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Oman

19 October 2020

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Oman Publishes Royal Decree for Value Added Tax Law

On 18 October 2020, Oman published Royal Decree No. 121/2020 in the Official Gazette, which promulgates the Value Added Tax Law. The Decree will enter into force 180 days after its publication (April 2021).

As previously reported, the law provides for the introduction of a VAT regime including a standard VAT rate of 5% that will apply on most goods and services. The VAT Law also includes several VAT exemptions, including for:

  • Financial services;
  • Health care services and associated goods and services;
  • Education services and associated goods and services;
  • Undeveloped land (bare land);
  • Resale of residential properties;
  • Local passenger transport;
  • Rental of real estate for residential purposes.

Several supplies are also zero-rated, including exports as well as the supply of:

  • Certain foodstuffs, to be set by a decision;
  • Certain medicines and medical equipment, to be set by a decision;
  • Investment gold, silver, and platinum;
  • International transport of goods and passengers, and the supply of related services;
  • Sea, air, and land transportation for the transport of goods and passengers for commercial purposes, and the supply of related goods and services for such transportation;
  • Rescue aircraft and ships and assistance; and
  • Crude oil and its derivatives and natural gas.

Persons making taxable supplies in Oman are required to register for VAT if the VAT registration threshold is met. According to initial guidance published by the Oman Tax Authority, mandatory registration is subject to two possible tests:

  1. Backward Look: Taxable turnover has exceeded the mandatory VAT threshold in the current month plus the previous 11 months; or
  2. Forward Look: It is expected that the taxable turnover will exceed the mandatory VAT threshold in the current month plus the next 11 months.

The mandatory registration threshold is OMR 38,500 and is based on the value of supplies made. Voluntary registration is also allowed if meeting a threshold of OMR 19,250, which is based on the value of supplies made and the value of inputs subject to VAT in Oman. Persons not resident in Oman are also required to register where the reverse charge does not apply. No particular threshold is provided under the law in such cases and registration is required either directly or through a tax representative.

Each VAT-registered person, or the person authorized to act on their behalf, will be required to file a VAT return with the Tax Authority within 30 days after the end of each tax period along with payment of the net tax due. Deliberately failing to comply with registration or return requirements may result in fines of OMR 5,000 to OMR 20,000 or imprisonment of up to three years. Other violations may result in fines of OMR 1,000 to OMR 10,000 or imprisonment of up to one year. Penalties may also be double in cases of repeat violations.

According to the Tax Authority, guidance with respect to how and when to make payments, filing VAT returns, and the frequency of VAT filings will be provided in due course. It is expected that the executive regulations for the VAT Law and further guidance will be issued in December 2020.

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