Oman VAT Academy VAT Executive regulations, registrations

Oman VAT Academy

VAT Executive regulations, registrations

and go-live around the cornerMarch 2021

2© 2020 Deloitte & Touche (M.E.). All rights reserved.© 2021 Deloitte & Touche (M.E.). All rights reserved. 2

Agenda

Introduction and overview 4

Key highlights on recent developments 6

Immediate action 21

Recent updates on the VAT registration process (non-resident businesses)

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Q&A 27VAT Executive Regulations

Exempt and zero rated supplies

Other key considerations

Preparation and lessons from other VAT implementations in the GCC

Mandatory registration - Staggered approach

Non-resident businesses

Introduction and overview

© 2021 Deloitte & Touche (M.E.). All rights reserved. 44

VAT in the GCCProgress

VAT progress in Oman

• 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 countries to opt for different VAT treatments and approaches.

• KSA and the UAE implemented VAT effective from 1 January 2018; and Bahrain implemented VAT effective from 1 January 2019

Legislation framework

Oman

KSA

Kuwait

UAE

Bahrain

Qatar

• Oman Royal Decree No. 121/2020, promulgating the Value Added Tax (VAT) Law, was 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.

Key highlights on recent developments

VAT Executive Regulations


VAT Executive RegulationsFinal 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 supply;

Place of supply provisions including real estate services, telecommunication services, electronically supplied services;

VAT tax point for supply of goods and services including vouchers and consignment sale;

Determination of value of supplies (including market value for related party transactions);

Partial exemption and capital goods adjustment rules;

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Details on transactions to qualify as exempt and zero-rated supplies;

VAT applicability on Custom duty suspension and special zones provisions;

Registration, tax grouping and de-registration;

Tax invoice, returns filings and record keeping;

Tax oversight, inspection, collection and refund of VAT; and

Vital administration matters, including penalty provisions.

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Exempt and zero rated supplies


Exempt and zero rates: how to apply?Supplies – different VAT rates, but one default rule…

Supply of goods and

services in the

Sultanate…

Unless an exception

applies… Subject to 5% VAT

The following

exceptions may

apply to the

Executive

Regulations

then it could be subject to the zero-rate or exempt from tax

• Article 79: Financial Services

• Article 80: Health Care Services

• Article 81: Educational Services

• Article 82: Undeveloped Land

• Article 83: Residential Properties

• Article 84: Local Passenger Transport

• Article 85: Rental of Properties for Residential Purposes

VAT is a broad-based tax applies to most of the goods and services with a few exceptions


ExemptionExempt Supplies

Time is ticking…

Exempt Supplies

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

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5

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ExemptionSnapshot in practice

Healthcare Services, include but not limited to:

• General Medicine Services.• Medical specialty services.• Dental services and laboratory work.• Psychiatric services.• Physical therapy services.• Nursing services in hospitals, nursing

homes or similar licensed institutions in accordance with the laws and regulations in force in the Sultanate.

• Legal midwifery services.• Diagnosis and treatment of diseases

and individuals.• Service of surgical, reconstructive and

cosmetic surgeries

Educational Services:

Supplied by educational institutions licensed by competent authorities in the field of education, including –• Education in Pre-primary and

kindergarten stages.• Education in all stages.• Higher education.• Vocational and technical

education, that is, theoretical or practical education to qualify persons to practice a profession or a craft.

• Adult education for adults who did not attend formal schools.

• Education for people with special needs, including the blind, deaf and mute.

• Teaching languages.• Vocational institutes.

Financial Services provided by banks and financial institutions:

• Providing and transferring loans, advances and credit, including credit installments in rental or lease-to-own purchase transactions and credit guarantees.

• Depositing money into current, savings and deposit accounts.

• Supply and issuance of financial instruments such as derivatives, deferred contracts and similar options and transactions.

• Supply and issuance of shares, bonds and other securities.

• Transfer of ownership of any securities or derivatives related to any securities.

• Life insurance services.


Zero ratingCategories

Time is ticking…

Certain food items (milk, fresh eggs, certain fruits and vegetables, coffee, tea, bread, salt, bottled water, etc.)

Investment gold, silver, and platinum

Means of transport (air, sea, land) designated for the transportation of passengers and Goods for commercial purposes plus any associated goods and services

Supply of crude oil, oil derivatives and natural gas

Medicines and medical equipment

International transport of passengers and goods, including intra-GCC transport

The supply of rescue planes, and rescue and assistance boats

Categories


Zero ratingAn 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:

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.

Food salt, sugar, olive oil

Vegetables, fruits & grains

Bread

Dairy products, child foods

Fish, poultry, meats & fresh eggs

Coffee, tea, cardamom & bottled water


Zero 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

It is critical to examine your supply chain, taxable status of the customer and carefully consider if supply qualifies for 0%

Zone should be recognized as a Free or Special Economic zone for VAT purpose

Customer should be taxable

Customer posses license from SEZ

Services are not exempt per Article 47 of the Law.

Goods and services are for the purpose of activity in the Free Zone

Supplies do not fall under blocked input VAT list


Zero ratingOil 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

It is critical to examine your supply chain and carefully consider if supply qualifies for 0%.

Supplier and customer should be taxable

Should be Primary and intermediate activities in supply chain and not final

Supplier and customer posses license from MOG

Not an exempt supply

Supply should not be in the nature of entertainment , food , hotels etc.

Supplies do not fall under blocked input VAT list

Other key considerations


Keys from the Executive RegulationsBlocked Input Tax

Motor vehicles and related goods and services that are available for personal use

Any provision of food and beverage catering

services.

Goods or services used for the purpose of entertainment

services

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

• 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:


Keys from the Executive RegulationsTax Invoice Requirements

• Generally, a tax invoice must be held before Input Tax can be recovered in the VAT return and for this reason, businesses should confirm that vendor tax invoices are valid (i.e. meet ALL requirements set out in Article 144 of the Executive Regulations).

1. The term "tax invoice"2. The date of issuance of the tax invoice, the date of supply, and the date of payment3. The serial number of the tax invoice4. The supplier's full name, address and Tax identification number5. The customer's full name, address and Tax identification number, if any6. Description of the goods and services7. The quantity of goods8. Payment date of advance payment, if any,9. Total consideration excluding Tax10. The applicable Tax rate11. 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 Tax12. Taxable value13. Value of the Tax due

Main points to consider:

• Preparation of invoice templates in sufficient time• Instances where full Tax Invoices are used • Instances where simplified Tax invoices are used• Reflecting discounts• Tax Credit Notes

XYZ Business

Industrial Area

Muscat, OmanOur TRN: xxxxxxxxxxx

TAX INVOICE (example)

ABC Commercial LLCMuscat, Oman

P.O. XXXXInvoice number: XXXXXXXX

Mustcat, OmanInvoice date: XX-XX-XXXX

Your TRN: xxxxxxxxxxx

Supply date: XX-XX-XXXX

Ship from: Muscat Ship to: Muscat Service location: n/a

DescriptionQuantit

yUnit Price

(USD) VAT rate VAT Net Total (OMR)Net Total

(USD)

Supply of Goods 10 5,000.00 5% 2,500 183,625 50,000

Total amount 183,625 50,000

Discount -3,672.5 -1000Total amount after

discount 179,952.5 49,000VAT (5%) 8,997.63 2,450

Total amount inclusive of VAT 188,950.13 51,450

Exchange Rate:

3.6725


Keys from the Executive RegulationsTax Return Filing

First tax period: From January 1 to March 31Notes:

These are the tax periods as set out in Article 160 of the Executive Regulations for which the Taxable Person is obliged to file tax returns.

The tax periods are equal to a quarter of the tax year.

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 date following the end of the expired tax period.

Sourcing Top Talent

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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 third tax period: from July 1 to September 30

Fourth Tax Period: From October 1 to December 31

Immediate 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?


“Veni, vidi, vici…”

I came, I saw, I conquered….

Lessons from VAT implementations in other GCC countries


Immediate action items businesses should be aware of as the VAT go-live date approaches Mandatory VAT Registration - Staggered Approach

Notes:

For the purpose of the Mandatory Registration threshold, the following supplies will be considered:

1) Value of Taxable Supplies (except Capital Assets)

2) Value of Goods and Services supplied to Taxable Persons and subject to the Reverse Charge Mechanism

3) Value of Intra GCC supplies of Good and Services

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.

Non-resident businesses who need to register must do so before 16 April 2021.

Top TalentValue of annual supplies(actual or expected)

Period to file the application Registration date

More thanOMR 1,000,000

1 Feb 2021 to15 Mar 2021

16 Apr 2021

OMR 500,000 toOMR 1,000,000

1 Apr 2021 to31 May 2021

1 Jul 2021

OMR 250,000 toOMR 499,000

1 Jul 2021 to31 Aug 2021

1 Oct 2021

OMR 38,500 toOMR 249,999

1 Dec 2021 to28 Feb 2022

1 Apr 2022

Recent 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 that is resident in Oman

• Set up bank guarantee or fiscal undertaking arrangements. The bank guarantee must be issued in favor of the OTA.

• The non-resident business may appoint a non-resident principal officer/equivalent responsible person that is a member of the company’s management team

• The registrant will need to set up a bank guarantee or similar fiscal undertaking –as for Option 1.

• Appoint a local tax agent or representative under Article 57 of the VAT Law – such as Deloitte Oman

• Ensure that a bank guarantee or equivalent fiscal undertaking is set up as per options 1 and 2 above.

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Q&A

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Oman VAT Academy VAT Executive regulations, registrations