Oman to implement 5 per cent VAT from 2021

Muscat: Oman will start implementing a 5 percent value added tax (VAT) from April 2021, according to Oman TV said on Monday.

The value-added tax law was issued today under Royal Decree No. (121/2020) that set the date for the application of this tax to be 180 days after the date of this decree’s publication in the Official Gazette, so that the Sultanate joins the 160 countries that apply value-added tax around the world.

This tax will be imposed on most goods and services (exceptions specified in the law and regulations) at every point of sale, that is, at every stage of the supply chain, and it will also be imposed on the import of goods into the Sultanate, with specific exceptions in the law and regulation as well.

The unified value-added tax agreement for the countries of the Cooperation Council for the Arab States of the Gulf, which was signed by the member states of the Council in the month of November 2016 , defined the principles on which the local law of each country will be based, while allowing each country to choose different tax treatments in some of the cases specified in the agreement.

The basic value-added tax rate to be applied in the Sultanate at a rate of (5%) is among the lowest rates at the international level. Therefore, it is expected that its impact on the per capita cost of living in the Sultanate will be limited.

It is worth noting that value-added tax has been applied in more than 160 countries, and global rates range between 5% and 27%.

The value-added tax is expected to provide an additional resource for the state’s public finances to ensure the continued quality of public services, and it will also support the achievement of the Sultanate’s goals to reduce dependence on oil and other hydrocarbon products as main sources of its revenue.

It is believed that the application of the value-added tax will have a positive impact on the economic and social development and the international competitiveness of the Sultanate, as the financial resources obtained from it will contribute to building a sustainable economy for future generations, and will also contribute to improving public services and continuing the development of infrastructure in the future.

The business sector must register for VAT, and enterprises will need under this tax law to operate an efficient accounting and billing system and to maintain accurate accounting records.

It is expected that the impact of the value-added tax on the cost of living will be limited, especially since the rate that will be applied in the Sultanate is considered low when compared to that applied in other countries around the world, which means that the impact of this tax on the prices of goods and services will be subtle.

It should be noted that the sectors of health care, education, financial services, basic foodstuffs, and supplies for people with disabilities will not be covered by the value-added tax.

According to the value-added tax law, the business sector will have to clarify the amount of this value tax that the consumer will bear for each good / service at the outlet and provide the necessary information that helps the consumer to choose the good / service as the tax is recorded in the establishment’s invoice in accordance with the regulatory regulations.

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