What is the GCC VAT Framework Agreement and How does it Apply to VAT in Oman?

The GCC VAT framework agreement was released on the 3rd May 2017. This is a 33-page document which outlines the outcomes from the resolution of the GGC supreme Council meeting. This took place on the 9th – 10th December 2015 for the introduction of VAT in the GCC.

The framework is not a document based on the VAT rules that the collective GCC states will implement but is more of a framework on which they will base their country specific legislation on. However, there will be aspects to the framework which is mandatory on all GCC states to implement. This also means that the VAT laws within each country will be similar.

The following information are the key points contained in the GCC Framework:

  • A business/organisation is mandated to register for VAT once its revenue is above $100,000 within a 12 month period. If the revenue is half of the amount, then registration is optional
  • VAT will apply to supplies of Gas, Oil, Water and Electricity
  • Place of supply can be deemed at the supplier’s place of residence or the client’s place of residence depending on the type of goods/services provided
  • The place of import of goods will be the country of the first point of entry
  • The date of tax due will be the following:
  • date of when the good or service is supplied; or
  • date of the tax invoice; or
  • date the services are partially or fully received
  • The VAT rate will be at 5% unless it is an exempt or zero rated good or product
  • Zero rated supplies will include education, healthcare, real estate and local transport
  • Other exemptions on VAT include farming, fishing and companies hosting international forums
  • Intra-GCC and international transport will also be subject to zero rated VAT
  • In certain cases where not all of the input tax incurred is for the provision of goods and services, then a proportion of the input tax can be recovered against the output tax.
  • There maybe provisions where input tax incurred prior to registration maybe claimed subject to conditions
  • Tax invoices must be issued for goods and services and records must be kept for a period of 5 years.
  • Tourists may be able to claim a refund on VAT purchased in the GCC subject to conditions.

It should be noted that the Framework was originally released in Saudi Arabia and may not necessarily be relevant in Oman. Also, it was released in the Arabic language and then translated into English so there may be a risk of translation errors. Professional advice should be taken before acting upon any of the recommendations.

More specifically in Oman, there are two legislative documents are expected to be released. The first one is the VAT procedures law, which is the legal framework of the VAT and the second is the more detailed VAT law, which is the legislation document with the detailed guidance.

We will be releasing more detailed articles and case studies once the final VAT law is released.

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This article is written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of its contents.