Oman is expected to join the league of GCC countries KSA, BAHRAIN and UAE after the implementation of VAT, which is expected to come into effect from April 2021.
High oil prices have always played vital role in GCC countries economy. One of the main reasons for the introduction of VAT in GCC was the plunge in oil prices back in 2018 which affected their revenues. The crude il prices per barrel are now half the price it was a decade ago, which made the GCC countries economic growth difficult and now the pandemic has resulted in contraction of GDP in Oman and other countries. Also, Oman’s debt to GDP ratio is the worst among the six GCC countries and that is expected to climb in the coming days which makes substantial tax reforms necessary.
The Oman government had tweeted that implementation of VAT could strengthen the country’s financial sustainability and improve the business environment. Experts say that implementation of VAT is important for Oman’s fiscal reform.
The main conditions for introduction of VAT are: Increase in gross domestic product (GDP), effect of VAT should be only on those whose income is above OMR 900 and to support low income groups.
What is VAT?
VAT (value added tax) is a consumption tax that is levied on business products to the consumer at every stage of supply chain. Consider example, a product costs 50 OMR and 5% VAT levied on it, then the product will be sold to the consumer at 52.5 OMR. Then merchant will keep 50 OMR and 2.5 OMR goes to the government.
VAT rate in Oman will be 5%. Vat Registration in OMAN will start from beginning of January 2021, all organizations above threshold 19,250 OMR required to do compulsory VAT enrolment in OMAN. Whereas organizations with OMR 19,250 can volunteer for VAT registration Oman.
Sectors that are zero-rated or exempt from VAT in Oman: Health care services, educational services, real estate, local public transportation, crude oil derivatives, basic food products, financial services, exports of goods and services.
VAT is determined on the estimation of provisions made by a business toward the finish of any month.
It is mandatory for a non-resident entity in Oman to do registration of VAT.
