New executive decisions on VAT implementation issued by Oman Tax Authority

Muscat: The Tax Authority on Wednesday issued three executive decisions pertaining to the implementation of the Value Added Tax (VAT), which will enter enforcement stage by April 16, 2021.

The first decision determines the minimum volume of sales requiring the taxpayer to compulsorily register with the Tax Authority. The second relates to deadlines for registration to the Tax Authority while the third decision lists the foodstuff exempted from the VAT (zero VAT payment).

The first decision specified that registration to the Tax Authority becomes compulsory if the taxpayer’s annual sales stand at OMR38,500 or more or are expected to reach this ceiling.

The decision set the ceiling of ‘voluntary’ registration to the Tax Authority at OMR19,250 and states that, accordingly, the taxpayer may apply for voluntary registration if the applicant’s annual sales stand at, or cross or expected to go beyond the value of OMR19,250.

Determining ceilings for compulsory and optional registration comes within the context of the provisions of the GCC Unified VAT Agreement, which the Sultanate signed in November 2016.

The second decision fixes deadlines for taxpayers’ registration to the VAT at the Tax Authority.

The decision took into account a certain level of progression in taxpayers’ registering to the Tax Authority, depending on the volume of their annual sales. The aim is to grant small and medium enterprises (SMEs) sufficient time to prepare and adjust their systems and their mechanisms of filing and billing to meet the requirements of the Tax Law.

The decision sets the Deadline of Registration, which is the date on which the taxpayer will be required to implement the provisions of the VAT Law, according to the volume of the taxpayer’s sales.

The decision states that taxpayers whose value of annual sales crosses or is expected to cross OMR1 million have to register to the Tax Authority during between February 1, 2021 and March 15, 2021.

Accordingly, the VAT for this segment (OMR1 million-worth supplies) becomes applicable from April 16, 2021.

As for taxpayers whose value of sales crosses or is expected to cross OMR500,000, their registration begins from April and the deadline of registration will be July 1, 2021. The deadlines of lower segments follow a similar slope (per volume of sales) till the minimum level of OMR38,500-worth supplies.

The decision grants taxpayers a right to register voluntarily to the Tax Authority with effect from February 1, 2021 in case the value of their supplies crosses or is expected to cross OMR19,250.

The third decision specified the type of foodstuff exempted from the VAT. The list consists of 94 customs tariff items to be exempted from the VAT.

These include meats, fish, poultry, dairy products, fresh eggs, vegetables, fruits, coffee, tea, cardamom, cereals and grains, olive oil, sugar, child foods, bread, bottled water and table salt. 

CA. Sarweshwar Biyani, Vice President - Finance & Accounts, SV Pittie Sohar Textiles LLC, said: “The VAT is paid eventually by the consumer.

However, due to its structure of spreading responsibility on all businesses, there is a substantial compliance cost burden on all. These are adopting accounting and IT systems to capture accurately and remit the correct amount of VAT to tax authority, issuing correct VAT invoices, filing VAT returns, manpower training, VAT audits and dispute resolution etc.

Scattered registration process over a period is a really good decision by the tax authority which will be favorable for business community. It will give ample time to them to prepare for VAT specially SME. It will not put sudden burden and rush for small businesses. Also, if businesses prepare themselves in an appropriate manner to become crucial part of VAT collection administration system, it will finally help tax authority to collect VAT hassle free. It’s like win-win situation for both.”