Davis Kallukaran –
Oman Vat regime is aligned to the GCC VAT framework. The UAE and Saudi governments had gone ahead with the implementation of VAT in 2018 followed by Bahrain in 2019. This gives great advantage to Oman to learn the issues, challenges and the solutions to problems faced by those countries in the implementation of VAT.
The VAT Law will be applicable in Oman from April 16, 2021. The law consists of 13 chapters and contains 106 articles and talks about a standard rate of 5 per cent for goods and services with limited number of zero ratings and highest number of exemptions compared to other countries in the region.
This is significantly lower than the OECD average rate of 19 per cent. The expected annual revenue from VAT is about RO 400 million. The executive regulations issued subsequently consists of 13 chapters consisting of 211 articles.
Exempt and zero-rated categories
The law has exempted or zero-rated most of the food items, medical, educational, travel expenses, renting and sale of residential properties and many more subject to certain conditions.
The VAT registration has already started from February 1, 2021 and is taken up in stages. The threshold limit for mandatory registration is RO 38,500 and those above RO 19,250 can also voluntarily register especially to get the refund of VAT paid on procurement.
Right from the registration to the administration of the VAT regime, strict fines and penalties have been enacted in the law for non-compliance. Taxable persons including business corporates need to be aware of the provisions of the VAT Law that can invite administrative fines and penalties for non-compliance. Administrative penalties are additional amounts payable by a person and may also attract imprisonment for breaching the provisions of the VAT Law.
According to Article 100 of the VAT Law, the following non-compliances may lead to a fine ranging from RO 1,000 to RO 10,000 and/or an imprisonment from two months to one year:
n Failure to identify the responsible person or appoint another person in his /her absence
n Intentional failure to notify any changes in the registration details
n Intentional failure to maintain tax invoice or records
n Failure to submit a VAT return or filing an incorrect return or failure for timely submission of records
n Failure to issue VAT invoice or issues an incorrect VAT invoice
n Committing any act to prevent the authority from carrying out their duties.
As per Article 101 of the VAT Law, the following breaches may lead to a fine ranging from RO 5,000 to RO 20,000 and/or imprisonment from one year to three years:
n Deliberate failure to register
n Deliberate failure to report correct taxable value and tax payable on VAT return
n Submitting forged returns and documents to evade tax payment
n Deliberately destroying, concealing or disposing of documents and records and
n Intentionally instigating or assisting taxable person in submitting incorrect returns or documents.
Further Article 202 of the Executive Regulations also talks about disciplinary penalties in the event of certain failures which may lead to a fine of RO 500 to RO 5,000. This may arise in the following situations:
n Failure to submit tax returns on the legally prescribed dates for submission
n Failure of the taxable person to display the Registration Certificate in a visible place according to Article 123 of these regulations
n Failure of the taxable person whose registration has been cancelled fails to keep accounting records and books, and documents
Moreover, certain non-compliances as per Article 203 of the Executive Regulation may lead to a fine of RO 1,000 to RO 10,000 in the following cases:
n Refund of the Tax based on incorrect documents or details
n Failure of the taxable person to apply to cancel the registration from the Tax in the compulsory cases specified in the VAT Law
n Failure of the person who incorrectly received a Tax refund to repay the amount due as soon as person becomes aware of the error
n Failure to present prices of Goods and Services inclusive of Tax
Under the VAT regime, it is advisable for the taxpayer to be aware of the consequences of non-compliance to the VAT Law and should seriously look-forward for timely registrations and VAT impact assessment in their organisations.
[Davis Kallukaran is the Founder and Managing Partner of leading audit and tax advisory firm, Crowe Oman]