GCC Indirect Tax Weekly Digest
October 14, 2020
VAT to be implemented in April 2021
At long last the Oman Government has announced that VAT will be implemented in Oman 180 days after publication in the Official Gazette – likely mid-April 2021.
We expect the formal release of the VAT Law shortly, and the more detailed VAT Executive Regulations to be released two months later. VAT registration is expected to open in the New Year, in January 2021.
Businesses in Oman should as a matter of critical priority take action to ensure that their business is in compliance with the VAT legislation on the date of implementation. To this end, our team of Indirect Tax experts are keen to discuss how Deloitte can assist your business with preparation.
Based on our experience with assisting clients in the UAE, KSA, Bahrain and Oman on VAT implementation, Oman VAT will not simply be the same as those other 3 GCC countries. A multi-phased implementation project should normally be undertaken in order to prepare effectively.
In addition, we will be discussing this in further detail in our Oman Tax webinar on 20 October 2020 at 12 PM Muscat time. Click here to learn more and register for the webinar.
FTA publishes VAT Public Clarification on ‘VAT-free’ special offers
The UAE Federal Tax Authority (FTA) has published a new VAT Public Clarification on what are often marketed as ‘VAT-free’ special offers.
VATP020 states that calling such offers ‘VAT-free’ is misleading and contrary to the UAE VAT legislation, as the goods or services are not actually supplied free of VAT, if VAT is applicable to them. The FTA clarifies that VAT-registered businesses should not advertise offers as being free of VAT and must ensure that VAT is accounted for where applicable.
Where goods or services are standard rated at 5% VAT, the supplier is required to charge this VAT to the customer. Therefore, instead of advertising an offer as ‘VAT-free’, a supplier may instead offer a discount equivalent to the amount of VAT (i.e. the supplier offers to cover the VAT on behalf of the customer).
As prices are to be displayed to non-registered customers inclusive of VAT, the amount paid by the customer for the promotional offer should also be inclusive of VAT. For example, if a product is advertised at a ‘VAT-free’ price of AED 100,000, the AED 100,000 paid by the customer should be considered a VAT-inclusive amount. The supplier will therefore be required to split the VAT from this amount, i.e. AED 4,761.90 VAT (AED 100,000 / 21) and account for this amount as output tax in its VAT return.
In addition, this VAT amount must be shown on the tax invoice as the VAT applicable to the supply, even though the promotion makes it seem as though the customer is not paying VAT.
This Public Clarification is particularly relevant to businesses in the Consumer Business sector where the majority of customers would likely not be registered for VAT purposes. Promotional offers and discount programs should be reviewed to ensure that they are not advertised as being ‘VAT-free’, but rather reflect that the supplier is paying the VAT on behalf of the customer, where this is applicable. In addition, where discounts are provided, businesses must ensure that these are
correctly accounted for on the tax invoice.
FTA publishes VAT Public Clarification on VAT registration of sole establishments
The FTA has published a new VAT Public Clarification on the VAT registration of sole establishments.
VATP021 addresses the VAT registration obligations of natural persons operating sole establishments (i.e. 100% owned by the natural person).
The Public Clarification states that a natural person owning several sole establishments only needs to obtain one VAT registration for all its sole establishments, rather than separately for each.
The FTA emphasizes the distinction between a sole proprietorship, which does not have a separate legal personality from its owner, and a limited liability company (LLC) owned by a single person, which does have a separate legal personality from its owner. As a sole proprietorship is not legally independent of its owner, multiple sole proprietorships owned by the same natural person would therefore be included in the owner’s single VAT registration.
The Public Clarification further states that the taxable supplies of the owner and their sole proprietorship(s) should be considered collectively when determining VAT registration obligations. Where any sole proprietorships were wrongly excluded from determining VAT registration obligations or output tax, the registrant must take the appropriate corrective action (i.e. registration or Voluntary Disclosure where required).
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.