VAT comes into effect in Oman

Muscat: The Sultanate started implementing the Value Added Tax (VAT) System today, ushering in one of the major economic reforms that were announced last year to improve fiscal efficiency.

The VAT has been planning since a Common Agreement agreement was signed between member GCC countries in 2016.

While Oman joined 160 other countries in the world that impose the VAT, the UAE and Saudi Arabia imposed a 5% VAT from January 1, 2018, followed by Bahrain.

"The introduction of VAT will serve as the foundation for the Sultanate’s revenue-raising framework by introducing a broad-based indirect tax," the official statement said.

In October 2020, Oman Gulf State said the VAT Law will come into effect 180 days after its publication in the Official Gazette. Registrations opened on February 1 this year and the executive regulations were then published on March 14.

As the exact introduction date for the new VAT system was 180 days from the day the rules were officially gazetted on October 18, 2020, this is why the date of implementation was April 16, 2021. It is estimated that VAT will contribute 1.5% towards the country's gross domestic product (GDP)

The Tax Authority last week issued a decision identifying the food commodities that will be subject to value-added tax at a rate of zero per cent.

The decision is based on the Value-Added Tax Law issued by Royal Decree 121/2020 and decision2021/2 specifying food commodities subject to value-added tax at a rate of zero percent.

The Tax Authority has identified 488 food commodities that are exempt from value-added tax, including vegetables, fruits, legumes, grains, dates, spices, oils, fish, red meat, and poultry, in addition to milk, cheese, tea, coffee, sugar, salt, and juices without added sugar or sweetening materials.

The government had previously announced 93 basic food commodities exempt from value-added tax, but the list of these commodities was expanded to 488 food commodities within the package of social protection initiatives issued on Thursday.

The value-added tax will be introduced in the Sultanate from April 16.

The government has also decided to bear the cost of the VAT charged against electricity and water services for all citizens who own two accounts or less of the residential category. This includes families that were previously eligible for government support for the two services.

It will increase the volume of subsidized fuel to be consumed by holders of the National Subsidy Card from 200 litres to 400 litres per month. The government bears the cost of the VAT towards that amount so that it remains at the same subsidized price of 180 baisa per litre.

The Tax Authority called upon all companies to register through the electronic portal of the Authority and that includes every person whose annual supplies exceeded or are expected to exceed the mandatory registration threshold (RO 38,500). It is permissible to register voluntarily for those who exceeded or are expected to exceed the value of their annual supplies (RO 19,250).

From April 16, the taxable person must display a copy of the registration certificate in a prominent place at the headquarters of the activity, with a tax identification number issued to him in the registration certificate.

Regarding the penalties for violating the value-added tax law, the TA said there will be an administrative fine of not less than 500 and not more than 5,000 in the event of failure to submit tax returns by the date set for their legal submission, failure of the taxable person to display the registration certificate in a conspicuous place, failure of the taxpayer who has canceled his registration to keep the records, accounting books and documents.

Moreover, a fine of not less than 1 percent and not more than 25 percent; of the difference between the tax value on the basis of the real tax that must be declared and the tax value based on the previously submitted tax return, will be imposed in the event of the failure of the taxable person to declare the real tax in his declaration for any tax period, or a fine of 300 percent of the difference in tax due related to tax evasion.

Besides, there will be an administrative fine of not less than RO 1,000 and not exceeding RO 10,000 in case of a refund of tax value based on incorrect documents or data, the taxable person failed to submit an application to cancel the registration from the tax in the mandatory cases specified in the law and regulations, the person who recovered the tax amount by mistake failed to pay the amount due upon him as soon as the person concerned becomes aware of the error, or in case if the taxable person fails to supply the prices of goods and services including the tax.

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