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Oman VAT Guide for Associated Persons Including VAT Groups — Orbitax Tax News & Alerts

The Oman Tax Authority (OTA) has published a VAT Guide for Associated (Related) Persons. The guide is currently only available in Arabic, although an English-language version is expected to also be published on the OTA VAT webpage. Some of the key aspects of the guide are summarized as follows.

VAT Tax Groups

Guidance in provided on the formation of tax groups for VAT. This includes that associated persons may register as a tax group for VAT purposes if the following conditions are met:

  • All persons are tax resident in Oman;
  • All persons are legal persons (entities);
  • All persons are registered for VAT according to the law;
  • One person (the parent entity), in or outside the group, must have control over all other persons in the tax group;
  • No person is a member of another tax group; and
  • None of the persons are registered in a special regime zone.

For the purpose of forming a VAT tax group, the parent entity must have at least 50% direct or indirect control/ownership of all the tax group members. The parent entity does not need to be part of the group or even be eligible to join the group. It is further provided that the control/ownership condition can be met through an intermediary outside of Oman that would not be eligible to join the group. For the purpose of the VAT legislation, the tax group is treated as a single taxable person independent from its members, with only one member of the group representing it as the "representative of the group". Once formed, all supplies and imports made by or to a member of the group are considered to be made by or to the representative. Transactions involving the supply of goods and services between group members are not considered taxable supplies for VAT purposes.

VAT Treatment of Transactions between Associated Persons

In addition to the guidance on VAT tax groups, the guide also covers the VAT treatment of transactions between associated persons. This includes that where the value of a supply is lower than the fair market value, VAT must be calculated on the basis of the market value. The fair market value must be determined as the price that other unrelated customers can receive within the usual context of the transaction for similar goods and services, at that time of supply, and with the same terms of sale (i.e., an arm's length price). Similar market value rules apply in cases where goods or services are provided by an employer to an employee, which are considered associated persons. For example, if an employer provides a 40% discount for employees while providing a 20% discount for other customers, VAT must be determined based on the 20% discount.

Intra-Group Transactions and Adjustments

Lastly, guidance is provided in relation to intra-group transactions, including that where administrative services are provided between group companies in Oman, such services are subject to VAT at the basic rate. Where services are provided by a non-resident group member to a company in Oman, the Oman company must calculate the VAT on the services itself. Further, it is provided that if transfer pricing adjustments are made within a group of companies that impacts the agreed price for supplies of goods and services subject to VAT, then suppliers must make appropriate adjustments for output VAT and recipients must make appropriate adjustments for input VAT. If no VAT is due on a supply of goods or services or an adjustment is not related to a supply, then no output or input VAT adjustments are required.