Oman to implement VAT from April 2021
- Oct 15, 2020
- 2 min read
On Monday 12 October 2020, His Majesty, the Sultan of Oman, Sultan Haitham bin Tariq bin Taimur, issued Royal Decree No.121/2020 in relation to the implementation of VAT in Oman.
The VAT Law is expected to be published in the Official Gazette on 18 October 2020 with an effective date for the introduction of VAT in April 2021. The VAT Law will set out the general principles for the application of VAT in Oman in line with the Unified GCC Agreement for Value Added Tax. The VAT Executive Regulations will provide more detail on specific areas of the Law and are expected to be published by December 2020.
Although the information currently available is limited, the Oman Tax Authority has begun to issue some information on the VAT Law through its social media channels, including that the following categories will not be subject to VAT at the standard rate of 5%:
Basic food commodities.
Medical care services and associated goods and services.
Education services and associated goods and services.
Requirements for people with disabilities.
Supplies for charities.
Financial services.
Undeveloped lands (vacant lands).
Resale of residential properties.
Passenger transport services.
Renting out real estate for residential purposes.
Supply of medicines and medical equipment.
Supply of investment gold, silver and platinum.
Supplies of international transport and interchange of goods or passengers, and the supply of associated services. The supply of marine, air and land transportation means intended for the transport of goods and passengers for commercial purposes, and the supply of goods and services associated with transport.
Supply of rescue and aid aircraft and vessels.
Supply of crude oil, petroleum derivatives and natural gas.
In the past months, it had looked likely that the Gulf state would delay the introduction of the consumption tax due to the worsening COVID-19 situation. Facing a 2.8 per cent economic contraction this year and a government deficit of 16.9 per cent of gross domestic product (GDP), according to the International Monetary Fund, Oman has cut public spending to contain the financial leakage caused by lower oil prices and the downturn caused by coronavirus lockdowns.
Like the other oil-rich Gulf states, Oman has suffered from the drop in oil prices, and is looking to stabilise its revenues through the introduction of the consumption tax. The decline in oil revenue in recent years means Oman's sovereign debt as a percentage of GDP has been steadily increasing, and is expected to grow above 60 per cent this year, according to a note published earlier this month by Fitch Ratings.
Next Steps
The issue of the Royal Decree is a significant and long awaited step in the introduction of VAT in Oman. Although further guidance is expected over the coming days and weeks, businesses should consider immediate steps on how to best prepare and assess the impact of VAT on their business activities in Oman.
Given the relatively short implementation timeline and the fact that the Executive Regulations may not be issued until the end of 2020, it is crucial that businesses start to plan for implementation as soon as possible.
We will provide further updates as more information becomes available, together with details of the VAT Law, in due course.
Comments