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Oman Says VAT Not On The Backburner

Thursday, August 8, 2019

Oman's Government has released a statement confirming that it is preparing to introduce VAT legislation into parliament to implement the levy without delay.

In a statement published by the state news agency with the headline "No plans to postpone VAT", the Ministry of Finance said: "The Government is working on completing the legislative procedures to issue the VAT law [and] the General Secretariat of Taxation is currently completing the administrative and technical procedures in preparation for applying this tax once approved."

Earlier Oman was eyeing the introduction of VAT from September 1, 2019, as indicated by government officials back in October 2018.

Reuters reported on July 30, 2019, that it had seen a government bond prospectus issued during July that indicated a 2021 start date for VAT. However, the new statement issued by the Government a day later indicates that VAT could be introduced as early as next year, subject to it being approved by lawmakers.

Having introduced value-added tax on January 1, 2018, the United Arab Emirates and Saudi Arabia became the first two states of the six-member Gulf Cooperation Council grouping to follow through on the bloc's commitment to introduce a harmonized value-added tax. Bahrain followed suit from January 1, 2019.

Initially, the tax was supposed to have been in place by 2012, but certain member states struggled to lay the technical and administrative foundations for the measure. Furthermore, there has been a great deal of internal resistance to the proposals from politicians, taxpayers, and businesses. As a consequence of these problems, the timetable slipped for the introduction of VAT repeatedly.

Finally, in June 2016, GCC finance ministers approved the VAT framework, which sets out the parameters of the regime that will apply in all member states. This was eventually signed in 2017, and the framework was published in May of that year, with a view to VAT being introduced across the GCC on January 1, 2018. However, the VAT framework did not stipulate that the tax must be introduced simultaneously by the member states on a certain date and so far only three have done so.

The framework provides for a basic VAT rate of five percent, with individual states permitted to exempt or zero-rate certain supplies as they see fit, including education, local transportation, health services, and real estate sales. In addition, each member state may zero-rate the oil and gas sector under the framework. A number of other supplies are zero-rated under the framework, including medicines and medical equipment, international transport services, precious metals, and exports to jurisdictions outside the GCC.

The framework also states that member states must exempt financial services performed by banks and financial institutions. Member states are required to subject foodstuffs to VAT at the basic rate, unless an exemption is approved by the Financial and Economic Cooperation Committee.

The mandatory registration threshold is set at SAR375,000 (USD100,000, or its equivalent in the GCC state currencies). There is a voluntary registration threshold, which is 50 percent of the mandatory registration threshold. The Ministerial Committee has the right to amend the mandatory registration threshold after it has been in force for three years.