What is VAT?
A value-added tax (VAT) is a consumption tax levied on a product whenever value is added at any stage of the supply chain, from production to the point of sale. The amount of VAT paid by the user is based on the cost of the product, less any previously taxed costs of materials used in the product.
The advantages of VAT for GCC Countries
VAT is an efficient and transparent way for governments to raise revenue; the IMF estimates that implementing VAT will increase GDP by 1.5% in GCC countries. This will assist GCC members in diversifying their economies away from oil and continuing to meet their public sector requirements.
Introduction of VAT in Oman
The Sultanate of Oman will be the fourth GCC country to implement VAT law, following the UAE, Saudi Arabia, and Bahrain. The tax law will go into effect on April 16, 2021, as a result of the Royal Decree No. 121/2020 dated 12 October 2020.
Oman’s Tax Authority will apply VAT at the standard rate of 5 percent, on most goods and services except essential food items, medical care, education, and financial services. This is significantly lower than the OECD average VAT rate of approximately 19%. Export of goods outside the GCC will be zero-rated, which means exporters can claim a tax refund.
The implementation of VAT is also associated with Muscat’s dedication to the Oman Vision 2040 initiative, which seeks to diversify the economy away from oil and toward non-oil sectors such as logistics, manufacturing, and tourism. VAT was introduced in accordance with comprehensive studies performed over a long period of time. The studies looked at the economic and social consequences of VAT in the Sultanate. Another study found that the VAT will have little impact on Oman’s consumers.
Who is required to register for VAT?
VAT is a self-assessed tax and businesses are required to continually assess the need to be registered for VAT.
Voluntary registrations apply to:
- Any person who has a place of residence in the Sultanate that exceeds or is expected to exceed the annual revenues generated by him from a commercial, industrial, professional or other activity, the voluntary registration limit (RO 19,250), and
- Any person who has a residence in the Sultanate that exceeds or is expected to exceed the annual expenses that he spends in the Sultanate related to a commercial, industrial, professional or other activity, the voluntary registration limit (RO 19,250)
The Registration Time Period for SMEs
Small and medium enterprises in the Sultanate with an annual turnover that qualifies them for the Value Added Tax (VAT) regime have until April 1, 2022, to effectively apply for the new levy.
The Oman Tax Authority has relaxed the registration deadlines for small businesses in response to the economical, administrative, and logistical challenges that VAT preparations may pose to this increasingly essential section of the Omani economy. It will give SMEs the time they need to familiarize themselves with Oman’s VAT regulations, understand how VAT will affect their operations, and plan adequately to be compliant.
Impact of VAT on SMEs in Oman
Generally, large businesses are better prepared to deal with major reforms than small and medium enterprises (SMEs). They have bigger and better resources, and greater financial ability to appoint VAT and tax consultants in Oman to advise them on the process and supervise their progression and compliance activities.
Small and medium businesses, on the other hand, may face greater financial difficulties in adapting to the VAT laws. With limited resources and simpler technology, it is not easy for them to accommodate such changes in their businesses. Many of their wider financial processes have been handled outside of a core framework, so VAT would almost certainly necessitate system changes as well as manual processes.
In terms of dedicated personnel and the opportunity to engage external VAT consultants in Oman, SMEs are often more budget constrained. As a result, SMEs could face increased inefficiencies in continuing to trade and complying with VAT, as well as financial problems and non-compliance costs. Considering the scale of an SME, this can be a major hassle.
How Do VAT Consultants In Oman Help SMEs?
Small and medium enterprises that are worried about the newly announced VAT law in Oman, can take on a professional VAT consultant for SMEs to manage and advise them on the indirect tax and aid them in the VAT filing services. Taking guidance from VAT consultants allows users to easily navigate complicated formulas, statistics, and estimates.
Since VAT is one of the biggest sources of revenue for the government, it has basic rules and standards that businesses must strictly adhere to in order to avoid any compliance issues. VAT consultants in Oman will help you understand the law and act responsibly, making sure your business does not have to go through any legal matters.
VAT and tax consultants in Oman have expertise in the current and prospective VAT account management and also have abundant knowledge on legislations and treatment of VAT by the Oman Tax Authority. VAT consultants in Oman have a detailed understanding of VAT processes, laws, and regulations. VAT experts who are well-versed in VAT laws and rules will inform taxpayers about the different VAT rates and how to determine the correct payment.
The businesses benefit by being able to focus their time and efforts on the core activities of their work, while the VAT consultants for SMEs oversee and administer all VAT-related services, VAT assessment, VAT filing services, and billing work.
These VAT consultants for SMEs provide their VAT services in Oman and are precise, customized according to your business, and are at a reasonable price. They provide cost-effective and reliable assistance to small businesses, by helping them understand the important chunks of VAT in a simple manner.
Since these VAT consultants in Oman are tailored to cater to the needs of SMEs, they will assist them in gaining an understanding of the VAT requirements for their business to function following VAT implementation.