GCC Indirect Tax Weekly Digest

March 31, 2022

Oman developments 

OTA publishes guide on VAT Profit Margin Mechanism

The Oman Tax Authority (OTA) has been very busy issuing Value Added Tax (VAT) Guides – including one on VAT and the Profit Margin Mechanism, which is mainly applicable for businesses engaged in buying and selling of used (second-hand) goods.

The Profit Margin Mechanism is essentially a special VAT calculation method, which enables a seller of used goods to pay output VAT on the difference between selling prices and purchase costs (i.e. the profit margin). Otherwise, in a normal scenario, a business would need to calculate VAT on the full amount of consideration received from a customer.  

The Guide describes types of goods which would qualify for use under the Mechanism and conditions to be met by businesses seeking to applying the Profit Margin Mechanism. It also looks at the requirements for the required special tax invoice, manner of calculation of margin and VAT amount, as well as the treatment of trade-in/exchange/barter aspects. The guide, which is currently only available in Arabic, can be accessed on this link.

OTA publishes VAT guide on Education sector

The OTA has also just issued a guide on Education, applicable to persons engaged in providing education and related services or goods.

Under the Oman VAT law, education services, as well as ”related” goods and services, are exempt from VAT. The Guide expounds on VAT treatment – in particular registration requirements for educational institutions including guidance on distance learning provided by entities or bodies located in Oman and abroad.

The document outlines specific scenarios for services provided by public schools in Oman, international schools in Oman, and certain examples of goods and services related to the education sector which may qualify for VAT exemption. The guide, which is currently only available in Arabic, can be accessed on this link.

New Free Zones in Oman

His Majesty Sultan Haitham bin Tarik, the Sultan of Oman, issued a Royal Decree 10/2022 on 27 March 2022, to expand the scope of Free Zones in theSultanate. The following three zones are now apparently declared (with others expected soon):

  1. Muscat International Airport named the “Muscat International Airport Free Zone“;
  2. Sohar Airport named the “Sohar Airport Free Zone”; and    
  3. Salalah Airport named the “Salalah Airport Free Zone”.

Operators and the companies working within these free zones are granted incentives, benefits, and facilities as stipulated in the Free Zones Law (promulgated by Royal Decree 56/2002). These include concessions from the normal minimum capital requirement under the Oman Commercial Companies Law, exemptions to do with dealing with foreign currencies as well as from Customs Duty on importation of goods in the Free Zones.

These entities operating within Free Zones (with few exclusions, like banks, financial institutions, etc.) are also exempt from income tax for a period not exceeding 15 years for each project separately – this could however be renewed for a period of 5 additional years. It is also expected that benefits and facilitations applicable under VAT for businesses operating in Special Zones may also be extended to these Free Zones, once these are recognized as VAT Special Zones.

UAE developments

FTA launches redesigned website

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has launched a redesigned version of its website.

In a news release, the FTA states that the redesigned website is intended to make it easier to access relevant information such as guidance and legislation, and includes a range of accessibility features.

Further, the FTA states that the new website includes a feature to search for tax agents and clearance companies by name and geographical location.

This digest is for information purposes only and should not be construed as advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.

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