VAT registration in Oman to start in January  

MUSCAT: Businesses in the Sultanate that fall under the remit of the Value Added Tax (VAT) regime when it comes into force with effect from April 2021 will be required to get registered with the Tax Authority – a process expected to commence from January next year.

According to tax experts, the GCC VAT Agreement, which Oman has signed up to, provides for different types of registrations based, for example, on turnover, group size, non-residential status, free zone status, and so on.  Registration is however mandatory for firms with a taxable turnover reaching $100,000 per annum.

Well-known multinational professional services firm Deloitte explained in an advisory to clients on the implications of Oman’s VAT announcement for local businesses: “Subject to any transition period or rules, businesses reaching the GCC set mandatory registration threshold (US$100,000 or RO 38,500 of taxable turnover in a year) would have to compulsorily register. Details of how this will work – a mechanism of both looking forward and back – are expected shortly.”

Deloitte noted however the likelihood of relief given to businesses making only zero-rated supplies. “Such businesses would have an option to seek exemption from registration, subject to the prior approval of the Tax Authority. Once again details to be confirmed,” it stated.

On the other hand, businesses which do not reach the mandatory registration threshold would have an option for voluntary registration, says the tax, audit and advisory services firm. “There is to be a prescribed threshold for voluntary registration determined based on the value of total supplies (probably US$50,000 or RO 19,250) or on qualifying expenses,” it pointed out.

Royal Decree 121/2020 issued earlier this week promulgates the VAT Law prescribing a five per cent tax on a wide array of goods and services consumed in the Sultanate with effect from April 2021.  But several categories of basic products and essential services have been either zero-rated for VAT or exempt altogether.  Included in this list is a broad range of food items, notably dairy products, fruits and vegetables, fresh eggs, water, tea and coffee beans, sugar, salt, bread, grains, baby food products, fish, meats, according to Deloitte.

Also zero-rated for the new tax are medicines and medical equipment; investments in gold, silver and platinum; International or intra-GCC transport of goods as well as passengers, plus related services; Crude oil, oil derivatives and natural gas; Supply of means of transport like aircrafts, vessels, and so on; and Exports of goods and services. Exempt from VAT are, among other areas, financial services, healthcare and education, bare land, and renting or resale of residential property.

Significantly, businesses operating within free zones, special economic zones and duty free zones are subject to special VAT rules. Deloitte’s advisory elaborated: “Based on our experience, certain concessional VAT treatments are likely to be applicable for supplies within, to and from the customs duty suspension zones, free zones or special zones. Importers, who are availing themselves of customs duty suspension benefits under the GCC Common Customs Law, would also likely be eligible for similar benefits under VAT – we expect some clarifications in the coming weeks.”

Similarly, non-resident businesses will likely have to be registered for VAT if they trade in taxable goods and services in the Sultanate, according to the firm. “There is no minimum registration threshold for non-resident persons as per the GCC VAT Agreement. A non-resident business would likely to have an option to appoint an agent in Oman – we understand that the agent does not have to be jointly and severally liable, nor a fiscal representative of the principal. More will emerge in the VAT Law and the Executive Regulations,” it added.