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Impact Analysis: Staggered Registration of VAT in Oman

Oman Tax Authority has introduced the staggered VAT registration as follows:

Taxable TurnoverRegistration Due dateEffective Date of Registration
Above OMR 1million1st Feb 2021 to 15th March 202116th April 2021
Between OMR 500K to OMR 1 million1st April 2021 to 31st May 20211st July 2021
Between OMR 250K to OMR 499,9991st July 2021 to 31st Aug 20211st Oct 2021
Between OMR 38500 to OMR 249,9991st Dec 2021 to 28th Feb 20221st April 2022

This staggered registration would allow the entities and the Oman Tax Authority to phase out the registration and introduce VAT in Oman gradually and efficiently.

There would be certain impacts for entities as a result of this phased approach. This is further explained in the sections below:

Entities registering in the Initial Phase for VAT in Oman

  • Quicker Implementation – They would have to get their entire eco system ready for implementing VAT from 16th April 2021
  • VAT Applicability – They would have to charge VAT on all transactions w.e.f 16th April 2021
  • Import related impact – All imports into the country wef 16th April 2021 will have an additional impact of 5% VAT. It remains to be seen whether the Reverse Charge Mechanism and import related VAT payments would be facilitated through the VAT returns. In case it is not enabled, there would be additional cashflow for VAT payments on import which can be claimed subsequently through the returns
  • Supplier Declarations – These entities would have to seek declarations from their suppliers in case they are not required to register for VAT, as these suppliers would not charge VAT on their supplies.
  • Contract related Impact – These entities would have to review their contracts immediately to ensure that they are able to charge VAT after 16th April 2021. In case the contracts are silent and they are not able to negotiate the terms with their customers, the supplies after 16th April 2021 would be presumed to be inclusive of VAT and this might impact their margins.

Entities registering in the Subsequent Phases for VAT in Oman

  • Additional time for preparation –They would comparatively have more time to get their systems ready for VAT
  • Declarations – They would have to provide declarations of VAT non-applicability to their customers who are already registered for VAT
  • Impact on Margins – They would have to bear 5% VAT on their imports since they are not registered. This would increase their costs especially for the sales during the period that they are not registered for VAT. However they will be able to take input VAT credit for stock held and sold subsequent to their effective VAT registration date.
  • Local Purchase and Expenses Margin Impact – Similarly they would incur VAT on their local purchases and services from their suppliers registered for VAT. They would only be able to take input VAT credit on their stock and expenses primarily related to further taxable supplies subsequent to their VAT registration date.
  • Tracking VAT expenses – The above scenario would require these entities to track their input VAT incurred during the period of non-registration so that they could evaluate the input VAT credit that they can take subsequent to the VAT registration date.
  • Contracts related impact – These entities have some more time to incorporate the VAT clause in their contracts so that their margin is not impacted. Also in case of their VAT registered suppliers, they could choose to consider their contracts as being inclusive of VAT, in case the VAT clause is not specified in the contracts entered prior to 16th April 2021. This is especially valid for sales which they are likely to make post 15th April 2021 and prior to their VAT registration, as this could increase their costs in case VAT is levied on the pre VAT prices by their VAT registered suppliers.

The above impacts would obviously mean that the entities not required to register in the initial phases would need to evaluate whether there is a need to register in the initial phase, considering the impact of VAT on their bottom-line. This would depend on their extent of imports and their supplies from entities registered in the initial VAT phase.

Please feel free to seek any clarifications or the impact of Staggered VAT registration on your Entity transactions.

Contact Details

Telephone (Dubai UAE): +971 4 3319501
Telephone (Muscat Oman): +968 24571401
Mobile (Muscat Oman): +968 91769455
Working Hours: 9AM – 6PM, Sunday to Thursday[/vc_column_text]