close
Share with your friends

Royal Decree 121/2020 (Oman VAT Law) for the implementation of Value Added Tax (VAT) in Oman was published in the Official Gazette on 18 October 2020, and will be effective 180 days after publication. Oman will, therefore, introduce VAT from 16 April 2021.

The Oman Tax Authority has published three decisions in the Official Gazette Issue 1374 published on 10 January 2021, in preparation of the introduction of VAT in Oman.

Decision Number 1/2021

Decision Number 1/2021 on Determination of Mandatory and Voluntary Registration Threshold, issued on 4 January 2021, provides that:

  1. The monetary threshold for mandatory registration under Article 55 of the Oman VAT Law will be RO 38,500.
  2. The monetary threshold for voluntary registration under Article 61 of the Oman VAT Law will be RO 19,250.

This decision comes into effect from the day after it is published in the Official Gazette, i.e. 11 January 2021. To access the Arabic version of Decision Number 1/2021, please click here.

Decision Number 2/2021

Decision Number 2/2021 on Determination of Food items subject to VAT at zero rate, issued on 4 January 2021, provides the list of food items eligible for zero rate of VAT. To access KPMG’s unofficial English translation of the list, please click here.

This decision comes into effect from the day after it is published in the Official Gazette, i.e. 11 January 2021. To access the Arabic version of Decision Number 2/2021, please click here.

Decision Number 3/2021

Decision Number 3/2021 on Determination of VAT Registration Schedule and Date, issued on 4 January 2021, summarizes the schedule for mandatory VAT registration for Taxable Persons under Article 55 of the Oman VAT Law, as follows:

#

Value of annual supplies

Timeline for registration

Effective date of registration

1

Exceeding RO 1 million

1 February 2021 to

15 March 2021

Friday, 16 April 2021

2

Between RO 1 million to RO 500,000

1 April 2021 to

31 May 2021

Thursday, 1 July 2021

3

Between RO 499,999 to RO 250,000

1 July 2021 to

31 August 2021

Friday, 1 October 2021

4

Between RO 249,999 to RO 38,500

1 December 2021 to

28 February 2022

Friday, 1 April 2022

The decision also provides that Taxable Persons eligible for voluntary VAT registration may apply for registration under Article 61 of the Oman VAT Law anytime on or after 1 February 2021.  The effective date of such registration will be as specified in the registration certificate.

This decision comes into effect from the day after it is published in the Official Gazette, i.e. 11 January 2021. To access the Arabic version of Decision Number 3/2021, please click here.   

Next steps

The Oman Tax Authority attempts to minimize the impact of VAT on the final consumer by extending zero rating to over 90 food items.  The list of food items zero rated for the purposes of VAT largely resembles the list of food items exempt from Customs duty.  Food items that are not specifically zero rated would attract VAT at the standard rate of 5 percent.  Therefore, for businesses, classification of the goods will be critical to ascertain their correct tax treatment.  The tax treatment, among others, will impact the pricing, documentation and system configuration.  Incorrect tax treatment could result in over/underpayment of VAT and lead to penalties. 

On the other hand, the VAT registration schedule implies that Oman, like KSA and Bahrain, will stagger the introduction of VAT. This means that until the VAT registration schedule runs its course, some businesses would be registered while others may not.  As a result, businesses that are not registered for VAT could make purchases from businesses that are registered for VAT and incur input VAT.  In the absence of a mechanism or compliance with the mechanism for recovery of pre-registration input tax credit, this input VAT could become a cost to the purchasing business.  Moreover, failure to obtain registration within the specified time could lead to penalties. 

To avoid tax leakage, and keep administration and compliance simple, it will be important for businesses to plan, among other things, their registration and procurement strategies.  With implementation inching closer, 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.