After Saudi Arabia, the United Arab Emirates and Bahrain, the Sultanate of Oman will be the fourth member State of the Gulf Cooperation Council (GCC) to implement value added tax (VAT).
On 12 October 2020, His Majesty, the Sultan of Oman, Haitham bin Tariq bin Taimur, issued Royal Decree 121/2020 (Oman VAT Law) for the implementation of VAT in Oman. The Oman VAT Law was published in the Official Gazette on 18 October 2020 and will be effective 180 days after publication. The effective date will, therefore, be Friday, 16 April 2021.
The other GCC member States that have introduced VAT so far have published the Executive Regulations before VAT was implemented. However, the Oman VAT Law allows the Tax Authority (TA) up to six months after the effective date to issue the Executive Regulations. In other words, the TA has until 13 October 2021, to issue the Executive Regulations. Our discussions with the TA suggest that their intention is to issue the Executive Regulations before the effective date. We also expect them to issue Guidance Notes from time to time.
Generally, the Oman VAT Law reflects the principles set out in the Common VAT Agreement of the States of the GCC and the procedures specified in the Income Tax Law of the Sultanate. There are, however, differences between the Oman VAT Law and the VAT laws of other GCC States.
VAT has a significant impact on every facet of business and therefore requires timely and careful planning. The Oman Tax Authority will issue further guidance over the next few weeks, but businesses need to immediately consider the steps necessary to be adequately prepared, especially given that the law does not oblige the Tax Authority to issue the Executive Regulations before VAT is implemented. Moreover, as VAT will be implemented from 16 April 2021 (i.e. the middle of the month), businesses would need to give due consideration to transition and cut-over planning.
The Oman Tax Authority is allowing businesses six months to prepare for VAT implementation. It is critical that businesses use this time judiciously.
KPMG has a dedicated team of experienced VAT implementation specialists and advisors based in Oman supported by a larger, experienced regional team. If you need any assistance with VAT implementation in Oman, please reach out to your tax advisors at KPMG or the contacts mentioned below.