Finance ministry drafting legislation

“The publishing will give businesses comfort that the VAT and excise systems are progressing according to plan. In particular, it also helps them understand the VAT framework in the GCC countries and means they can move forward with preparations while waiting for local implementing laws in each country. This is a significant step and provides businesses with certainty,” Deloitte’s Justin Whitehouse added.

Deloitte has also launched a ‘VAT Guide’ mobile application and video guides to promote better understanding of impact of VAT on businesses. According to officials, early implementation can save thousands of rials in terms of fines.

KPMG spokesman Ashok Hariharan said: “Once the agreement is ratified, each member state can issue its own local law consistent with the framework and then implement VAT. The framework paves the way for implementation, allowing for a basic rate of VAT of five per cent with certain supplies of goods and services zero rated or VAT exempt.”

He added that the Ministry of Finance is in the process of drafting the legislation and preparing its systems to gear up for VAT and that the mandatory VAT registration threshold is expected to be OMR38,500.

“VAT will impact all businesses in Oman, either directly or indirectly. The framework provides more than enough information to begin planning for VAT. Businesses should be planning and preparing now, carefully reviewing their processes to understand VAT’s impact and to determine what needs to be done to be fully compliant. Clear communication will be key. “Time is short and will pass quickly. Be prepared. Consult. Consider a budget and secure the resources required for practical implementation,” he said.

According to Deloitte, a business will need to submit a VAT return every quarter containing accurate information on the amount of VAT it has charged to customers and paid to suppliers, and it must be able to rely on the information which is produced by its finance systems. The Omani tax authorities will conduct audits of businesses to ensure their VAT compliance, and if businesses are not able to produce a reliable audit trail establishing how it has arrived at its VAT return figures then it could face assessments and penalties. Non-compliance due to delays in implementing the systems can cost businesses even more.

“Around the world it is common for penalties for non-compliance to be 100 per cent of the error, and if negligence is involved it’s rare to be ‘let off ’ and the penalties get worse. Because it is a self assessed tax all the responsibility sits with the business and it becomes another risk issue for the business to manage.

“In Europe it is taken extremely serious at board level and the tax authorities frequently put personal responsibility on the officers of the company,” Justin Whitehouse, Indirect Tax Leader at Deloitte added. Similar to IT systems, a business must be able to rely on its staff to have knowledge of how their actions impact the business’ VAT position and be confident that employees are competent.