The VAT in Oman

by Jayati Gadamsetty 26, Feb 2024

Value-added tax is a consumption-based tax that the buyer of a product or service pays. It is paid to the government by the customer. Oman enforced VAT on 16th April 2021 and became the fourth Gulf Cooperation Council (GCC) member. 

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Introducing VAT in Oman changed the tax scene and planned to expand its income sources and contribute to economic growth.

Let us Understand the details of VAT in Oman through this blog.

Overview of VAT in GCC Countries

The Kingdom of Saudi Arabia and the United Arab Emirates introduced VAT with the implementation of 5% on 1 January 2018. According to the GCC VAT agreement, the participating states, such as Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE, have the choice to set their own rules with respect to some aspects of VAT. The rules of VAT can differ from country to country in the GCC.

The unified GCC agreement states the following -

  • 5% VAT is applied to goods and services.
  • Businesses earning more than 375,000 SAR or the same in any GCC currency must register for VAT.
  • Businesses must pay VAT on imported goods at the first entry point into the GCC. 
  • The following business sectors have 0% VAT
  1. Oil and Gas
  2. Financial services
  3. Certain food items
  4. Medicine and equipment
  5. Export of goods outside GCC
  6. Shipment of goods and travellers within GCC and internationally

Details of VAT in Oman

In 2016, the GCC countries joined hands to reduce reliance on oil income by implementing VAT and expanding revenue sources. 

Oman is demographically different from the rest of the GCC countries. Its main focus is on agricultural products, seafood, etc. They also focus on specific chemicals and aim to grow the country's tourism and hospitality sector.

  • VAT Registration 

Businesses with a specific turnover must register for VAT with the Omani Tax Authority (OTA). Post registration, businesses will receive a VAT identification number and must follow the rules and regulations. 

  • VAT Compliance

The OTA is responsible for VAT compliance and administration. Businesses must submit regular VAT returns elaborating taxable transactions. It is essential that businesses maintain proper records to ensure no fraudulent activities are carried out. Businesses failing to register for VAT will face penalties.

  • VAT’s Impact on Businesses

VAT in Oman plays a major role in businesses. Although VAT allows the authorities to expand revenue aspects, businesses need to be very careful while dealing with the regulations. 

  • VAT’s Affect on Customers

VAT affects consumers by raising the cost of goods and services. Essential goods are subject to 0% taxes. However, the cost of living rises when businesses sell goods and services at a higher price.

  • VAT Exemptions

Some goods are exempt from Oman’s tax system, while some are taxable at 0%.  Provisions such as healthcare and education are exempt from taxes. Businesses such as exports and international trade are charged 0% tax.

Conclusion

VAT in Oman has brought a major change to the country’s tax environment. The 5% tax rate is standard and is one of the lowest rates worldwide. To avoid fines, Businesses in Oman must thoroughly understand the rules and regulations of VAT.

Seeking professional help is mandatory. Consult Commitbiz to navigate easily through Oman's tax environment. Speak with our experts to have a deeper understanding of businesses and taxes in Oman. Contact us.