Oman
VAT in Oman
His Majesty, the Sultan of Oman, issued Royal Decree No. 121/2020 on 12th October 2020, in relation to the introduction of VAT in Oman. Following the introduction of VAT in the KSA, the UAE, and Bahrain, Oman will be the fourth GCC country to implement VAT in the region. The VAT Law has set out the general principles for the application of VAT in Oman in line with the Unified GCC Agreement for VAT.
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The introduction of VAT will be a significant change for businesses in Oman. VAT has a broad scope and businesses will need to consider the impact of VAT on key areas including all transactions, supply chains, contracts, and IT systems.
There is very limited time left for businesses to become VAT compliant. They should acknowledge the potential challenges associated with becoming VAT compliant. We recommend that businesses focus on being in a position to at least issue tax invoices and capture VAT on purchases.
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The experience of UAE, KSA, and Bahrain VAT implementation has shown that businesses need significant time to prepare their people, customers, vendors, and systems for the introduction of VAT. Such a transformation will require the involvement and support of senior management to ensure that the necessary steps are taken.
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A well planned and executed VAT implementation will benefit the business in respect of ongoing compliance and management of risks, as well as, cash flow management
Important Dates for VAT Registration
With the implementation of VAT businesses are required to register and comply with a number of VAT obligations: i.e. charging VAT, issuing tax invoices, filing periodical VAT returns, and paying any VAT due to the tax authorities.
While the list of obligations set out above is by no means exhaustive, it is imperative for any business to ensure it is registered for VAT in line with the prescribed timeline.
What Oman businesses should do now
Businesses will need to develop a comprehensive action plan that takes into account their impact on people and organizations, processes and controls, and data and technology. They will need to consider the following activities to be VAT-ready:
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Understand key areas of impact in their business
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Prepare different scenarios for the design and application of VAT
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Plan for the training of existing staff and the recruitment of skilled resources
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Continually track policy development regarding VAT and update prepared scenarios
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Identify areas of adverse impact and plan accordingly
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Assess the capability of existing IT systems and manage the integration of multiple applications
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Identify issues needing representation to the authorities and develop a strategy for effective advocacy
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Prepare the implementation road map and align relevant teams
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Facilitate sustained implementation
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Manage the VAT initiative in line with the strategic agenda of the business
How Narayan & Narayan can help?
Our team is available to discuss and bring clarity to the specific challenges that your businesses will face in getting ready for VAT.
At Narayan & Narayan, we have organized VAT workstreams that involve impact assessments, service design, and implementation, as well as ongoing VAT technical analysis, advisory, training, project, and change management. We can help you through all phases of implementation, providing advice and recommendations for managing VAT compliance, addressing VAT costs, and avoiding significant penalties
Oman VAT Implementation plan
Narayan & Narayan can provide a complete range of services to address all elements of VAT implementation and ongoing compliance
Phase 1: VAT Impact Assessment
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Identify how VAT will impact business structure and operations. It will include the identification of relevant transactions that are likely to be affected by the regulations, either directly or indirectly
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Understand the processes and accounting system changes required and estimate the new costs involved with VAT implementation and compliance
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Understand how the legislation can impact the revenues, expenses, and cash flows
Phase 2: Planning and Implementation
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Assistance in designing VAT processes, compliance manual, and documentation requirements (including review of records to be maintained)
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Assistance in obtaining VAT registration
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Conduct function-specific VAT training for personnel(2-3)
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Inputs with respect to changes in invoices, debit/credit notes, etc. raised by the company on the customers and by vendors on the company
Phase 3: Transition and Output Testing
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Assess whether VAT positions are consistent with the legislation at the time of transition
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Review (on a sampling basis) and comment from a VAT technical perspective on the output of systems testing and a trial run-generated VAT report for the preparation of VAT returns
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Understand contractual obligations and agreements that need to be reviewed and amended
Phase 4: Post-Implementation Assistance
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Review of returns for the first month under the VAT regime. Our scope of work will include a high-level review of the disclosures made in the returns
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Providing answers to day-to-day routine queries for the first three months
Oman Tax Authority Publications
The Oman Tax Authority issued a guide on VAT Registration (Arabic only) providing clarity on the VAT registration process, following the issuance of the Oman VAT law in October 2020. The guide confirms that the go-live date for VAT in Oman is 16 April 2021 and the VAT registration will take effect in a phased manner i.e. based on the revenue of the taxable person.
The Oman Tax Authority has also published three decisions in the Official Gazette Issue 1374 published on 10 January 2021, in preparation for the introduction of VAT in Oman. All three decisions were issued on 4th January 2021 and would come into effect from the day after it is published in the Official Gazette, i.e. 11th January 2021.
Decision Number 2/2021 is on the Determination of Food items subject to VAT at zero rates. The list is similar to the list of food items exempt from Customs duty and Bahrain’s list of zero-rated VAT food items.
To download Narayan & Narayan's unofficial English translation of the list, please click here.
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Also to download list of details required for VAT Registration, please click here.
Oman VAT Guide
This publication provides a detailed view of Oman VAT Law, Executive Regulations, and the Notifications issued by the Oman Tax Authority. This document covers the information on all the key points required for businesses to successfully implement VAT and also to manage it post-implementation.
This publication is for OMR 10.