VAT calculation on 1.2% deduction clarified

Muscat: The Tax Authority has clarified the method of calculating Value Added Tax (VAT) on invoices and contracts in the oil and gas sector and government units, where 1.2 per cent is deducted for training and employment support purposes.

In a public advisory, the Authority said VAT must be calculated on the total invoice value before deducting the 1.2 per cent training and employment contribution.

The clarification came in response to a common question on whether VAT should be calculated before or after deducting the 1.2 per cent contribution from invoices and contracts issued for companies affiliated with Oman Investment Authority, government units and the oil and gas sector.

The Tax Authority said the 1.2 per cent contribution related to training and employment is not considered a discount on the basic value of supply. Instead, it is treated as an independent deduction and does not affect the taxable value.

Accordingly, VAT is first calculated on the full invoice amount, and the 1.2 per cent deduction is then applied in accordance with approved procedures.

Providing a practical example, the Authority said that if the invoice value is RO 100, VAT at 5 per cent will be calculated at RO 5, bringing the total invoice value to RO 105. The 1.2 per cent training and employment contribution, amounting to RO 1.2, will then be deducted, leaving the net amount payable to the supplier at RO 103.8.

The Authority summarised the process in three points: the invoice is issued for the full value of supply, VAT is calculated on the total invoice value, and the 1.2 per cent training and employment contribution is deducted separately without affecting the taxable value.

The Tax Authority said taxpayers can contact its call centre on 1020 or follow its official social media channels for further information.