VAT In Oman – Pondering The Road Ahead

The anticipated introduction in Oman of Value Added Tax (VAT) in 2019 under the Framework GCC VAT Agreement has created an array of issues for businesses to consider so as to ensure adequate business continuity.

The implementation of VAT in Oman should be examined in the following context:

Impact on existing operations. Business restructuring. Change in business processes and practice. International experience. Where to start? Impact on existing operations

The primary concern for any business facing the introduction of a new tax regime is to ensure business continuity. This requires a comprehensive evaluation of the impact of the relevant tax on inward and outward transactions. Inadequate preparation for the new VAT regime may lead to businesses struggling to understand the taxation of day-to-day transactions - potentially having a detrimental effect on customer and supplier relationships. Whilst no law or implementing regulations have been published in Oman at this stage, businesses can look to the Framework GCC VAT Agreement, as well as the VAT laws of the UAE and Saudi Arabia, to broadly answer key questions. These questions may include the following:

Are a company's purchases taxable, zero-rated or exempted? What conditions need to be fulfilled in order to become eligible for exemptions? Which taxes are recoverable and which are not? What treatment is given to exports, imports and intra-GCC supplies? Preliminary analysis of the above questions can assist companies in preparing for the introduction of VAT and assist them in retaining their competitive edge. In addition, it is strongly recommended that customers and vendors are informed prior to implementation of any tax change and, where possible, contracts should be reviewed, assessed and potentially renegotiated to safeguard business interests and ensure business continuity.

Business restructuring

A new tax regime can prompt businesses to better scrutinise business operations and contractual relationships allowing for the development of solutions and outcomes to questions such as:

whether to maintain inventory and undertake registration in another GCC country; and/or how to better undertake transactions with overseas group companies in the nature of imports, exports and inter-company recharges. Such an analysis may also assist in identifying other tax inefficiencies (such as corporate tax and customs) which intersect with VAT. It can also lead to benefits in areas unrelated to tax such...