Oman VAT Academy VAT Executive regulations, registrations and go-live around the corner - March 2021 - Deloitte
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Oman VAT Academy VAT Executive regulations, registrations and go-live around the corner March 2021
Agenda
Recent updates on the VAT registration process
Introduction and overview 4 25
(non-resident businesses)
Key highlights on recent developments 6 Non-resident businesses
VAT Executive Regulations Q&A 27
Exempt and zero rated supplies
Other key considerations
Immediate action 21
Preparation and lessons from other VAT implementations in the GCC
Mandatory registration - Staggered approach
© 2020
© 2021Deloitte
Deloitte& &
Touche (M.E.).
Touche All rights
(M.E.). reserved.
All rights reserved. 22Introduction and overview
VAT in the GCC
Progress
Legislation framework
• The six Gulf Cooperation Council countries had agreed on a common VAT Framework
Agreement – there are common rules for the tax across the GCC.
• The VAT Framework Agreement acts as the basis for local VAT legislation by stipulating
certain principles, which must be followed by all member states, while allowing the Bahrain
Kuwait
countries to opt for different VAT treatments and approaches.
• KSA and the UAE implemented VAT effective from 1 January 2018; and Bahrain Qatar
implemented VAT effective from 1 January 2019
UAE
VAT progress in Oman
KSA
• Oman Royal Decree No. 121/2020, promulgating the Value Added Tax (VAT) Law, was Oman
published in Arabic in the Official Gazette 1362 on 18 October 2020.
• Oman announced that the VAT go-live date will be 16 April 2021.
• The Oman Tax Authority (OTA) has issued the Executive Regulations (Regulations) through
Ministerial Decision 53/2021.
• The Regulations are published in Arabic in the Official Gazette no. 1383 dated 14 March
2021.
© 2021 Deloitte & Touche (M.E.). All rights reserved. 44Key highlights on recent developments
VAT Executive Regulations
VAT Executive Regulations
Final version 1.1
The Regulations highlight a number of key areas taxpayers should be aware of and outline the rules, procedures and conditions of various aspects of the VAT Law, including:
Supplies, deemed supplies, composite and multiple Details on transactions to qualify as exempt and zero-
supply; rated supplies;
Place of supply provisions including real estate VAT applicability on Custom duty suspension and
services, telecommunication services, electronically special zones provisions;
supplied services;
Registration, tax grouping and de-registration;
VAT tax point for supply of goods and services
1 including vouchers and consignment sale; 2 Tax invoice, returns filings and record keeping;
Determination of value of supplies (including market Tax oversight, inspection, collection and refund of
value for related party transactions); VAT; and
Partial exemption and capital goods adjustment Vital administration matters, including penalty
rules; provisions.
© 2021 Deloitte & Touche (M.E.). All rights reserved. 77Exempt and zero rated supplies
Exempt and zero rates: how to apply?
Supplies – different VAT rates, but one default rule…
VAT is a broad-based tax applies to most of the goods and services with a few exceptions
• Article 79: Financial Services
• Article 80: Health Care Services
The following • Article 81: Educational Services
then it could be
Supply of goods and exceptions may
Subject to Unless an exception subject to the zero- • Article 82: Undeveloped Land
services in the apply to the
5% VAT applies… rate or exempt from • Article 83: Residential Properties
Sultanate… tax Executive
Regulations • Article 84: Local Passenger Transport
• Article 85: Rental of Properties for
Residential Purposes
© 2021 Deloitte & Touche (M.E.). All rights reserved. 99Exemption
Exempt Supplies
1 Financial Services
2 Healthcare Services and related Goods and Services
3 Educational Services and related Goods and Services
Exempt
3 Undeveloped land (bare land)
Supplies
5 Resale of residential properties
6 Local passenger transport
7 Rental of properties for residential purposes Time is ticking…
© 2021 Deloitte & Touche (M.E.). All rights reserved. 10
10Exemption
Snapshot in practice
Healthcare Services, include but not Educational Services: Financial Services provided by banks
limited to: and financial institutions:
Supplied by educational institutions
• General Medicine Services. licensed by competent authorities in • Providing and transferring loans,
• Medical specialty services. the field of education, including – advances and credit, including credit
• Dental services and laboratory work. • Education in Pre-primary and installments in rental or lease-to-own
• Psychiatric services. kindergarten stages. purchase transactions and credit
• Physical therapy services. guarantees.
• Education in all stages.
• Nursing services in hospitals, nursing • Depositing money into current, savings
homes or similar licensed institutions • Higher education. and deposit accounts.
in accordance with the laws and • Vocational and technical • Supply and issuance of financial
regulations in force in the Sultanate. education, that is, theoretical or instruments such as derivatives,
• Legal midwifery services. practical education to qualify deferred contracts and similar options
• Diagnosis and treatment of diseases persons to practice a profession or and transactions.
and individuals. a craft. • Supply and issuance of shares, bonds
• Service of surgical, reconstructive and • Adult education for adults who did and other securities.
cosmetic surgeries not attend formal schools. • Transfer of ownership of any securities
• Education for people with special or derivatives related to any securities.
needs, including the blind, deaf • Life insurance services.
and mute.
• Teaching languages.
• Vocational institutes.
© 2021 Deloitte & Touche (M.E.). All rights reserved. 11
11Zero rating
Categories
Categories
Certain food Investment Means of Supply of crude
items (milk, gold, silver, and transport (air, oil, oil
fresh eggs, platinum sea, land) derivatives and
certain fruits designated for natural gas
and vegetables, the
coffee, tea, Medicines and International transportation The supply of
bread, salt, medical transport of of passengers rescue planes,
bottled water, equipment passengers and and Goods for and rescue and
etc.) goods, commercial assistance
including intra- purposes plus boats
GCC transport any associated
goods and
services
Time is ticking…
© 2021 Deloitte & Touche (M.E.). All rights reserved. 12
12Zero rating
An evolving picture: food and drink items which may be subject to 0% VAT
• Article 51(1) of the VAT law provides for a zero-rating for the supply of certain food items specified by a decision from the Chairman
• Ministerial Decree 2/2021, dated 4 January 2021, detailed the list of food products that will be subject to VAT at the zero rate in Oman on what can be considered essential or
basic food items such as:
Fish, poultry, meats & Vegetables, fruits & Bread
fresh eggs grains
Coffee, tea,
Dairy products, child cardamom & Food salt, sugar,
foods bottled water olive oil
If you import, manufacture, distribute or sell such types of food and drinks items, it would be crucial for the business to conduct a product classification exercise as early as
possible given the impact it can have on your supply chain and VAT compliance.
© 2021 Deloitte & Touche (M.E.). All rights reserved. 13
13Zero rating continued…
Supplies to, within. between Special Zones
The Supplies of goods and services to special economic zones are subject to 0% subject to meeting conditions
Zone should be recognized as Customer should be Customer posses
a Free or Special Economic taxable license from SEZ
zone for VAT purpose
Supplies do not fall under Goods and services are for Services are not exempt
blocked input VAT list the purpose of activity in per Article 47 of the
the Free Zone Law.
It is critical to examine your supply chain, taxable status of the customer and carefully consider if supply qualifies for 0%
© 2021 Deloitte & Touche (M.E.). All rights reserved. 14
14Zero rating
Oil and Gas
The Supplies of crude oil and its derivatives and natural gas including the supply of Goods and Services related to these goods, shall be taxable at a (0%) zero-percent rate if
following conditions are met
Should be Primary and Supplier and customer Supplier and customer
intermediate activities in should be taxable posses license from MOG
supply chain and not final
Supplies do not fall under Supply should not be in the Not an exempt
blocked input VAT list nature of entertainment , supply
food , hotels etc.
It is critical to examine your supply chain and carefully consider if supply qualifies for 0%.
© 2021 Deloitte & Touche (M.E.). All rights reserved. 15
15Other key considerations
Keys from the Executive Regulations
Blocked Input Tax
• Article 54 of the Executive Regulations provides that a taxable person may deduct Input Tax incurred if used in the making taxable supplies or supplies made to outside of
Oman and which would have been taxable if made in Oman.
• Input Tax on the following goods and services cannot be claimed:
Any provision of food
Goods or services used for the Motor vehicles and related and beverage catering
purpose of entertainment goods and services that are services.
services available for personal use
Taxable persons who incurs Input Tax on goods or services that are used fully or partially for a non-activity purposes are required to apportion the Input Tax on a fair and
reasonable basis based on the actual use of the goods or services concerned
© 2021 Deloitte & Touche (M.E.). All rights reserved. 17
17Keys from the Executive Regulations
Tax Invoice Requirements
• Generally, a tax invoice must be held before Input Tax can be recovered in the VAT return and for this XYZ Business
reason, businesses should confirm that vendor tax invoices are valid (i.e. meet ALL requirements set out in Industrial Area
Article 144 of the Executive Regulations). Muscat, Oman
Our TRN:
xxxxxxxxxxx
1. The term "tax invoice"
2. The date of issuance of the tax invoice, the date of supply, and the date of payment TAX INVOICE (example)
3. The serial number of the tax invoice
4. The supplier's full name, address and Tax identification number ABC Commercial
LLC
5. The customer's full name, address and Tax identification number, if any Muscat, Oman
6. Description of the goods and services P.O. XXXX
Invoice number:
XXXXXXXX
7. The quantity of goods Invoice date: XX-XX-
Mustcat, Oman XXXX
8. Payment date of advance payment, if any, Your TRN: Supply date: XX-XX-
xxxxxxxxxxx XXXX
9. Total consideration excluding Tax
10. The applicable Tax rate
Ship from: Muscat Ship to: Muscat Service location: n/a
11. Any price discounts, or reductions granted to the customer, or subsidies granted by the state that
were not included in the value of the consideration excluding Tax
12. Taxable value Description
Quantit
y
Unit Price
(USD) VAT rate VAT Net Total (OMR)
Net Total
(USD)
13. Value of the Tax due
Supply of Goods 10 5,000.00 5% 2,500 183,625 50,000
Total amount 183,625 50,000
Main points to consider: Discount -3,672.5 -1000
Total amount after
• Preparation of invoice templates in sufficient time discount 179,952.5 49,000
VAT (5%) 8,997.63 2,450
• Instances where full Tax Invoices are used
• Instances where simplified Tax invoices are used Total amount
inclusive of VAT 188,950.13 51,450
• Reflecting discounts Exchange
Rate:
• Tax Credit Notes 3.6725
© 2021 Deloitte & Touche (M.E.). All rights reserved. 18
18Keys from the Executive Regulations
Tax Return Filing
Notes:
Sou
1 First tax period: From January 1 to March 31
rcin These are the tax periods as set out in Article 160 of
the Executive Regulations for which the Taxable
g Person is obliged to file tax returns.
Top
Tal The tax periods are equal to a quarter of the tax year.
ent2 The second tax period: from April 1 to June 30 (first tax period for the
business post go live 16 April to 30 June 2021) The first tax period starts from the effective date of
registration until the end of the tax period within
which this date falls.
In all cases the following tax period begins from the
3 The third tax period: from July 1 to September 30 date following the end of the expired tax period.
4 Fourth Tax Period: From October 1 to December 31
© 2021 Deloitte & Touche (M.E.). All rights reserved. 19
19Immediate action
Immediate action items businesses should be aware of as the VAT go-live date approaches
Preparation
Registration process has started - is your project moving as per the plan?
Identify/validate applicable VAT treatment to your supplies
Train and communicate VAT requirements to your employees, vendor and customers to create VAT awareness
Start/expedite IT implementation
Set priority list – Distinguish between “must have” and “good to have” items
Review your contractual arrangements? Transitional implications will be critical
Identify issues which may need clarifications through Executive Regulations, guidelines. Keep window open to approach Oman Tax Authority for issues peculiar to
your operations?
© 2021 Deloitte & Touche (M.E.). All rights reserved. 21
21Lessons from VAT implementations in other GCC countries
“Veni, vidi, vici…”
I came, I saw, I conquered….
© 2021 Deloitte & Touche (M.E.). All rights reserved. 22Immediate action items businesses should be aware of as the VAT go-live date approaches
Mandatory VAT Registration - Staggered Approach
Below is a summary of the revenue thresholds and registration timelines. Registration process to be in
staggered manner during transitional period. OTA to continue accepting registrations on and after 15 March up
to the VAT go-live date and beyond. Notes:
Non-resident businesses who need to register must do so before 16 April 2021. For the purpose of the Mandatory Registration
Top Talent threshold, the following supplies will be considered:
Value of annual supplies Period to file the application Registration date 1) Value of Taxable Supplies (except Capital Assets)
(actual or expected) 2) Value of Goods and Services supplied to Taxable
Persons and subject to the Reverse Charge
More than 1 Feb 2021 to Mechanism
16 Apr 2021
OMR 1,000,000 15 Mar 2021 3) Value of Intra GCC supplies of Good and Services
OMR 500,000 to 1 Apr 2021 to
1 Jul 2021
OMR 1,000,000 31 May 2021
OMR 250,000 to 1 Jul 2021 to
1 Oct 2021
OMR 499,000 31 Aug 2021
OMR 38,500 to 1 Dec 2021 to
1 Apr 2022
OMR 249,999 28 Feb 2022
© 2021 Deloitte & Touche (M.E.). All rights reserved. 23
23Recent updates on the VAT registration process (non-resident businesses)
VAT registration process
Non-resident businesses
Different options to register for non-resident businesses, either by appointing an “Omani resident responsible person”; or by appointing “Non-Omani resident responsible
person”; or by appointing “a tax representative/agent” in Oman
In order for non-resident businesses to register for VAT they must utilize one of the following options:
Option I Option II Option IIII
• Appoint a principal officer/responsible person • The non-resident business may appoint a • Appoint a local tax agent or representative under Article 57 of the VAT
that is resident in Oman non-resident principal officer/equivalent Law – such as Deloitte Oman
• Set up bank guarantee or fiscal undertaking responsible person that is a member of • Ensure that a bank guarantee or equivalent fiscal undertaking is set up
arrangements. The bank guarantee must be the company’s management team as per options 1 and 2 above.
issued in favor of the OTA. • The registrant will need to set up a bank
guarantee or similar fiscal undertaking –
as for Option 1.
© 2021 Deloitte & Touche (M.E.). All rights reserved. 25
25Q&A
26Member firms and DTTL: Insert appropriate copyright Presentation title 27 [To edit, click View > Slide Master > Slide Master] [To edit, click View > Slide Master > Slide Master]
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