Oman Introduces VAT System

Andrew Decker
April 20, 2021

The Sultanate of Oman has imposed a Value Added Tax from 16 April 2021. The VAT system is scheduled to be implemented in phases, with businesses required to register for VAT at different points over the next year based on their turnover.

Turnover Mandatory Registration Deadline Effective Date of Registration
Greater than 1,000,000 OMR March 15, 2021 April 16, 2021
500,000 OMR to 1,000,000 OMR May 31, 2021 July 1, 2021
250,000 OMR to 499,999 OMR August 31, 2021 October 1, 2021
38,500 OMR to 249,999 OMR February 28, 2022 April 1, 2022

VAT will be imposed at a rate of 5% on supplies of goods and services sourced to Oman, as well as on imports. Business to consumer supplies of most services are to be sourced to the supplier’s residence. However, several exceptions exist such as supplies of electronic services and telecommunications (which are sourced to Oman if used in Oman) or supplies of restaurant services. VAT registered businesses must file returns through an electronic portal on a quarterly basis.

The following supplies are subject to a zero-rate of VAT:

  • Specified food items listed as listed in VAT regulations
  • Specified medicines and medical equipment
  • The supply of investment gold, silver, and platinum
  • Supplies of international and intra-GCC transport of goods or passengers and supply of services in connection with this transport
  • The supply of air, sea and land means of transport that are designated for the transportation of passengers and goods for commercial purposes and the supply of goods and services related to transport
  • The supply of rescue planes and rescue and assistance boats
  • The supply of oil, oil derivatives and natural gas

The following supplies are exempt from VAT:

  • Financial services
  • Healthcare services and related goods and services
  • Educational services and related goods and services
  • Undeveloped land (bare land)
  • Resale of residential properties
  • Local passenger transport
  • Rental of properties for residential purposes

In 2016 the six Member States of the Gulf Cooperation Council (GCC) agreed to implement a 5% VAT in accordance with a common framework. Saudi Arabia and the United Arab Emirates implemented their VAT systems in 2018, with Bahrain following suit in 2019. In July of 2020 Saudi Arabia increased its VAT rate to 15%. Kuwait and Qatar have both announced their intentions to implement VAT in the future, though the exact timeline has not been set.

The framework agreement calls for special rules relating to the sale of goods between GCC Member States. Similar to the EU’s rules for intra-community supplies, such rules have been suspended until more Member States have implemented the framework and the necessary IT infrastructures have been put in place.

Organisations doing business in Oman need to evaluate their VAT liabilities going forward.

Further information about the new measures can be found on Oman’s Tax Authority website: https://tms.taxoman.gov.om/portal/web/taxportal/

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Author

Andrew Decker

Andrew Decker is a Senior Regulatroy Counsel at Sovos Compliance. Within Sovo’s Regulatory Analysis function, Andrew focuses on international VAT and GST issues and domestic sales tax issues. Andrew received a B.A. in Economics from Bates College and J.D. at Northeastern University School of Law. Andrew is a member of the Massachusetts Bar.
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