Exempt Supplies in Oman VAT

Yarab A | Updated on: December 17, 2021

What are exempt supplies?

Exempt supplies are non-taxable supplies that are exempted from VAT. In simple words, on the supply of goods or services which are notified as exempt, no VAT is levied. The important point that needs to be remembered here is that businesses will not be allowed to claim Input vat deduction on VAT paid on the purchases.

Example of exempt supplies and Input VAT implication

Al-Ameen LLP purchased raw materials worth 1,000 OMR with VAT 5% i.e.50 OMR. The raw materials are used to produce the finished product which is exempted from the VAT. Al-Ameen sold the finished products for 1,100 OMR.

In the above example, Al-Ameen will not charge VAT on their sale since the finished product is exempt from VAT. On the other side, they will not be allowed to claim the input VAT deduction of 50 OMR which was paid on the purchase of raw materials.

List of exempt supplies in Oman VAT

The following are supplies that are exempt from the VAT. It is important to note that specific conditions and guidelines will be issued in executive regulations pertaining to supplies listed below.

• Financial Services.
• Healthcare Services and related Goods and Services.
• Educational Services and related Goods and Services.
• Undeveloped land (bare land).
• Resale of residential properties.
• Local passenger transport.
• Rental of properties for residential purposes

List of goods import supplies that are exempt under Oman VAT

• Imported Goods in cases where the supply of such Goods is exempted from Tax or subject to Tax at a rate of zero percent in the destination point of entry.
• Imported Goods in favor of diplomatic and consular Bodies, and international organizations, and to Heads and members of consular and consular bodies certified by the Sultanate, on the condition of reciprocity.
• Anything imported to the armed forces and internal security forces in all its divisions such as ammunition, weapons, supplies, and military means of transport and its parts.
• Personal effects and used household appliances brought by citizens residing abroad and foreigners who are coming to stay in the country for the first time.
• The supplies for non-profit charities.
• Returned Goods

Exemption in case of baggage and gifts

Personal baggage and gifts accompanying travelers arriving in the sultanate, and requisites for people with special needs are exempt from Tax. These will be exempted only when the specific conditions and rules mentioned in the regulations are met.

Broadly, VAT exemptions in Oman are given for certain financial services, re-sale residential buildings, and supply of bare land, local passengers, and so on. However, to consider a supply as exempted from the VAT, the specific conditions mentioned in the Oman VAT Act and Executive Regulations need to be fulfilled.

Frequently asked questions

What are VAT exempt supplies?

Exempt supplies are non-taxable supplies that are exempted from VAT. In simple words, on the supply of goods or services which are notified as exempt, no VAT is levied.

Do I have to register for VAT if my supplies are exempt?

No. If you are a taxable person or business selling exempt supplies, even if your revenue exceeds the prescribed threshold, you do not need to register for VAT.

What goods and services are exempt from VAT?

• Financial Services.
• Healthcare Services and related Goods and Services.
• Educational Services and related Goods and Services.
• Undeveloped land (bare land).
• Resale of residential properties.
• Local passenger transport.
• Rental of properties for residential purposes

Is ITC available on exempt supplies?

No. Businesses will not be allowed to claim Input VAT deduction on VAT paid on the purchases.

Do exempt supplies go on VAT return?

No. A supplier making exempt supplies is generally not allowed to recover input VAT in relation to such supplies.

Watch Video on VAT Treatment on Exempt Supply Presented by CA Girish Chand

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