VAT FAQs

VAT has been implemented in more than 160 countries around the world. It is an indirect tax charged on nearly all goods and services that are bought and sold in the Sultanate, including goods and services imported into the Sultanate. Certain goods and services may be zero-rated or exempt. VAT is a tax on consumption that is paid and collected at every stage of the supply chain; from a manufacturer’s purchase of raw materials to a retailer’s sale of an end-product to a consumer.

Effectively, Omani businesses act as a tax collector for the Sultanate of Oman and bear the costs of charging, collecting and claiming back the VAT – and staying compliant. Businesses must register for VAT if they meet or expect to meet an annual supplies threshold. Any business with annual supplies of mandatory registration threshold or more must register for VAT. Generally, businesses with supplies of voluntary registration threshold up to the mandatory threshold above may register voluntarily.

VAT will be charged by VAT registered businesses on taxable goods and services to its customers. The standard rate of tax will be 5% on most goods and services, with a few exceptions (e.g. certain financial services).

Generally, yes. However, certain food items will be zero-rated. You will be able to refer to the Chairman’s decision for the full list of zero rated basic groceries.

Certain residential property transactions, such as resales and leases, are exempt from VAT. Therefore, renting a residential property, for example, will not attract VAT. However, for residential leases, the lease needs to be under certain conditions. This means that holiday rentals, short-term leases, hotel stays, etc. will all be subject to VAT. Commercial property, both sales and leases, will be subject to VAT.

There are selected items that are not subject to the standard VAT rate of 5%, including: - Exports (zero-rated) - School fees set out in the regulations (exempt) - Certain healthcare services (zero-rated) - Sale of bare land (exempt) - Certain financial services, such as a life insurance policy (exempt)

Visitors, tourists, and diplomats will still be charged VAT on their taxable purchases, however, they will be able to obtain a refund based on certain conditions specified in the Regulations (including type of items eligible for refund, minimum value for a refund to be considered, etc.).

Where amounts are paid towards goods and services prior to the implementation of the VAT Law, VAT may become due if the goods or services are supplied after the implementation date - whether in part or in full. There will be special transitional rules to deal with these circumstances.

Not all self-employed businesses need to be registered for VAT. Some traders are not registered for VAT because their businesses are small – and some business activities do not attract VAT. If your business income reaches the VAT mandatory registration threshold, you must then register for VAT.

The VAT in the Sultanate of Oman is similar to other countries around the world but is a relatively new form of tax in Oman. Adopting VAT will have a positive impact on development and competitiveness, and contribute to building a sustainable knowledge-based economy for future generations.

The Framework Agreement envisages an electronic matching system for intra-GCC systems. In practice, this system may not be available for a while and so it is likely a VAT number checking system will be made available country by country. The Ministry of Finance and the TA are in the process of developing a system and will make an announcement when the system, at least for Omani businesses, will be available.