• The receipt of goods and services by a taxable person in Oman from a supplier who does not have a place of residence in Oman and is not subject to tax in Oman
• The importation of goods from outside the GCC implementing states into Oman (however, at the time of preparing this chapter, none of the GCC Member States treat one another as an implementing state for VAT purposes)
Effective use and enjoyment. To avoid instances of non-taxation or double taxation, jurisdictions can apply “use and enjoyment rules” that allow a service that is “used and enjoyed” in the jurisdiction to be taxed or prevent a service that is “used and enjoyed” outside the jurisdiction from being taxed. If a service is taxed in the jurisdiction under the “use and enjoyment” provisions, a non-established supplier of the service may be required to register for VAT in that jurisdiction where it has customers that are not taxable persons. In Oman, the place of supply for electronically supplied services and telecommunication services is determined under the place of actual use and enjoyment rules. However, the VAT Executive Regulations state that the place of actual use and enjoyment shall be as follows:
• Place of use and enjoyment for electronically supplied services:
Place of residence of customer for taxable customers – Place of use and enjoyment for nontaxable customers shall be determined in accordance with the following:
(a) The fixed location in cases where the service requires the customer to be at a fixed location
(b) The international symbol for the electronic chip used by the customer to receive the services
(c) The internet protocol (IP) address of the device the customer is using or any other method that identifies the customer’s geographical location
(d) The customer’s address as stipulated in the tax invoice, or the documents used to send the invoices
(e) Customer’s bank account details
(f) Other information of a commercial nature
• Place of use and enjoyment for telecommunication services:
– The fixed location in cases where the service requires the customer to be at a fixed location
– The country that owns the international symbol of the electronic chip used by the customer, for services supplied through mobile networks
– If either of the cases above do not apply, then the place of supply shall be the place of residence of the customer, which the supplier shall determine based on information provided by the customer in accordance with usual commercial security procedures
As per the latest amendment to the VAT Executive Regulations, the place of supply for telecommunication services, and in particular roaming services, the place of supply would be determined where the data chip is issued and used by the customer, rather than in the place of use and actual enjoyment.
For further details, see the subsection Digital economy below.
Transfer of a going concern. Normally, the sale of the assets of a VAT-registered or VAT-registrable business will be subject to VAT at the appropriate rate. However, a transfer of a business as a going concern (TOGC) may be outside the scope of the tax under certain conditions. A TOGC is the sale of a business or part of a business capable of separate operation including assets. Where the sale meets the conditions, the supply is treated as outside the scope of VAT. In Oman, a TOGC is treated as outside the scope of VAT where the following conditions are met:
• The part of activity being transferred is capable of operating by itself
• The supply includes all elements of the transferred activity, fully or partially, including tangible and non-tangible assets, and may include debt
• The transferee uses the assets to carry the same activity that the transferor is engaged in and the transferee must be licensed to carry out this activity
• The transferor shall be a taxable person, and the transferee shall be a taxable person or become taxable as a result of the transfer
• There must not be a series of consecutive transfers of the asset
• The transferor and transferee shall jointly and severally notify the tax authority of the transfer in the form prescribed for this purpose within a period of one month from the date of supply
• The transferor must provide an invoice to the transferee which includes all the requirements of a tax invoice and specifies all the supplies resulting from the transfer of the activity, and mention that it is not subject to VAT in line with Article 18 of the law
Transactions between related parties. In Oman, for a transaction between related parties, the value for VAT purposes is calculated at the market value. Based on the VAT Executive Regulations, the term “market value” means the value of the consideration without tax for the supply as if it took place between two persons independent from each other and within fair competitive conditions, compared to similar supplies’ values occurring on the date of that supply.
C. Who is liable
A “taxable person” in Oman is a person who conducts an activity independently for the purpose of generating income and is registered with the tax authority or is required to register.
A person’s obligation to register for VAT in Oman is determined based on their residence status. A person who has a place of residence in Oman must register with the tax authority in either of the following two cases:
• If the total value of supplies at the end of any month in addition to the 11 months immediately preceding it, exceeds the mandatory registration threshold (OMR38,500).
• If the total value of supplies, which is expected to be achieved at the end of any month in addition to the 11 months immediately following it, exceeds the mandatory registration threshold (OMR38,500).
Any person who does not have a place of residence in Oman must register with the tax authority from the date it is obliged to pay tax in accordance with the provisions of the Oman VAT law.
Exemption from registration. A taxable person whose taxable supplies exceed OMR38,500 but whose supplies are exclusively zero-rated may apply to the tax authority for an exemption from VAT registration (also known as registration exception). However, the tax authority has the right to collect any VAT due, as well as administrative penalties, for the period of exemption from registration if the taxable person was not entitled to the exemption.
Voluntary registration and small businesses. Every taxable person who has a place of residence in Oman and makes taxable supplies and is not obliged to register under the mandatory registration criteria may apply for a voluntary registration in either of the following two cases:
• If the total value of supplies or expenses at the end of any month in addition to the 11 months immediately preceding it, exceeds the voluntary registration threshold (OMR19,250).
• If the total value of supplies or expenses expected by the end of any month in addition to the 11 months immediately following it, exceeds the voluntary registration threshold (OMR19,250).
For companies with an Omani commercial registration certificate, the VAT registration should be carried out online through the taxpayer portal. For individuals or entities without a commercial registration, an online excel form is available on the Oman tax authority website, which may be submitted via email.
Group registration. Two or more persons may register and may be treated subsequently as a tax group, provided the following conditions are met:
• Each person has a place of residence in the Sultanate
• Documents proving that the activity or part of the activity of the applicant is carried out within the special zones
• Bank account details
• Any other details or documents determined by the authority
• Bank guarantee for nonresidents
Deregistration. In the case of deregistration, the registered person should apply to the tax authority to cancel its registration in any of the following cases:
• Discontinuation of activity (i.e., commercial, industrial, professional, artisanal or service activities that may or may not be taxable under the Oman VAT law)
• Discontinuation of taxable supplies (supplies taxable at the standard or zero-rate of VAT under the Oman VAT law)
• If the value of the supplies falls below the voluntary registration threshold
A registered person may also request the cancellation of its registration if the value of its supplies falls below the mandatory registration threshold but exceeds the voluntary registration threshold.
The tax authority may reject an application for cancelation of registration if it does not meet the conditions for deregistration, and it must notify the taxable person of the decision to reject the application and the reason for such a decision.
Changes to VAT registration details. Any changes to the registration details for a registered taxable person already submitted to the tax authority at the time of obtaining VAT registration (e.g., change of principal officer or business address) should be reported within 30 days from the change in circumstance. The tax authority will issue a registration certificate containing the new information. The taxable person may notify the tax authority of the changes in the form available for this purpose, on the tax authority portal.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.
The VAT rates are:
• Standard rate: 5%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods and services unless a specific measure provides for the zero rate or an exemption.
• Basic food items
Examples
of goods and services taxable at 0%
• Medicines and medical equipment approved by Ministry of Health (MOH)
• Investment grade gold, silver and platinum
• International transport of goods or passengers and the supply of related goods and services
• Supply of means of transport by sea, air and land, adapted for the transport of goods and passengers for commercial purposes and the supply of related goods and services
• Supply of rescue aircraft and ships
• Supply of oil and gas and oil derivatives
• Export of goods and services outside the GCC region including those that would be exempt if supplied domestically
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Partial exemption. Input tax related to goods and services used to provide supplies that are subject to VAT and other supplies that are exempt, may be deducted in accordance with the proportion of costs related to the supplies subject to the VAT.
The standard partial exemption method consists of the following two-stage calculation:
• Attribution of input tax exclusively used in making either taxable or exempt supplies.
• Apportionment of non-attributable input tax using the standard input-based calculation, which will calculate the percentage of recoverable input tax. This percentage is based on the respective values of VAT incurred to make taxable supplies and VAT incurred to make wholly exempt and outside-the-scope supplies. The percentage should be rounded to three decimal places.
The percentage calculated must be multiplied by the amount of total non-attributable input tax incurred to establish the recoverable portion of that input tax.
The calculations referred to above must be undertaken in respect of each tax period where input tax incurred relates to making exempt supplies or to activities that are not in the course of business. At the end of each tax year, the taxable person must undertake the annual calculation outlined above, taking into account the amounts for the full tax year and any adjustment should be included in the first tax period of its subsequent tax year. The amount calculated for the tax year is compared to the input tax amount recovered in all the tax periods making up the tax year, and an adjustment to the recoverable tax must be made in the tax period.
Approval from the tax authorities is not required to use the partial exemption standard method.
A taxable person may use an alternative (i.e., special) method to calculate partial exemption. Such alternative methods may be used provided the following conditions are met:
• The alternative method to calculate partial exemption gives an acceptable apportionment
• The method is based on actual use of the goods and services
• The method must include an annual adjustment of the exemption
A taxable person must obtain the tax authority’s approval to use an alternative method to calculate partial exemptions.
Capital goods. Capital assets include material (tangible) assets (e.g., machinery, land and buildings) and immaterial (intangible) assets (e.g., patents, trademarks and royalties), which form part of the business assets of a taxable person, allocated for long-term use as a business instrument or means of investment. The following are also considered to be capital assets for the purposes of VAT:
• The acquisition or purchase of land, buildings or both land and buildings
• The construction of any building
• Large assets held primarily for sale in the ordinary course of business Input tax incurred on the purchase of a capital asset should be adjusted over a period of:
• Ten years for long-term assets (e.g., assets permanently attached to land)
• Five years for other capital assets
Businesses are entitled to deduct input tax on purchase, importation or development of capital assets at the time the input VAT is incurred and in accordance with the intended use of the assets. The input tax should be deducted in line with the intended use of the capital assets. Input tax incurred on capital assets intended for wholly taxable use can be deducted in full, while input tax on capital assets intended wholly for exempt or nontaxable business purposes may not be deducted. Where an asset is intended or adapted to be used partially for a business purpose and partially for a nontaxable business purpose, then input tax shall be apportioned according to the expected use.
• Refund of excess VAT on imports by nontaxable persons:
– Nontaxable persons in Oman may apply for a refund of VAT amount paid on imports exceeding the amount of import VAT due to the OTA. This circumstance can arise if there has been a downward revision in the value of the goods post-customs assessment or if an incorrect classification led to overpayment of VAT at the point of importation. The refund should be supported with documentation proving an amendment to the customs declaration and proof of reclaiming excess customs tax, if initially levied.
• Refund of import VAT on goods that are subsequently re-exported:
– Nontaxable persons in Oman may apply for a refund of import VAT paid on goods that are subsequently re-exported in accordance with the provisions of the GCC Common Customs Law, and where the customs duties are refunded. The refund should be supported with documentation evidencing the initial VAT payment, the customs declaration for the re-exportation and proof of reclaiming excess customs tax, if initially levied.
Additional conditions for the above-described refund scenarios include:
• The refund must be submitted on a quarterly basis
• The refund amount must not be less than OMR15
• The OTA is required to decide on a refund application within 30 days upon receipt of all necessary and complete documentation. If an answer is not provided within this timeframe, the application will be deemed rejected.
• Upon approval, the OTA shall process the refund amount within 15 days from the date of the decision notification.
Pre-registration costs. A taxable person may deduct the input tax incurred on goods supplied to the taxable person or imported by the taxable person prior to the effective date of registration, as per the following conditions:
• The goods are supplied to, or imported by, the taxable person within a period not exceeding three years, counting back from the effective date of registration, and the goods are still available for use on the effective date of registration.
• The taxable person has the right to deduct input tax on these goods - in accordance the law and regulations.
Bad debts. A taxable person may adjust the value of the tax due if the consideration was not fully or partially collected, provided the following conditions are met:
• The unpaid consideration is a result of supplies within the taxable person’s activity
• The taxable person has listed this unpaid consideration on each supply recorded in its accounting books and records
• The value of the supply recorded in its books not including tax is over OMR5,000
• The taxable person has declared and paid the tax due on the supply to the authority
• The period between the tax payment due date mentioned on the invoice and date of the adjustment is no less than 12 months; if no tax payment due date is stated in the invoice, it will be taken as the tax invoice date
• The taxable person has written off the value of the consideration for the supply as a bad debt
• The supply is not made to related parties
• The taxable person has notified the customer in writing of the amount adjusted and included the wording “This is the amount of input tax to be adjusted on the tax return for the period within which the date of this notice falls.”
In all cases, the taxable person may adjust the value of the tax on supplies within three years from meeting conditions required for bad debts.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Oman.
• There is a written agreement between the parties that includes a description of the supplies to which this agreement applies.
• The supplier does not issue a tax invoice for the same supply.
• Both parties must notify the other party if they are no longer registered for VAT purposes.
• The customer provides the supplier with a copy of the tax invoice issued on its behalf and that the supplier approves it.
• The tax invoice includes the phrase “the taxable person is liable to pay any tax due on the supply.”
• Each party notifies the other party in writing should they wish to cease this agreement.
Use of this scheme requires pre-approval from the tax authority.
Proof of exports. Until the implementation of the electronic services system across all the GCC Member States, supplies of goods shipped from Oman to other GCC states will be treated as an export of goods, which should be subject to the zero-rate of VAT, subject to the following conditions being met:
• The goods are physically exported to a place outside the GCC within (90) days from the date of supply.
• The goods are not used, consumed or changed in any way before the actual export, except in the manner necessary to prepare the goods for export.
A taxable person should maintain records and documents related to supplies of exported goods and services. Although the law has not explicitly stated the documents, this typically includes:
• Commercial documents (such as tax invoice, purchase orders, etc.)
• Transport documents
• Customs documentation
Foreign currency invoices. For the purposes of Oman VAT, VAT invoices can be issued in the domestic currency, which is the Omani rial (OMR) or any other currency. If the invoice is issued in a foreign currency, the VAT must be converted to OMR based on the average purchase and sale price of the currency published by the Central Bank of Oman at the date the tax is due.
Supplies to nontaxable persons. There are no special invoicing rules for supplies to nontaxable persons. As such, full VAT invoices are required. However, if the conditions to issue simplified invoices are met, simplified invoices can be issued for supplies to nontaxable persons (see the Simplified invoicing subsection above).
Records. In Oman, examples of what records must be held for VAT purposes include:
• Daily records in which the details of daily transactions are recorded according to their chronological and sequential order and maintaining all relevant documents that enable the control of the validity of these transactions
• The master record that monitors the opening of accounts and the transactions based on this account if there is a separate account for each type of supplies (taxable or exempt)
• The inventory record, where inventory items, the budget and the total count are recorded
• Records and documents related to supplies of imported and exported goods and services
• Records and documents related to intra-GCC supplies of goods and services, when applicable
• Records and documents related to all customs transactions
• All documents proving taxable supplies at zero percent (0%) rate
• Tax invoices, tax credit notes, tax debit notes issued or received
• Custom documents and other documents (e.g., shipping documents) related to import and export of goods
• Tax returns (including all supporting workings) and records of output tax in the case of tax declared under the reverse-charge mechanism or deferment of import tax
• Records that include information necessary to determine the correct tax treatment
The taxable person’s records or books should be maintained in OMR. However, foreign currency records can be maintained after receiving written approval from the tax authority.
The taxable person may keep accounting records and books, invoices and documents in any language, if they are made available in the Arabic language upon the request of the authority.
At the time of preparing this chapter, there is no guidance in the VAT law or from the tax authorities on whether the records need to be kept locally in Oman or can be kept outside the country.
Record retention period. Records should be maintained by the taxable person for 10 years (or 15 for real estate-related transactions) following the end of the tax year in which the tax return is filed.
Electronic archiving. Electronic archiving is allowed in Oman. Records can be archived electronically provided they are true copies of the original documents.
I. Returns and payment
Periodic returns. A taxable person must submit a VAT return electronically within 30 days following the end of the tax period.
The VAT return filing frequency is quarterly for all taxable persons.
• First tax period: January 1 to March 31
• Second tax period: April 1 to June 30
• Third tax period: July 1 to September 30
• Fourth tax period: October 1 to December 31
The first tax period starts from the effective date of registration until the end of the tax period. In all cases, the following tax period begins from the day following the end of the previous tax period.
Taxable persons are expected to file nil returns for tax periods with no taxable transactions.
Periodic payments. Payment of VAT due by a taxable person in respect of a tax period must be made at the latest by 30 days following the end of that tax period. The taxable person making the payment must provide details of the tax registration number of the taxable person and the tax period to which it relates. VAT due may be paid by any of the following means:
• Submitting bank checks in the name of the tax authority
• Depositing the amount in the account of the tax authority created for this purpose
• Issuing a written order to the bank to transfer the amount from the taxable person’s account to the tax authority’s account and notifying the tax authority. The VAT due is not considered paid in this case unless the amount is credited in full to the tax authority’s account
• Any other means determined by the tax authority
Electronic filing. Electronic filing is mandatory in Oman for all taxable persons. All tax returns, financial statements, records, documents and others must be filed electronically to the tax authority through the tax authority’s online portal. As an exception, such returns may be submitted by hand or through registered mail.
Payments on account. Payments on account are not required in Oman.
Special schemes. Profit margin scheme for used goods. A taxable person may calculate VAT on any supply of used (secondhand) goods by reference to the profit margin scheme in the following situation:
• The activity of buying or selling used goods is within the scope of the taxable person’s usual activity
• The taxable person obtains approval from the authority to use the profit margin mechanism to calculate the tax on the form prepared for such purposes
• The used goods are physically located in Oman
• If the used goods are purchased from any of the following persons: – A nontaxable person in the Sultanate
– A taxable person who calculated the tax on these used goods according to the profit margin mechanism under the approval of the authority
– A taxable person who is not allowed to deduct input tax on the goods
The profit margin is the difference between the purchase price of the goods and the selling price of the goods, and the profit margin shall be deemed to be inclusive of VAT. A taxable person may not elect to calculate VAT on the profit margin in respect of the goods (as outlined above) if a VAT invoice or other document is issued for the supply, mentioning an amount of VAT chargeable on the supply.
Where a taxable person has charged VAT in respect of a supply under the profit margin scheme, the taxable person must issue a VAT invoice that clearly states the phrase “tax calculated under the profit-margin mechanism” in addition to all other information required to be stated in a VAT invoice except the amount of VAT. A “self-issued profit margin invoice” should be issued when a taxable person purchase used goods from a nontaxable person.
Annual returns. Annual returns are not required in Oman.
Supplementary filings. No supplementary filings are required in Oman.
Correcting errors in previous returns. A taxable person in Oman can file a revised VAT return if it becomes aware of an error or omission in its VAT return. The revised VAT return should be filed electronically in the portal within 30 days of discovering the error or omission. A revised VAT return filed within the specified time limit is regarded as the original tax return. It is not permissible to revise the VAT return after three years from the date of its submission. In all cases, the taxable person is not allowed to revise the VAT return if the tax authority has initiated a tax inspection in relation to that return period.
Digital tax administration. There are no transactional reporting requirements in Oman.
J. Penalties
Penalties for late registration. Any taxable person who has not applied for VAT registration within the set time frame is liable to a penalty of imprisonment for a period not less than one year and not exceeding three years, and/or a fine of not less than OMR5,000 and not exceeding OMR20,000, or both. The court, in the case of recurrence, may double the penalty and increase the imprisonment to the maximum of the legal threshold of punishment but not exceeding half this threshold.
Penalties for late payment and filings. If a taxable person deliberately fails to submit a VAT return for any tax period, it is liable to a penalty of imprisonment for a period not less than two months and not exceeding one year, or a fine of not less than OMR1,000 and not exceeding OMR10,000, or both. The court, in the case of recurrence, may double the penalty and increase the imprisonment to the maximum of the legal threshold of punishment but not exceeding half this threshold. For late payment of VAT, a surcharge is imposed at a rate of 1% on the value of tax not paid. The surcharge applies to every month of the payment being overdue or part of a month from the end of the specified period for settlement until the settlement date.
Penalties for errors. Deliberately including inaccurate data or information in a refund application or deliberately issuing an invoice stating tax other than the tax imposed in accordance with the provisions of the law is liable to a penalty of imprisonment for a period not less than two months