VAT in Oman - New clarifications and guidance

Special Zones:

On 27 April 2021, the Public Authority for Special Economic Zones and Free Zones (OPAZ) in coordination with the OTA have announced that the Special Economic Zone at Duqm (SEZAD) and the Free Zones in Salalah, Sohar and Al Mazunah are classified as “Special Zones” in accordance with the provisions of the Oman VAT Law and Executive Regulations.

Under Article 54 of the VAT Law, the supply of goods and services to or from the Special Zones, or within them, could be zero-rated, subject to fulfilment of the conditions prescribed in the Executive Regulations. Below we list some of the conditions that businesses need to be attentive to.

Conditions for zero-rating of supplying or transporting goods to or within these Special Zones include:
  • The customer or the recipient being “subject to VAT”. In addition, the customer or the recipient should be licensed and registered by the operating and supervising authority of the Special Zone to conduct activity within this Zone.
  • The customer or the recipient has received the goods for the purpose of that activity within the Special Zone.
  • The goods do not fall under the blocked category (i.e. expenses on which no-input VAT can be recovered).
  • It is crucial that the documents proving transfer of goods to, within or between the Special Zones must be kept and certified by the entity operating and supervising the Special Zone with regards to the supply of goods within the Zone. This also applies to the documents issued by the Oman Customs authorities, with regards to the supply and transportation of goods to the Special Zone or from one Special Zone to another.

Conditions for zero-rating of supply of services to Special Zones include: 
  • The customer being registered for VAT
  • The customer must be a person licensed and registered by the Authority operating and supervising the Special Zone
  • The customer has received services for the purposes of activity in the Special Zone
  • The services do not include restaurants and hotels, food and beverage. undertakings and cultural, artistic, sports, educational and entertainment services      
  • The services should not be exempt from VAT.

Release of list of zero-rated medical items

The Ministry of Health in Oman has recently released the latest list of medical equipment and medicines (in Arabic) which would be zero-rated under VAT in Oman. Refer to the list here.

Clarification on certification requirement for zero-rating Oil and Gas related Supplies
  • As per Article 93 of the Executive Regulations, the supply of goods and services related to supply of oil, oil derivatives and natural gas, shall be zero-rated, subject to certain conditions. One of the conditions is that “the supplier and the customer must be registered and licensed by the Ministry of Energy and Minerals (MEM) to carry out primary and intermediate activities related to exploration, production, extraction, transportation or import of crude oil and its oil derivatives and natural gas.”  
  • In this context, MEM, through its letter no. MEM/US/1161/2021/2000 dated 13 April 2021, has clarified that the registration issued under the Joint Supplier Registration System (JSRS) shall be accepted by OTA in lieu of MEM licenses, registration and certification.        
  • All operators, contractors and service providers engaged in upstream and midstream activities are accordingly suggested to submit their JSRS registration certification to the OTA as part of their application to use the zero-rating provisions.

Registration by non-resident persons

The OTA recently issued revised guidance on registration by non-resident persons, outlining the procedure for registration either by appointing a resident “responsible person”, a non-resident “responsible person” or a tax representative/tax agent.

The guide also covers the procedure for registration including the information and documents that are required to be submitted. Some of this information include the bank account and bank guarantee details or fiscal undertaking requirements. We understand that the registration of non-resident persons is being granted on a prospective basis and is not retrospective to 16 April 2021, in most instances. For more details, please refer to our detailed alert on registration by non-resident persons available on the following link.

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