The GCC states are looking to expand their economy as the revenue from the oil and gas exports are steadily decreasing. The Omani government are focusing on increasing their revenue from taxes and have decided to introduce VAT (Value Added Tax).
Value Added Tax (VAT), also known as Goods and Services Tax (GST) in some countries, is an indirect tax which is on consumption of a good or a service and is assessed on the value added to the said goods and services at each stage of production or distribution. Under any government following VAT, the ultimate tax burden is endured by the consumer.
Vat in GCC (Gulf Cooperation Council)
In the GCC region, VAT is being introduced under the GCC VAT agreement which was approved by the GCC members. UAE and the Kingdom of Saudi Arabia were the first 2 GCC members to implement VAT. The Kingdom of Bahrain has implemented VAT recently, on 1 January 2019 and has become the third member state to implement VAT. Now Oman and Qatar are set to follow the footsteps of Bahrain and introduce VAT in their country. If you are planning to set up a business in Oman, you should know certain essentials.
VAT in Oman
Oman is likely to launch the implementation of VAT from 1 September 2019 and will levy a marginal rate of 5% as the VAT rate, but this decision is being reviewed by the government and is not final as the proposal has to undergo scrutiny at various levels. The Omani government have much time to prepare for the launch of VAT. Oman is different from the other GCC member states, and it needs to ensure the rollout of this tax goes without any problem. Armed with the data from the three countries which have already implemented VAT, Oman can conduct a technical and fiscal analysis of VAT and determine the impact of it on the economy which would help in the smooth transitioning of the Omani economy to a follow Value Added Tax.
Advantages of VAT for Oman
The implementation of Value Added Tax will be a milestone for the country as it will not only help in the growth of the economy but will also aid in the development of the country as a whole. This would prove to be one of the essential steps that the state takes with regards to diversifying its economy.
The Benefits of VAT for Oman are as follows:
1.Diversification of the economy
This would lead to the expansion of the economy and will also help the government to lessen its dependence on the oil and gas sector. The diversification will help to uplift the economy gradually.
The Introduction of VAT would be beneficial for society as the people would now spend money only on things that are needed and on sensible items.
The revenue gained from VAT will be used for various projects which would lead to the prosperity and well-being of the people. Such projects include providing health facilities, construction of roads, providing proper infrastructure, etc.
In comparison to the other taxes that are levied to the people, the chances of evading this type of tax are very less.
5.Standard of Living
It would help in slowly increase the standard of living of the people by providing the necessary funds to the government so that it could focus on the various developmental activities.
These are the advantages of the VAT that is to be implemented in Oman. Now the next agenda for you would be to make your business ready for VAT implementation, and can be done in the following ways:
- Maintain financial records in order.
- Reduce your costs as much as you can.
- Get a secure accounting system with a VAT component.
- Get professional help if needed such as CA firms who would do the necessary legwork for you.
- Assess the capability of existing systems.
- Identify an implementation strategy for VAT.
Although VAT can be very advantageous for the people of Oman, it can be a little tricky for the current business to get ready for the implementation of such tax. They can take care of the burden on their own or can get some professional help to do the needful.
The advisors at Business Setup Worldwide up to date with the taxation framework and can help you in filing your Value Added Tax. We also provide other services ranging from business incorporation to taxation. For any help or clarification of any doubt – contact us.