How does VAT affect Omani businesses?

Pratibha Devasenapathy | Updated on: October 27, 2021

The Sultanate of Oman is all set to introduce VAT across the country, starting April 16th, 2021. Companies are expected to foresee great changes in the months leading up to the new 5% tax regime as they must adapt and prepare before the new rule takes effect.

VAT is generally charged when a “taxable person” makes a “taxable supply”. Usually, businesses with a turnover above a certain threshold are deemed to be taxable persons and are required to register for VAT with the local authorities. As part of the scheme, VAT is collected by businesses on behalf of the local tax authorities and, broadly, VAT paid on purchases and expenses is credited against VAT charged on supplies made. Businesses are required to submit VAT returns and pay over any VAT due to the local authorities periodically.

What is VAT and How does it work?

What does it mean for businesses in Oman?

Businesses whose taxable supplies’ value exceeds the mandatory threshold will need to register for VAT with the Oman Tax Authority (OTA). The voluntary registration option is designed for start-up businesses with low or no turnover, to enable them to register for VAT and claim input VAT on purchases. With the implementation of VAT, businesses will be mandated to issue tax-compliant invoices, maintain accurate book of records, file returns on a timely basis, etc.

The 5% VAT rate covers the supply of all goods and services in Oman, except for certain exempted categories and cases.

Who Should Register Under Oman VAT?


What are exempt supplies?


What are zero-rated supplies?

Impact of VAT in Omani Businesses

Companies will inevitably play a vital role in effecting the smooth implementation of VAT in the Sultanate, and preparing themselves for April 2021 must be a priority. Here’s how the VAT introduction will impact various businesses in Oman:

Compliance with new tax laws

First of all, businesses must register for VAT, based on the threshold limit defined by Oman TA. Secondly, they must maintain and run an effective accounting and billing system, maintain accurate accounting records relating to value-added tax, maintain and update all information in the books of accounts since record maintenance began for a company.

Tax across the sectors

Some sectors may qualify for a different rate of VAT (including 0% in some cases) to be levied on their taxable supplies. The supply of certain categories of goods and services may also be exempt from VAT. Typically, these may include the provision of financial, insurance, education and health care services. Businesses providing exempt services may not be able to deduct VAT and consequently suffer VAT costs on their expenses and overheads. In these cases, VAT may become a non-recoverable cost.

Consumer behaviour

The Value Added Tax will be applied according to regulations and controls through which businesses must clarify the amount of value-added tax the consumer will bear for each good and service at the outlet, and provide the necessary information that helps the consumer to choose the appropriate goods and services. This tax rate is also recorded in the establishment’s invoice according to the regulations that control VAT in the country.

Organisation-wide readiness

The introduction of VAT requires fundamental and wide-ranging changes across an organization. It is multifaceted and will impact tax, finance, procurement, sales and marketing, supply chain, logistics, legal, information technology, and even HR. Therefore, it is critical that companies invest in careful and timely planning in order to be adequately prepared. All businesses in Oman should be taking steps now in order to define strategy and implement plans, to ensure organization-wide readiness before the introduction of VAT.

Did you know, with TallyPrime your business will stay VAT compliant in a jiffy?

The application of VAT will have a positive impact on economic and social development and the international competitiveness levels of the Sultanate while strengthening its financial position, which will help contribute to building a sustainable economy, as the tax collected will provide additional financial resources for the state that will enable it to improve public services and help with the continued development of infrastructure in the future.

How is Introduction of VAT going to Affect Oman Economy?

Each business has its own different priorities, but a successful implementation will result in VAT being effectively embedded within processes. At the end of the day, you should have confidence that you will have a well-managed compliance system, producing accurate and timely VAT filings. TallyPrime ensures that you are VAT-ready and adhere to all compliance guidelines established by the regulatory bodies. Take a free demo of TallyPrime today and make your business 100% VAT compliant!

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