VAT Compliance in Oman

Understanding and complying with VAT in Oman doesn't have to be overwhelming. Irrespective of you being a small business or a large enterprise, navigating value added tax in Oman becomes much easier with the right support. By ensuring your business aligns with the latest VAT executive regulations, you not only stay compliant but also streamline business operations and avoid penalties.

How VAT in Oman is Changing the Business Landscape?

Oman has positioned itself as a forward-thinking economy in the Gulf Cooperation Council (GCC). This can be attributed to the fact that the government is taking decisive steps to diversify its revenue streams and strengthen its fiscal framework. With strategic reforms and government-backed initiatives, the Sultanate has caught the attention of both local and international businesses.

One of the most significant reforms in recent years has been the introduction of VAT. Backed by the robust VAT laws, this framework is part of the country’s broader plan under Oman Vision 2040 to ensure long-term economic sustainability.

Apart from aligning the country with the global best practices, value-added tax also provides a structured path for compliance, growth, and improved financial governance.

Here, we cover everything you need to know about VAT in Oman. Read on to stay informed and ready.

What Is Value Added Tax in Oman?

Omani VAT is a type of consumption tax levied at each stage of the supply chain, right from production to the final sale.

In the Sultanate, Value-added tax is applied to most goods and services, making it a comprehensive tax system which is designed to generate sustainable government revenue. Its structure follows the unified GCC VAT agreement, which is consistent with other GCC countries that have already adopted similar tax systems.

VAT Implementation in Oman and Its Importance

In Oman, VAT was officially implemented on April 16, 2021, after the issuance of Royal Decree No. 121/2020, which laid the foundation for the Oman VAT law.

The introduction of VAT is a part of the Sultanate’s broader strategy under Vision 2040 and is instrumental in reshaping the fiscal environment of the country. All businesses must adhere to the VAT executive regulations to ensure smooth operations and avoid penalties. Given this, understanding Oman's VAT rate, registration requirements, and filing deadlines is crucial.

How to Register for the VAT?

When it comes to the process of registering for VAT in Oman, it can be handled smoothly if you're aware of the steps. The VAT registration process involves the following steps:

Step 1 - Determining the Eligibility

In Oman, only businesses having an annual taxable turnover that exceeds OMR 38,000 have to register under the VAT law. So, you need to determine whether the business falls in that category or not.

Step 2 - Preparing Documentation

If the business is eligible, you need to ensure that all the documents that need to be submitted with the application are in order. This includes business details, financial statements, and other required information as stipulated by the Oman VAT regulations.

Step 3 - Submitting the VAT Application

The next step involves applying to the authorities with the documents. Our experienced tax experts can handle the submission of the VAT registration application to the Oman Tax Authority (OTA).

Step 4 - Get the VAT Number

Once the application is filed, it is reviewed by the authorities. Upon successful verification, the business is given an official VAT number, thereby enabling the business to legally charge and collect VAT on goods and services.

What are the VAT Registration Categories in Oman?

The Oman Tax Authority has set specific thresholds for helping businesses identify their registration obligations. The categories are as follows:

1. Mandatory VAT Registration

If the annual taxable turnover exceeds OMR 38,500, businesses must register for VAT. This includes all standard-rated, zero-rated, and reverse charge transactions.

2. Voluntary VAT Registration

Businesses with taxable turnover between OMR 19,250 and OMR 38,500 can choose to register voluntarily. This is beneficial for startups or small and medium-sized enterprises (SMEs) looking to claim input VAT and enhance business credibility.

3. Group VAT Registration

Related entities such as holding companies and subsidiaries may apply for VAT group registration if they meet the criteria set by the Oman VAT executive regulations. But the taxable turnovers must be as per the threshold mentioned.

How to File VAT in Oman?

Once the business is registered, VAT filing becomes an ongoing responsibility. In the Sultanate of Oman, VAT returns must be filed quarterly, and it's essential to maintain proper documentation to avoid any discrepancies.

The key steps involved with filing VAT include:

• Accurate Reporting: You must ensure that all taxable buy and sale transactions, input tax credits, and VAT on supplies are reported correctly to stay compliant with VAT regulations.

• Timely Submission: Adhering to the quarterly filing deadlines is critical when it comes to VAT filing in Oman. The tax filing should be done within 30 days after the end of the tax period. Incorrect filings and late submissions can lead to penalties or audits by the Oman Tax Authority.

• Understanding Oman VAT rate: While the standard VAT rate is set at 5%, certain goods and services are exempted or subject to reduced rates under the VAT law. As this is fully dependent on the nature of the supply, it's important to understand the factors involved before filing your VAT returns.

If you're unfamiliar with the local tax laws and regulatory procedures, bypassing the intricacies involved with VAT in Oman can be challenging. But, with the right support, staying compliant with Oman's evolving VAT regulations can be smooth if you're working with the right tax experts.

They can take care of the entire process, including registration, filing, exemptions, and industry-specific requirements.

I am working with startups, SMEs, and professional intermediaries to set up their businesses and branch offices in offshore destinations.