Business

Omani firms advised to get geared for VAT

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With the roll-out of Value Added Tax (VAT) set to become a reality sometime next year, Omani businesses are being urged to be suitably prepped for the implementation of this much-anticipated levy. According to a key Muscat-based tax expert, a Royal Decree promulgating the VAT Law is likely to be issued as early as towards the end of the third quarter of this year. Imran Mushtaq, Indirect Tax Director – PwC Middle East, cited a flurry of recent actions by Oman’s Tax Authority, as well as the Majlis Ash’shura and State Council, to stress the point that the regulatory framework underpinning the introduction of VAT is being rapidly put into place ahead of its planned implementation next year. “Post-Eid, we expect the VAT Law would have been approved by both (Majlis Ash’shura and State Council), and will be progressing to His Majesty, and based on the current timetable, we could potentially see a Royal Decree implementing the VAT Law as early as September this year,” Mushtaq stated. The expert made the comments during a webinar on Monday hosted by PwC Oman on the theme, ‘Tax & Legal Updates: COVID-19 Impact & Future Challenges’. He was joined by a team of panelists comprising Darcy White, Tax Leader Oman, and Gaurav Kapoor, Tax Director – PwC Middle East. The timing for VAT implementation “now looks critical” given the decline in the macroeconomic situation in Oman over the past year, aggravated by the COVID-19 pandemic, depressed oil prices and their overall impact on the country’s fiscal deficit and external credit rating, said Mushtaq. “Indeed, recent reports have indicated VAT may generate up to some $800 million per year for Oman, so the proposition is clearly very attractive,” he noted, adding that fellow GCC member states United Arab Emirates, Saudi Arabia and Bahrain have seen significant revenue generation since they adopted VAT. The Majlis Ash’shura, according to the tax executive, had recently completed its review of the draft law with two main advisory comments. Firstly, it proposed the implementation of the levy only when the economy returns to normal growth of around three per cent. Secondly, it urged the government to ensure that the new tax does not impose any additional burden on low-income households. The draft law has since been referred to the State Council, which has 15 days to review it and submit its recommendations to His Majesty. While a Royal Decree on VAT is imminent in the coming months, a go-live date for the implementation of the levy still remains a “burning question”, said Mushtaq. “Theoretically, January, April and July 2021 are all possible dates, but based on discussions with (the Tax Authority), a go-live target will be likely July 2021.” This projection, he explained, is in line with the Tax Authority’s consistent assertion that it would want to give taxpayers at least six months to prepare for VAT after the issuance of the law. Another factor, he noted, concerns the state of readiness of the Authority itself in terms of developing the requisite IT infrastructure, formulating VAT policy, and recruiting and training the estimated 300 – 400 new staffers required to run the VAT department. Nonetheless, Mushtaq urged businesses to make the most of the time available to prepare for VAT.  “VAT preparation should be a priority post-Eid; don’t wait for the VAT law and regulations to be issued; start the planning – a lot of this can and should happen now!” he stressed.