According to recent news reports, the Council of Ministers in Oman has referred two laws to the Shura Council. These comprise the draft Oman Value Added Tax (VAT) Law and a draft to amend the existing Oman Income Tax Law (collectively referred to as “the Laws”).
The Laws have been referred to the Shura Council as a matter of urgency. The Shura Council is required to decide on both the Laws, by approval or amendment, within one month from the date of the referral. The Shura Council’s current session, scheduled to end 16 July 2020, is likely to be extended to enable a decision on both the Laws. Once the Shura Council decides on the Laws, they will be referred to the State Council. The State Council is required to decide on them, by approval or amendment, within 15 days from the date of the referral. Once the State Council decides on both the Laws, the Laws will be submitted to His Majesty the Sultan, with the opinion of both the Shura and the State Council.
VAT likely to be implemented in early 2021
Oman, like many other countries in the region and outside, is significantly challenged with the sharp slump in international oil prices and the economic instability created by Covid-19, which continues to impact the country’s credit rating. Since the beginning of 2020, the Ministry of Finance has issued many circulars and directives to government units to reduce spending. In April 2020, the Ministry of Finance announced a cut of OMR 500 million in the State Budget.
In the recent past, Oman has made a conscious effort at economic diversification. Collections from indirect tax reforms, such as selective/excise tax and VAT, are expected to generate an additional OMR 400 million, which would give an immediate fillip to non-oil revenues.
The Sultanate has been preparing for the introduction of VAT for quite some time. The referral of the draft VAT Law to the Shura Council as a matter of urgency is a clear indication that VAT is likely to be implemented in Oman soon. In an interview with Bloomberg at the World Economic Forum 2020 in Davos earlier in January this year, His Excellency Ali bin Masoud Al-Sunaidi, Minister of Commerce and Industry in Oman, confirmed that Oman would introduce VAT “sometime during the beginning of 2021”.
VAT has a significant impact on every facet of business and therefore requires timely and careful planning. KPMG has a dedicated team of experienced VAT implementation specialists and advisors based in Oman. If you need any assistance with VAT implementation in Oman, please reach out to your tax advisors at KPMG or the contacts mentioned below.
Oman Income Tax Law amendments
Oman is expected to amend the Income Tax Law to allow, among other things, the Automatic Exchange of Information (AEOI) and Country-by-Country Reporting (CbyCR). These are some of the measures the Sultanate has taken over the last few months to action Oman’s commitment to implement the four minimum Base Erosion and Profit Shifting (BEPS) standards of the OECD. Oman is also expected to introduce detailed transfer pricing guidelines and documentation regulations to govern arms’ length pricing of transactions between related parties.
Our experienced Corporate and International Tax Law specialists based in Oman would be happy to discuss the implications of these recent developments on your business.
 Sultanate of Oman, Oman in the world view, Issue number 1, January 2016, published by the Ministry of Information, Oman