What is VAT ?
Value Added Tax (VAT) is a broad-based tax assessed on the value added to nearly all goods and services. VAT is paid and collected at every stage of the supply chain.
VAT in GCC ?
Following the signing of the Gulf Cooperation Council (GCC) VAT Framework Treaty, the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA) introduced VAT effective from 1st January 2018; whereas the Kingdom of Bahrain introduced VAT effective from 1st January 2019. The GCC VAT Treaty acts as the basis for local VAT legislation by stipulating certain principles, which must be followed by all member states, while allowing the countries to opt for different VAT treatments and approaches.
VAT in OMAN ?
Oman has started gearing up for VAT implementation. The Sultanate has got enough experience from the implementation of VAT in other GCC countries and around the world and it is well prepared and equipped for its implementation. Oman Tax Authority has already published a guide that provides clarity on when a Business should obtain VAT registration during the transitional period.
How does VAT impact a business?
As a transactional tax, VAT will have significant impacts across business operations. Whilst different sectors and organizations will face specific complexities, Arqam considers that business impacts can generally be categorized in following three broad areas:
Implementation of VAT impacts the management/ Board level on company structure, market positioning and negotiation with customers and suppliers for amending the existing agreements.
Business process has to be re-engineered in line with the VAT policies and amendments as proposed by Tax department. It will involve review of workflow and operations.
Arqam expects cashflow of the company to be impacted inclusion of VAT. Company has to invest in technology, process changes and for VAT compliance.
His Majesty, the Sultan of Oman, had issued Royal Decree No. 121/2020 in relation to the introduction of VAT in Oman. The VAT law has set out the general principles for the application of VAT in Oman in line with the Unified GCC Agreement for VAT.
The standard VAT rate will be 5% and will be levied on most goods and services, with exceptions made to some supplies, which will be zero-rated or exempt
The table below sets out the mandatory registration thresholds for VAT registration:
|Non Resident||Any Value (Article 57)|
The value of yearly supplies is calculated across a period of past 12 months or next 12 months. The following is to be taken into consideration:
- Standard rates & zero-rated sales (except disposal of capital assets);
- Intra-GCC supplies; and
- Supplies (goods and services) subject to reverse charge mechanism.
Oman Tax Authority published a guide that provides clarity on when a Business should obtain VAT registration during the transitional period.
Effective registration dates
|Annual supplies (IN RO)||Registration deadlines||Effective date of VAT registration|
|>1,000,000||1-2-2021 to 15-3-2021||16-4-2021|
|500,000 to 1,000,000||1-4-2021 to 31-5-2021||1-7-2021|
|250,000 to 499,999||1-7-2021 to 31-8-2021||1-10-2021|
|38,500 to 249,999||1-2-2021 to 28-2-2022||1-4-2021|
Tax Authority has given an option to taxable persons to register voluntarily from 1-2-2021, irrespective of above timelines.
Process flow for the Change
ASSESSMENT OF VAT IMPACT ON BUSINESS > GAP analysis of risk areas>Identify VAT risk areas>Report on VAT compliance requirement in accounting system>Review existing contracts
IMPLEMENTATION AND TRAINING>Review of IT system & recommend changes>Review implementation of recommended changes to system>Conduct VAT workshops to employees
COMPLIANCE ASSISTANCE>VAT registration>VAT return filing>Review credit policies & advice and cash flow management>Representation with tax dept
How does ARQAM help?
We at ARQAM believe that a successful VAT implementation means VAT being effectively embedded within business processes and the company is able to manage the system effectively and efficiently for timely VAT filings. Keeping in mind the same, ARQAM can support you with the following activities:
- GAP analysis of accounting system and recommend accounting process re-engineering.
- Assist in ensuring the recommended and required changes are implemented.
- Assessment of companies VAT registration requirements.
- Assistance in obtaining VAT registration.
- Assistance in making representation to the Tax authority.
- Training programme to staffs.
- Develop manuals, standard operating procedure (SOP), frequently asked questions (FAQs), guides for businesses.
- Ad-hoc VAT advisory services.
- On-going VAT compliance support.
- Ad-hoc VAT advisory services .
- Other post-implementation services (including overall health-check of a business).
- Periodic VAT updates