Basics of VAT in Oman: VAT Rate, Registration, Returns, Penalties

Majesty of Oman issued Royal Decree no. 121/2020 on 12th October 2020 to implement Value Added Tax (VAT) in Oman. Also, the Sultanate of Oman Tax Authority published the VAT law in the Official Gazette on 18th October 2020. VAT has been implemented in Oman w.e.f 16th April 2021.

This article explains the basics of VAT, including registration, VAT rates, input tax deduction, VAT returns, penalties and many more.

What is the VAT rate in Oman?

Sultanate of Oman Tax Authority announced a standard VAT rate of 5%. The authority decided the VAT rate considering the Gulf Cooperation Council (GCC) Unified Agreement and global standards.
 

VAT registration in Oman

VAT law in Oman mandates that businesses must mandatorily obtain VAT registration if the total value of supplies in a year exceeds or is expected to exceed Oman Riyal (OMR) 38,500. Also, businesses in Oman can voluntarily obtain registration if the total supplies or expenditures in a year exceed or are expected to exceed OMR 19,250.

Businesses in Oman can complete the VAT registration process online mode.

Types of supplies under Oman VAT Law

There are different types of supplies under VAT in Oman. The VAT rates are decided based on the nature of the goods or services.

1. Standard-rated supplies: A 5% VAT rate will be applied to these goods and services.
2. Zero-rated supplies: The supplies categorised as zero-rated supplies attract 0% VAT. However, taxpayers can claim relevant input tax. These supplies include exporting goods and services outside Oman, international transportation services, basic food items etc.
3. Exempt supplies: These are the supplies businesses can not charge VAT and can not claim input VAT. You can not recover the input tax when selling or providing exempt goods or services. These supplies include certain financial services, education services, local passenger transportation services, and renting of residential property etc.
4. Out-of-scope supplies: The Sultanate of Oman Tax Authority kept these supplies out of the VAT ambit.

Input tax deduction under Oman VAT

Businesses in Oman shall keep the below documents to claim the input tax paid on the purchases: 

• Original tax invoices. 
• Documents related to imports
• Tax returns and records of output VAT in case of Reverse Charge Mechanism (RCM)
• Tax return and records in case of postponement of import tax

VAT records in Oman

The Oman VAT-registered businesses must keep the relevant records for ten years from the end of the relevant VAT period. However, real estate businesses shall maintain records for 15 years from the end of the relevant VAT period. Below is the list of records to be maintained:

• Daily transactions
• Tax invoices
• Inventory
• Records intra-GCC sale of goods and services
• Imported and traded goods and services
• Custom transactions;
• Any other records mentioned by the authority

A taxpayer can maintain records in electronic format following the conditions specified in the Oman VAT Executive Regulations.

VAT returns in Oman

VAT-registered businesses shall submit the VAT return and make payment of VAT liability every quarter electronically to the Sultanate of Oman Tax Authority. The due date for filing a VAT return and payment of VAT liability is 30 days from the end of the quarter.

The due date for filing a VAT return and VAT payment will be extended to the next working day if the due date happens to be a public holiday or a weekend.

If you are late in VAT payment, you shall pay additional tax at 1% per month or part thereof.

Penalties for VAT offences in Oman

Sultanate of Oman Tax Authority has a right to impose penalties and fines on taxpayers whenever there is any violation of VAT law or rules. The below table explains the nature of the offence and its related penalties: