VAT law comes into force in Oman from April 2021 following Royal Decree No. 121/2020. The country will apply VAT at the standard rate of 5%. Oman becomes the fourth Gulf Cooperation Council (GCC) member state to implement VAT, following the UAE, Kingdom of Saudi Arabia and Bahrain. Let's look at the key features and impact of VAT implementation in Sultanate of Oman.


Key Features:

If taxable supplies by a business resident in Oman exceed the mandatory registration threshold either:

  • In the month in which the VAT law has been released plus 11 months preceding that month; or
  • In the month in which the VAT law has been released plus 11 months succeeding that month, the business should be ready to VAT-register as soon as the registration deadline is announced by the Authority. 

The standard VAT rate (5%) covers the supply of all goods and services in Oman, except for certain exempted categories and cases. VAT Payers in Oman will need to keep VAT records for a minimum of 10 years and will need to be made available for review at any time. VAT returns must be filed with the tax authority electronically and VAT payments and returns should be filed within 30 days of the end of the tax period.


Impact of VAT Implementation in Oman

The implementation of VAT in sultanate of Oman is projected to cause significant changes in the Oman economy. Let us examine how the implementation of VAT would affect the Oman economy:

VAT to provide more revenue:

Revenue from value-added tax (VAT) is expected to boost Oman's economy. This new source of income from VAT, in addition to the principal source of revenue from oil and gas, would increase fiscal revenue for public welfare and economic progress.

Help overcome state’s debt obligations:
VAT is projected to assist the state treasury in meeting its deficit and debt commitments, to diversify Oman's revenue away from oil, to increase the Sultanate's competitiveness levels, and to raise its sovereign rating.




Inflation at the start:

The general public will now have to pay a 5% surcharge on most transactions. However, since the VAT rate is lower than in the other GCC nations, it is believed that the price increases would have little effect on consumers.

Social and economic advancement:

According to the Oman Tax Authority, Oman's VAT rate is equal to that of the United Arab Emirates and much lower than that of Australia (10%), Egypt (14%), Turkey (18%), Germany (19%), France, and the United Kingdom (both 20 percent). VAT is not a direct source of money in the sense that it will be spent, but it will be utilised by the government to support services and programmes, some of which will be used for social and economic development.

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