VAT goes live in Oman from today

Citizens and residents in Oman can expect a five per cent increase in the cost of a wide array of goods and services purchased from April 16, 2021, as the Value Added Tax (VAT) comes into force across the Sultanate, according to a report in the Oman Daily Observer.

Only businesses and organisations with annual supplies valued over RO 1 million and duly registered with the Tax Authority are liable to charge and levy VAT with effect from April 16, 2021.

Other mid-size and small businesses will be progressively brought into the VAT framework based on a schedule published by the Authority late last year

While a significant proportion of food items are zero-rated for VAT, consumers can expect a five per cent uptick in, among other commodities and services, the cost of motor fuels, telecom services, and electricity and water.

Omantel and Ooredoo, the two leading telecom service providers in the Sultanate, have both affirmed in recent days that VAT will be effective on telecom services at the standard rate of five per cent.

The new levy will be applicable to both prepaid and postpaid customers across a wide spectrum of products and services. Omantel, in an FAQ published recently, explained, “In line with the government mandate, starting 16 April 2021, VAT at 5 per cent be added when you purchase a new SIM card, and on our tariffs and rates when you use your prepaid credit. VAT does not apply to donations and charitable SMSes, certain third-party content purchases, deposits, mobile credit transfer, or international credit transfer.

As for postpaid customers, VAT will apply to all new and existing monthly contracts, with 5 per cent added to their monthly bills, said the majority state-owned operator. VAT is also payable on handsets when paying the full price upfront for the device, it stated.

As pledged by authorities at the outset of the announcement on VAT’s implementation in the Sultanate, medicines have been zero-rated for the new levy.

A ministerial decision issued earlier this month further clarifies that the zero rate will also apply to medicinal supplies and equipment; herbal medicines; and biological, health, and food preparations for medical purposes.

Also exempt from VAT are financial services supplied by banks and financial institutions licensed by the Central Bank of Oman or any of the competent authorities.

They include: Provision of loans, their transfers and lending services; Credit, including credit instalments in lease-to-own transactions and credit guarantee; Depositing funds in current, savings and deposit accounts; Supply and issuance of financial instruments such as derivatives, deferred contracts, options and similar transactions; Supply and issuance of shares, bonds and other securities; Transferring ownership of any securities or derivatives related to any securities; and Life insurance services.

However, VAT is liable to be charged where payment is as a fee, commission or commercial deduction, according to the Tax Authority.

Similarly, Islamic financial transactions are also subject to the same exemption, provided such transactions involve a person licensed to engage in Islamic banking.