Oman issues its VAT Executive Regulations has been saved
Oman issues its VAT Executive Regulations
The Oman Tax Authority (OTA) has issued the anticipated Executive Regulations (Regulations) through Ministerial Decision 53/2021. The Regulations are published in Arabic in the Official Gazette no. 1383 dated 14 March 2021, available here
The Regulations highlight a number of key areas taxpayers should be aware of and outline the rules, procedures and conditions of various aspects of the VAT Law, including:
- Supplies, deemed supplies, composite and multiple supply;
- Place of supply provisions including real estate services, telecommunication services, electronically supplied services;
- VAT tax point for supply of goods and services including vouchers and consignment sale;
- Determination of value of supplies (including market value for related party transactions);
- Partial exemption and capital goods adjustment rules;
- Details on transactions to qualify as exempt and zero-rated supplies;
- VAT applicability on Custom duty suspension and special zones provisions;
- Registration, tax grouping and de-registration;
- Tax invoice, returns filings and record keeping;
- Tax oversight, inspection, collection and refund of VAT; and
- Vital administration matters, including penalty provisions.
What do you need to know?
Businesses dealing with VAT should consider the implications arising from the Regulations and review their approach to compliance obligations. There are a number of areas that need to be noted by businesses as listed below:
VAT exemption and zero-rating:
The Regulations provide details and clarity on the scope, conditions, limitations and extent of VAT exemptions and zero rating. Businesses operating in sectors that have exemption or zero-rating should ensure they understand the Regulations and how exemption and zero-rating will apply to their business activities.
VAT zero-rating will apply to certain, but not necessarily all transactions, within the following areas: supply of and related to oil, oil derivatives and gas; exports of goods and services; supply of certain food items; international transport of goods and passengers, investment gold, silver and platinum; supplies to Customs duty suspension and special zones; certain medicines and medical equipment.
Similarly, VAT exemption will apply to certain supplies, such as, financial services (including insurance or Takaful); education services, healthcare services; and real estate transactions relating to residential properties.
The Regulations provide for certain compliance requirements which every taxable person needs to follow and comply. A taxable person who is not in compliance with such requirements could be subject to administrative penalties prescribed under the Law and Regulations.
As per the Regulations, every taxable person is required to issue a tax invoice for every taxable supply including deemed supplies and against receipt of advances. The content of a full tax invoice is as follows:
- The term "tax invoice";
- The date of issuance of the tax invoice, the date of supply, and the date of payment;
- The serial number of the tax invoice;
- The supplier's full name, address and Tax identification number;
- The customer's full name, address and Tax identification number, if any;
- Description of the goods and services;
- The quantity of goods;
- Payment date of advance payment, if any;
- Total consideration excluding Tax;
- The applicable Tax rate;
- Any price discounts, or reductions granted to the customer, or subsidies granted by the state that were not included in the value of the consideration excluding Tax;
- Taxable value; and
- Value of the Tax due.
Simplified tax invoice:
The Regulations also provide an option to issue a simplified tax invoice with lesser contents than the full tax invoice. This is subject to the prior approval by the OTA and subject to certain conditions.
Tax period and filing of VAT returns:
VAT returns for all taxpayers will be based on the calendar quarters: 1 January until 31 March, 1 April until 30 June, 1 July until 30 September and 1 October until 31 December (tax period). The taxable person will be required to file a VAT return electronically through the online portal in the form to be prescribed by the OTA. A tax return along with payment of VAT will be due within a period of 30 days from the end of the tax period.
The Regulations also provide for the manner in which a taxable person should claim a refund of VAT. The refund application must be submitted in the form to be prescribed by the OTA, the amount of the VAT refund requested, the reason for the refund, and the tax period to which it relates. The refund of VAT may be claimed by the taxable person in the instances: where the VAT paid is in excess of the VAT due; the VAT paid by a person who is not a resident in Oman; the VAT paid by a foreign government, military, diplomats, etc.; the VAT paid by tourists on goods purchased in Oman and carrying them along as personal baggage; or the cases to be prescribed by OTA through an Executive decision.
As per the Regulations, refund claims must be submitted within a period of five
years from the end of the tax period in which it becomes due.
Maintenance of records:
The Regulations provide the records which are required to be maintained by the taxable person. This will include but will not be limited to:
- Daily transactions details in chronological and sequential manner;
- Inventory record, where the inventory items, the budget and the total/result count are recorded;
- Records and documents related to the supplies of imported and exported goods and services;
- Records and documents related to the intra Gulf Cooperation Council (GCC) supplies of goods and services;
- Records and documents related to all Customs transactions;
- All tax invoices and other documents issued by the taxable person;
- All tax invoices and other documents received by the taxable person; and
- Records that include information necessary to determine the correct tax treatment.
Appeals and administrative penalties:
The Regulations define the manner in which a taxable person is entitled to object on the tax assessment; or tax return adjustment; or registration decision made by the OTA. Please note that the objection will be submitted in Arabic.
Administrative penalties of OMR 500 to OMR 5,000 are set out for certain offences, including:
- Failure to submit tax returns within a specific time period;
- Failure to display a VAT registration certificate in a visible place as per the
- Failure to keep records, accounting books and documents in accordance with the Regulations.
For certain offences the administrative penalties could range from OMR 1,000 to OMR 10,000 such as:
- Refund of the tax value based on incorrect documents or details;
- Failure to submit a request to cancel the registration in the compulsory cases specified in the Law and the Regulations;
- Failure to pay incorrectly recovered VAT after becoming aware of the error; and
- Failure to present process of goods and services inclusive of VAT.
The release of the Regulations is an important milestone for VAT in Oman. Many aspects of VAT are clarified; but there are bound to be gray areas and open issues which may need some further guidance and clarification. The issue of the Regulations themselves requires taxpayers to review their compliance processes and adjust them as good practice dictates.
It is crucial for businesses to carefully read and familiarize themselves with the VAT Law, Executive Regulations and guidelines issued by the OTA. This is in order to ensure day one VAT compliance.
As we understand, the registration process for businesses with a taxable supply turnover of OMR 1 million (approximately USD 2.6 million) will remain open for applications through 15 March 2021 and until the VAT go-live date. The next wave of registration for businesses with a taxable supply turnover of more than OMR 500,000 (approximately USD 1.3 million) will start on 1 April 2021 until 31 May 2021.