The money from oil and gas exports is steadily declining, and the GCC governments are attempting to diversify their economies. For example, the Omani government has implemented VAT to increase tax collection (Value Added Tax).
Value Added Tax (VAT), often referred to as Products and Services Tax (GST) in some countries, is an indirect tax levied on goods and services. It is based on the value added to the taxable items at each stage of production or distribution. The final taxpayer under any government that implements VAT is the consumer.
Oman VAT Law
On April 16, 2021, the Sultanate of Oman implemented VAT nationwide. Therefore, companies should expect significant changes in the months before the new 5% tax regime goes into effect because they need to adapt and prepare before the new regulation takes effect.
When a "taxable person" makes a "taxable supply," VAT is typically assessed. Businesses are typically considered taxable individuals and must register with the local authorities if their revenue exceeds a specific threshold. Firms collect VAT on behalf of the local tax authorities, and in general, VAT is credited against VAT imposed on goods made. Businesses must submit VAT returns and pay any applicable fees. Learn more about filing corporate taxes in Oman.
Advantages of Oman VAT Rate
Implementing Value Added Tax will be a milestone for the country as it will help the economy's growth and aid its development. This is one of the state's essential steps in diversifying its economy.
The Benefits of VAT for Oman are as follows:
VAT Discount for Input
The tax paid by the taxable person concerning the supplies or services made to him or imported to carry out the activity is known as input VAT. The excess amount of the total value of output tax less than the full value of input tax deductible for that period is used to calculate the tax owed and payable by any taxable person for any tax period. However, the taxable person may make an input tax deduction claim within three years after a legitimate tax invoice date.
2. Trustworthiness and Business Standing
Since the VAT registration number must be disclosed on all business documents, such invoices prove a company's legitimacy and authority. Businesses with the necessary paperwork look to be well-established, given the registration threshold. Due to the input VAT discount, companies prefer doing business with legitimate, registered organizations.
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3. An Audit Trail
Any business needs to conduct audits. Businesses can guarantee total adherence to VAT legislation with rigorous audit inspections. Companies must ensure they are keeping accurate records for at least 5 years after adopting VAT and that they can supply the FTA with these documents upon request. This guarantees full compliance.
The Oman VAT Law's implementation helps the country's economy diversify since it will encourage economic growth while also assisting the government in reducing its reliance on the oil and gas industry. The economy will then progressively improve as a result of this over time.
5. Public Welfare
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, constructing roads, providing proper infrastructure, etc.
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Oman's citizens may benefit significantly from VAT, but preparing the country's current businesses for its introduction can take time and effort. They have two options: they can handle the burden independently or hire professionals to hold it for them.
Business Setup Worldwide's consultants are knowledgeable about the tax code and can assist you in filing your value-added tax. We also offer additional services, such as tax preparation and business establishment. Contact us if you need assistance or if you have any questions.
Which business sectors can levy the tax in Oman?
The provision of financial, insurance, education, and health care services.
In Oman, who needs to register for VAT?
Every person with a domicile in the Sultanate earns more than the minimum required for registration or is anticipated to do so annually from a commercial, industrial, or minor activity.