The Sultanate of Oman is due to implement Value Added Tax ‘VAT’ from 16th April, 2021. The Sultanate of Oman like its Gulf peer, Kingdom of Bahrain, has adopted a phased approach for Implementing VAT in its country. The Tax Authority has released a Transitional Registration guide that proposes a four phase VAT Registration Programme for persons with different level of annual supplies, which is due to begin from 1st February 2021.
A combined reading of Oman VAT Law (Royal Decree 121/2020), Executive Decisions and Transitional Registration guide we have made an effort to answer various questions with our comments with regards to the process of VAT Registration in Sultanate of Oman.
What is the Legal framework for VAT in Oman?
All the GCC Member States signed the Unified VAT Agreement for the Cooperation Council for the Arab States of the Gulf (“Agreement”). This Agreement outlines the basic structure within which all the Gulf Member states shall issue a national VAT Law. In respect of this Agreement, the Sultanate of Oman will be the fourth country in the Gulf to implement VAT after UAE, Saudi Arabia and Kingdom of Bahrain.
The Sultanate of Oman has already promulgated its national VAT Law (“VAT Law”) through Royal Decree No. 121/2020 (dt. 12 October, 2020). Although detailed VAT Regulations have not been issued till date, three Executive Decisions (dt. 4 January, 2021) regarding Mandatory and Voluntary threshold Limits, Food items subject to Zero Rate and VAT Registration dates have been issued.
Authors Comments:
- Gulf VAT Agreement (“Agreement”) envisages a common market across whole of Gulf for the purpose of VAT, which means that for the purpose of VAT, Gulf as a whole will coordinate VAT laws and ensure free flow of goods and credit between the Gulf Countries. However, until all the GCC States implement VAT in their countries (Kuwait and Qatar have not implemented VAT), Supply of Goods and Services from GCC states shall also be treated as a Supply from a state outside the member state territory. Resident Persons of GCC states shall be subject to the same treatment as residents of states outside the member state territory.
When will VAT get introduced in Oman?
VAT will get implemented in the Sultanate of Oman from 16, April, 2021 onwards in a phased manner. In accordance with the Executive Decision (2021-3) (Dt. 4 January 2021) a Taxable Persons must register with the Tax Authority according to the following:
| Phase | Category | Registration Due Date | Effective Date of Registration |
| 1 | If the value of annual supplies exceeds or is expected to exceed 1,000,000 OMR | From February 1, 2021 to March 15, 2021 |
April 16, 2021 |
| 2 | If the value of annual supplies is between 500,000 OMR and 1,000,000 OMR | From April 1, 2021 to May 31, 2021 |
July 1, 2021 |
| 3 | If the annual value of supplies is between 250,000 OMR and 499,999 OMR | From July 1, 2021 to August 31, 2021 |
October 1, 2021 |
| 4 | If the annual value of supplies is between 38,500 OMR and 249,999 OMR | From 1 December 2021 to February 28, 2022 |
April 1, 2022 |
What is the mandatory threshold limits for VAT Registration?
A combined reading of the Royal Decree for VAT (121/2020) along with Executive Decision No (2021-1) ascertains OMR 38,500 as the mandatory threshold limit for VAT Registration. There are two “tests” a person must check in order to determine if the Mandatory Registration Threshold has been exceeded.
- Retrospective Test: If annual supplies of the Business in the past 12 months exceeds OMR 38,500.
- Forward Test: If the expected annual supplies to be generated in the twelve months to come, exceeds OMR 38,500.
Article 55 of Oman VAT Law (Royal Decree (121/2020)) and Executive Decision (2021-1)
Authors Comments:
- Mandatory Threshold Limits do not compulsorily apply in the Transitional Period. Annual supply limits set for the Transitional Period take precedence over Mandatory threshold limits till April 1, 2022.
What is the voluntary threshold limit for registration?
A combined reading of the Royal Decree for VAT (121/2020) along with Executive Decision No (2021-1) ascertains OMR 19,250 as the Voluntary threshold limit for VAT Registration. There are two “tests” a person must check in order to determine if the Voluntary Registration Threshold has been exceeded.
- Retrospective Test: If annual supplies or expenses in the past 12 months exceed OMR 19,250.
- Forward Test: If the expected annual supplies to be generated or expected expenses in the twelve months to come, exceed OMR 19,250.
Article 61 of Oman VAT Law (Royal Decree (121/2020)) and Executive Decision (2021-1)
Authors Comments:
- Voluntary Threshold Limits duly apply even to the Transitional Registration Period. Any person with annual supplies or expenses above OMR 19,250 can voluntarily apply for VAT Registration from 1st February 2021 onwards.
Who is required to register for VAT?
> Any person who:
- has a place of residence in Oman;
- conducts a commercial, industrial, professional or other activity in the Sultanate; and
- has annual supplies that exceed or is expected to exceed the Mandatory Registration Threshold.
> Any person who does not have a place of residence in Oman but is obligated to pay tax, regardless of the value of supplies made.
As per Registration Transition Guide
Authors Comments:
- The above persons are required to register, whether they are natural or legal persons, and regardless of whether they possess a commercial registration number.
- Businesses should include the annual supplies for all stores and branches that fall under the same legal entity. For completeness, branch(es) under the same commercial registration number will be considered as the same legal entity for the purposes of VAT.
Are Importers / Exporters from Oman required to compulsorily register for VAT in the Phase 1 (i.e. before April 16, 2021)?
No, Importers / Exporters will not have to compulsorily register for VAT until their effective date of registration as discussed in phase-wise registration limits below.
Authors Comments:
- Importers will be liable to be pay VAT on imports into Oman from April 16, 2021 onwards (subject to Customs and VAT Regulations;
- Even though Importers will be liable to pay VAT at the Customs front, they will not be required to register for VAT until their effective date of registration has arrived.
- Availability of Input Tax Credit on imported goods as on the effective date of registration remains unclear as the Executive Regulations related to Transitional ITC are yet to be released.
How to Calculate the Value of Supplies for Registration Purpose?
For the purpose of registration, the value of supplies shall include the following:
- Value of Taxable Supplies – except supplies of capital assets.
- Value of the Goods and Services received by the Taxable Person that are subject to the Reverse Charge Mechanism.
- Value of Intra GCC supplies of Goods and Services.
Article 56 of Oman VAT Law (Royal Decree (121/2020))
Authors Comments:
- Exempt Supplies and Deemed Supplies are not to be included in the Value of Supplies for ascertaining Annual Supplies for the purpose of Registration.
- Imports are usually part of Purchases, however the inclusion of “Goods and Services under RCM” for estimating Value of supplies, shall increase the value considered for registration as against the actual revenue of the business for the given period.
- Businesses should include the annual supplies for all stores and branches that fall under the same legal entity. For completeness, branch(es) under the same commercial registration number will be considered as the same legal entity for the purposes of VAT.
How to determine effective date of VAT registration phase during Transitional Period?
The Royal Decree 121/2020 was promulgated on 12th October 2020, thus the period for calculating annual supplies for the purpose of registration shall be (November 1, 2019 to October 31, 2020) for retrospective test and (October 1, 2020 to September 30, 2021) for forward test.
VAT Registration during the Transitional Period
Calculation of Value of annual supplies for VAT Registration in the Transitional Period shall be done as given below:
| Calculation of annual supplies in the Transitional Period | Calculate the actual and expected annual supplies as follows:
(Select higher of the two options below)
Article 56 of Oman VAT Law (Royal Decree (121/2020)) |
↓
Select Registration Phase on the basis of annual supplies determined above
↓
| Registration Phase | Phase 1 If the value of annual supplies exceeds or is expected to exceed 1,000,000 OMR |
Phase 2 If the value of annual supplies is between 500,000 OMR and 1,000,000 OMR |
Phase 3 If the annual value of supplies is between 250,000 OMR and 499,999 OMR |
Phase 4 If the annual value of supplies is between 38,500 OMR and 249,999 OMR |
| Registration Due Date | Feb 1, 2021 to Mar 15, 2021 |
Apr 1, 2021 to May 31, 2021 |
Jul 1, 2021 to Aug 31, 2021 |
Dec 1, 2021 to Feb 28, 2022 |
| Effective Date of Registration | April 16, 2021 | July 1, 2021 | October 1, 2021 | April 1, 2022 |
Authors Comments:
- Voluntary Registration would be allowed from the first effective date of Registration (i.e. April 16, 2021) for those businesses who are above the voluntary threshold Limit (19,250 OMR).
How to determine registration applicability after the Transitional Period (after April 1, 2022)?
Calculation of Annual Supplies for mandatory Registration after April 1, 2022 (After Transitional Period):
- Retrospective Test: A business must register for VAT, if its annual supplies in the past 12 months exceeds OMR 38,500.
- Forward Test: A business must register for VAT, if the Expected annual supplies to be generated in the twelve months to come, exceeds OMR 38,500.
Authors Comment:
- Voluntary Registration would be allowed from the first effective date of Registration (i.e. April 16, 2021) for those businesses who are above the voluntary threshold Limit (19,250 OMR)
Can two or more Tax Persons form a Tax Group?
Yes, two or more persons may register as a Tax Group in accordance with the conditions determined by the Regulations.
Article 58 of Oman VAT Law (Royal Decree (121/2020))
Can a Person apply for Registration Exemption?
Yes, a person who is obliged to register and who conducts Taxable Supplies at a rate of zero percent in accordance with the provisions of the Oman Vat Law may apply to the Authority for exemption from registration. Conditions and procedures for the same shall be determined by the Regulations.
Article 60 of Oman VAT Law (Royal Decree (121/2020))
What documents are required for Registration process?
Documents required for Residents with Company Registration
1. Copy of Business Registration and trade License
2. Copy of identification of Principal Officer (residency card, ID or Passport )
Documents required for Residents without Company Registration and Non Residents
1. Details of actual or expected annual supplies
2. Details of actual or expected annual expenses
3. Copy of identification of Principal Officer (residency card, ID or Passport )
4. Proof of conducting activity in special zone or customs suspension situations.
5. Copy of company registration documents in country of residence. (if applicable)
Authors Comment:
- From the initial set of information it appears that Submission of Audited Financials have not been made mandatory for Omani Company during Registration. Only self-declaration of annual supplies is replied. The provisions regarding the submissions may change later.
Who can be the Responsible (authorized) person for VAT Registration on behalf of business?
The Taxable Person shall appoint the Responsible Person and notify the Authority of this in accordance with the procedures determined by the Regulations. Following persons can be the Responsible person of the business.
1. Owner of the Company
2. Manager of the Company
3. The agent of the owner of the Fixed Establishment,
4. The judicial guard or Bankruptcy Manager in the case of imposing the judicial guardianship or declaring bankruptcy or liquidation.
5. In respect of any person with no Place of Residence in the Sultanate: any person having a Place of Residence in the Sultanate and appointed by that person.
Article 2 & 3 of Oman VAT Law (Royal Decree (121/2020))
Authors Comment:
The Responsible Person shall not be outside Oman for a period exceeding (90) ninety days during the Tax Year unless he has notified the Authority. (Article 4 of Oman VAT Law)
How to Register for VAT?
Persons with Commercial Registration number (CRN) in Oman may register through the online portal (https://tms.taxoman.gov.om). Persons with no CRN must complete the form available on the Tax Authority’s website and send it via email.
What is the penalty for not registering for VAT within the due time?
An imprisonment penalty of not less than (1) year, and not more than three (3) years, and a fine of not less than (OMR 5,000) five thousand Omani riyals, and not more than (OMR 20,000) twenty thousand Omani riyals, or one of these two penalties shall be imposed on anyone who deliberately refrains from registering with the Authority.
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Article 101 of Oman VAT Law (Royal Decree (121/2020))
Authors:-
Said Al Wahaibi, Chairman, Al Sharif Auditing.
Ravi Soni, Partner with Esquire Tax Solutions.
Bhavna Maheshwari, Senior Managers at Esquire Tax Solutions.
Disclaimer: The information contained herein should not be construed as specific advice or opinion. This understanding document should not be substituted for any professional advice or service. Any views expressed by us are not binding on any Regulators. This understanding document presented is solely for the purpose of our discussion and may not be relied / copied / used or be construed as our opinion in any manner without a case specific study in place. Further, this understanding document may not quoted in whole or in part or otherwise referred to in any document or delivered to any other person or entity without our prior written consent. Whilst every effort has been made to ensure the accuracy of the information contained in this understanding document, the same cannot be guaranteed. We accept no liability or responsibility to any person for any loss or damage incurred by relying on the information contained in this update.
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