Oman VAT Law sets penalties of up to RO 10,000 for offences

MUSCAT: A new Value Added Tax (VAT) that was promulgated by Royal Decree recently prescribes a range of penalties in the form of fines and prison terms for tax evaders and other offenses related to the new levy.

The Oman VAT Law is expected to come into force with effect from around April 16, 2021, which marks 180 days from its publication in the Official Gazette. The latter event happened on October 18, 2020, effectively providing businesses covered by the remit of the new tax with a six-month timeframe to get their accounting and IT systems in readiness for the implementation of VAT.

As with other tax related statutes, the VAT Law too enshrines relatively stiff penalties for defaulters. Well-known tax, audit and consultancy firm KPMG Oman, the new VAT Law prescribes prison terms of not less than two months and not exceeding one year or fines ranging from RO 1000 to 10,000 or both. The penalty is doubled for repeat offences, although the prison term may be increased by no more than half of this limit.

An advisory issued by KPMG lists as many as a dozen different types of offences or other forms of non-compliance that are liable to attract the penal provisions of the law. Liable to be penalised are taxable entities that, among other things, deliberately fail to identify the “responsible person” – the company’s designated point of reference on tax matters.

Similarly, legal action may be initiated if “the responsible person deliberately fails to notify the Oman Tax Authority and obtain its consent to appoint another responsible person during the period of his absence for a period of more than 90 days”, according to KPMG.  Also liable for action are followings acts: unauthorised fudging of data, failure to tax returns, failure to maintain tax invoices and documents in the prescribed order, failure to respond to a summons, and submission of inaccurate data in order to secure a refund.

Furthermore, belated tax payments will attract an additional tax at rate of one per cent of the tax due for every month or part of the month the tax remains due, according to KPMG.

To deter tax evasion, the Tax Authority is empowered to take necessary action in cases where it is proven that a taxable entity has committed fraud, according to the multinational professional services firm.  Action may also be taken if the primary objective of any transaction effected, or activity carried out, before or after the effective date, is to avoid the tax due for any tax period, in full or in part.

Recently, Oman became the fourth member of the GCC to implement VAT, following in the footsteps of Saudi Arabia, the United Arab Emirates and Bahrain, which have since introduced the new levy. Oman’s Tax Authority has been granted up to six months after the tax comes into force to issue the Executive Regulations. This effectively means that the Tax Authority has until October 13, 2021, to issue the Executive Regulations, KPMG points out.