Deferment of VAT rollout hailed as generous gesture

The government’s decision to put off the introduction of VAT by another 12 months to 2019 has been broadly welcomed as a “generous gesture” to citizens and residents amid the ongoing economic downturn and the fiscal challenges it has spawned. The announcement ends months of uncertainty over a firm timeline for the rollout of VAT in Oman in line with a commitment by GCC member states to implement the new tax before the end of 2018. The UAE and Saudi Arabia are the only two GCC states that have concrete plans to introduce the tax with effect from January 1, 2018.

Reacting to the announcement, a tax expert described the move as a “mixed bag” in terms of its implications for the principal stakeholders involved. “From the government’s standpoint, the implementation of VAT would have bolstered state revenues in 2018, but the government has been generous to its people by deferring the tax rollout by a year,” said Alkesh Joshi, Partner (Business Tax Advisory Services), at multinational professional services firm EY Oman.

“From the consumer’s perspective — VAT being a consumption tax — the deferment is very good news indeed. People don’t have to worry about their purchases being more expensive in 2018 as a result of VAT. Barring the effects of any inflation, the purchasing power of consumers will remain intact for another year,” he remarked. The announcement will also come as cheery news to Omanis businesses, which now have an additional year to be suitably geared for the implementation of VAT, said Alkesh. “This is very good news for businesses as well. As consultants and advisers in the UAE and Saudi markets as well, we have been seeing that businesses there are struggling to cope with preparations for the introduction of VAT.

Businesses in Oman have 12 more months to prepare themselves, although 12 months is not a lot of time to get properly ready.” The announcement comes as a heads-up for Omani businesses to commence their preparatory work, said the tax expert. “So you have a good 11 months at least to plan out the impact of VAT on your business, make system changes, design changes, policy changes, and procedural changes within the organization.”
The implementation of VAT in the Sultanate is expected to be preceded by the promulgation of a domestic VAT law, which will be broadly based on the GCC VAT framework signed by Oman along with member states of the bloc. Both the UAE and Saudi Arabia have already enacted VAT laws in preparation for the introduction of VAT early next year.

Conrad Prabhu