Oman's VAT Law states that deliveries of goods or services to or from Special Zones, or inside them, are exempt from VAT. Most GCC countries have Free zones in significant areas. So, it is necessary to gather knowledge on VAT for Free Zones in Oman if you have a business setup in Oman

What is VAT for Free Zones in Oman?

VAT was introduced in Oman in October 2020 and was implemented in April 2021. VAT was imposed on these categories:

  • Food products
  • Medical or healthcare services and their associated goods and services
  • Educational services and their related goods and services
  • Needs for disabled people
  • Real estate rentals for residential purposes
  • Supplying medicines & medical equipment
  • Supplying investment gold, silver, and platinum
  • Supplying international transport, interchanging goods or passengers, and providing related services

 

Free Zones or Special Economic Zones are categorized as “Special Zones”. These special zones refer to an area where supplying goods and services originate from, or within zones. According to the conditions set by the authorities and regulations, these zones are zero-rated. 

These are the zones considered the special zones for VAT in Oman

  • Special Economic Zone at Duqm (SEZAD)
  • Salalah Free Zone (SFZ)
  • Al-Mazyunah Free Zone

Do you live in Oman? Do you own a business in one of the Free Zones? Then there is great news! Read on….

VAT Rates for Free Zones 

 

The VAT rates on these special zones (free zones and special economic zones) are Zero. Most businesses in these zones are exempted from the VAT. 

The applicability of VAT on the materials made in the special zones would be Zero. These are the categories of areas for which the VAT is declared Zero:

  • From the Mainland to the special zone
  • From  the Special zone to Gulf Cooperation Council (GCC) countries
  • From the Special zone to overseas outside GCC 
  • From the overseas or GCC to any zone (Free Zone or Special Economic Zone)

 

These zones and the businesses conducted here have to fulfill certain conditions. Here are the conditions:

  • Customer is a taxable person
  • Service provided to the customer for the purpose of activity 
  • Customer must be registered, licensed by the operating zone and supervising authority
  • No services should fall under the exempted service category, denying the VAT
  • No services related to restaurant and hotel services, supply of food & beverage, culture, sports, and education 

 Certain supplies are not exempted from VAT in Oman and are imposed with a 5% tax, despite being produced in special zones. 

 

KNOW ABOUT THE LOW COST FREE ZONES IN UAE

VAT Mechanism

BMS implements VAT through the 3-step process:  

  Step 1: Assessing the impact:

This step involves:

  • Performing a detailed analysis of end-to-end transaction flow in the business- GAP Analysis
  • Walkthrough of the Sales/Accounts Receivable and the Purchase/Accounts Payable cycle to identify VAT-risk sections
  • Map the transactions to enable VAT- Tax Mapping
  • Reviewing contracts and identifying the impact of VAT
  • Reporting on VAT compliance needs

Step 2: Implementation & Training

  • Reviewing the existing IT systems and assessing their compatibility to enable VAT
  • Reviewing system design and monitoring the implementation of suggested change in IT systems
  • Working with internal IT team/vendors to confirm and identifying the personalizations required in the IT system, and ensuring meeting the requirements of Oman law
  • Reviewing credit policies and advising on Cash Flow management & Inventory Management 
  • Conducting function-oriented VAT workshop for the personnel to meet the responsibilities in VAT compliance

Step 3: Compliance Assistance

  • Assisting in the registration
  • Providing guidance on first VAT return filling and other documentation
  • Providing VAT updates periodically

 

KNOW A DETAILED OVERVIEW ABOUT VAT IN OMAN

VAT Rates in Oman

VAT rates are classified into 3 categories:

  • Standard rate products: Products and services that are bought, sold or imported to Oman are victims of VAT, and they will be imposed with a standard rate of 5%. Businesses under Oman VAT must pay VAT at 5%, and thereby collect from the customers and give it to the government.
  •  Zero-rate products: These are taxable products at 0%. Specific products, such as the exported ones are considered Zero-rate, which means that no rate of tax will be imposed. Although these products are VAT-free, the registered businesses could still claim to impose VAT on the products and services and receive VAT refunds.
  • Exempt Products: These products do not claim to have VAT. This means the suppliers under this category do not charge VAT on their products or sales, and are not allowed to claim the VAT made on the purchases. 

 

With an impressive experience of over a decade in other GCC countries, BMS helps the businesses to learn the scope VAT laws, thus provide customized solutions for specific business requirements. A team of VAT professionals serve you with all the tax concerns. BMS helps you in the following ways:

  • VAT Registration
  • Return filling
  • Refund processing
  • Implementing VAT & Compliance
  • Training
  • Consulting in VAT
  • Compliant software for VAT
  • Bookkeeping in VAT

 

With the guidance of BMS, you can run the business in freezones of Oman as the regions are exempted from VAT. If you are running the business in other regions, BMS will assist you with VAT laws and regulations, so you are not misled, as our guidance will keep your business safe and steady. 

We are providing best audit in free zones in UAE to assist companies with their compliance to run business smoothly and efficiently. BMS Auditing is an authorised Tax Agent. We handle all aspects of VAT and provide the finest VAT services in the UAE, KSA, Qatar, Bahrain, Oman, India, the United Kingdom, and the United States. Our VAT services include the following:

 

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