Confused about VAT in Oman? Is your Business about to be taxed on its Profits or Salary?

Confused about how VAT will affect your pocket? Want to know more about the taxes which are coming to Oman? Will you be paying VAT from your salary and what is the percentage? This article will attempt to dispel any misconceptions that you may have about the new tax to be implemented in Oman.

VAT (value added tax) is a consumption tax, which is similar to GST (general sales tax) in that the tax is levied on goods and services. This is significantly different from Corporation tax, which is a tax on companies and business and is based on its profits. Income tax is a tax on individuals, and  is declared by them to the government or deducted directly from salaries. Oman will be following other GCC countries such as Saudi Arabia, UAE and Bahrain in implementing VAT.

So what is VAT? VAT is an indirect tax that is collected on behalf of the government by the intermediary organisation that is the organisation that charges VAT on goods and services. It is charged at each step of the supply chain and the ultimate consumer generally bears the final VAT cost. So for example, when an electric goods manufacturer produces TV’s in the UAE, it will pay VAT on the material imported and charge VAT plus the cost price to the wholesaler. The wholesaler then charges that retailer its mark-up on the goods with VAT on top when selling the goods to the retailer. The retailer again, adds their mark-up and VAT on the goods, which is sold on to the consumer. Although in this supply chain, from the manufacturer to the retailer, each entity in the supply chain will be paying the difference between the VAT charged and the VAT paid to the government and it is only the consumer who will be paying the VAT without a refund from the government. This type of VAT is also one of the more common types of consumption tax found around the world.

VAT is implemented across 150 countries around the world including all 29 EU members as well as Canada, UK, New Zealand, Australia, Singapore and Malaysia to name a few. For some countries it is an important source of sovereign revenue. For example, in France it accounts for 50% of state revenues.

The implementation of VAT was agreed by all GCC members (Saudi Arabia, UAE, Bahrain, Qatar, Kuwait and Oman) in June 2016 and it was agreed that implementation would start in January 2018. It has also been confirmed that the rate of VAT will be at 5% on all goods and services with the exception of certain local transport, a basket of food items, specific medical and education services.

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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.