Oman introduces 5% VAT on most goods and services
Oman introduced 5 per cent VAT on most goods and services in the sultanate, including imports, after a six-month transitional period.
There will be some exceptions specified in the law, according to the Oman News Agency.
The sultanate expanded the list of goods subject to zero-rate VAT from 93 basic food commodities to 488. Food products subject to zero-rate VAT include vegetables, fruits, legumes, grains, dates, spices, oils, fish, red meat and poultry.
Services such as education, health care and financial services will be exempt from VAT, which was introduced on Friday.
The tax will help Oman generate about 400 million Omani rials ($1.04 billion) in revenue annually, which is equal to 1.5 per cent of the total value of gross domestic product.
All six Gulf countries agreed to introduce VAT of 5 per cent in 2018 after a slump in oil prices hit revenue.
Saudi Arabia, the UAE and Bahrain began to apply the tax, with Riyadh tripling it last year.
Oman’s economy was hit hard by the coronavirus pandemic and low oil prices.
The sultanate’s economy is estimated to have shrunk by 6.4 per cent last year but is expected to make a modest recovery and grow by 1.8 per cent this year, the International Monetary Fund said in February.
The current account deficit is also projected to have widened from 5.4 per cent of GDP in 2019 to 10 per cent last year, mostly because of lower hydrocarbon exports, according to the Washington-based lender.
Oman is also taking other measures to strengthen its balance sheet.
Earlier this year, it removed electricity and water subsidies for Omanis, residents, government entities, private companies and industries.
It also intends to diversify its economy away from oil and is offering long-term residency permits to foreign investors.
Saud Al Shukaili, head of the tax authority, said all necessary preparations and requirements for the introduction of VAT had been completed.
This includes the issuance of a law related to the tax, the setting up of accounting systems, tax authority training on how to apply the levy, the preparation of a manual of VAT-related work procedures and the drafting of a guide on registration procedures.
Mr Al Shukaili said all companies, irrespective of the value of their taxable supplies, were required to have registered for VAT from February 1 this year.
Small establishments and companies were granted time to set up their accounting systems and other necessary procedures for tax compliance.
There will be a compulsory VAT registration threshold of 38,500 rials a year and a voluntary registration threshold of 19,250.
Companies and people that need to register for tax are permitted to do so in a phased manner. Those with an annual value of taxable supplies above 1m rials were required to sign up between February 1 and March 15, and will be considered to have registered from April 16.
Those with taxable supplies between 500,000 rials and 1m rials need to register between April 1 and May 31, with their VAT registration coming into effect from July 1.