates that: (a) The customer or the recipient are subject to tax, (b) The customer or the recipient be licensed and registered by the operating and supervising authority of the Special Zone to conduct the activity within the zone, (c) The customer or the recipient has received the goods for the purposes of the activity within the Special Zone, (d) The goods shall not be among the goods excluded from the right of deduction in accordance with the provisions of Article 56 of the VAT Regulations.


Supply of services

With regard to the supply of services to a Special Zone, the Article 107 of the Executive Regulations requires that: (a) The customer is registered for VAT in accordance with the VAT registration rules above, (b) The client must be a person licensed and registered by the authority operating and supervising the Special Zone, (c) The client has received services for the purposes of activity in the Special Zone, (d) These services do not include restaurant and hotel services, food and beverage undertakings and cultural, artistic, sports, educational and entertainment services provided for in the Clause 5 of Article 24 of the VAT Law, and (e) These services should not be exempt from VAT in accordance with the provisions of Article 47 of the VAT Law.


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