Value-added tax (VAT)
On 12 October 2020, His Majesty issued Royal Decree no. 121/2020 in relation to the implementation of VAT in Oman, and it was published in the Official Gazette on 18 October 2020. VAT has been implemented in Oman with effect from 16 April 2021. The standard rate of VAT in Oman is 5% and consistent with the Gulf Cooperation Council (GCC) Unified Agreement, and there are provisions for zero rating and exemptions in the Oman VAT Law. By global standards, 5% is one of the lowest VAT rates implemented in the world.
The standard rate of 5% VAT will apply on goods and services supplied in Oman, subject to specific exemptions and zero ratings prescribed under Oman VAT law.
Exempt supplies are not subject to VAT, and the input tax in relation to exempt supplies cannot be recovered. Examples of exempt supplies include certain financial services, local passenger transportation services, education services, renting of residential property, etc.
Zero-rated supplies are subject to VAT at 0%, and the supplier can avail input VAT credit in respect of goods / services used for making zero-rated supplies. Examples of zero-rated supplies include export of goods and services outside Oman, international transportation services, basic food items, etc.
Registration for VAT is an online process.
There is a mandatory registration requirement if the total value of annual supplies exceeds or is expected to exceed OMR 38,500. There is a voluntary registration threshold if the total value of annual supplies / expenditure exceeds or is expected to exceed OMR 19,250.
Taxpayers are required to file a VAT return and make payment of VAT liability on a quarterly basis. The due date for filing of VAT return and making payment of VAT liability is 30 days from the end of the quarter.
If the due date falls on a weekend or a public holiday, the due date for filing of a VAT return and making payment of VAT will be extended to the next working day.
The late payment of VAT liability is subject to additional tax at 1% per month or part thereof, whereas a delayed filing of VAT return is subject to administrative penalty ranging from OMR 500 to OMR 5,000.
The OTA has released VAT guides for certain industries (e.g. financial services, oil and gas, education services, healthcare, transportation services, real estate) to provide further guidance in terms of industry-specific VAT implications. Also, further VAT guides are expected to be issued in the near future.
Statute of limitations
As per the Oman VAT law, the OTA cannot assess the tax after completion of five years from the due date of a tax period (due date is 30 days from the end of tax period). The period will be extended to ten years in cases where registration is not made within the prescribed time limits.
VAT record maintenance
VAT records are required to be maintained for a period of ten years by the businesses. However, the businesses in the real estate sector are required to maintain records for up to 15 years. VAT records mainly include sales and purchase invoices, accounting records, customs documents, inventory records, etc.
A taxpayer is allowed to maintain electronic records, subject to conditions prescribed under the Oman VAT Executive Regulations.
A taxpayer may keep accounting records, books, invoices, and other documents / records in any language, provided that they are made available in Arabic language upon the request of the OTA.
Customs duty is applicable on the cost, insurance, and freight (CIF) value of imports for most non-GCC sourced goods, unless there is any preferential treatment under the Free Trade Agreement (FTA) signed between Oman and a foreign country.
Standard rate of customs duty is 5%. However, there are certain goods that are subject to customs duty at different rates.
Authorised Economic Operator (AEO) Program
The AEO program provides traders with the opportunity to partner with the customs authorities and secure benefits within their supply chain. All businesses operating in Oman can apply and benefit from the AEO program, subject to the fulfilment of the required criteria. Benefits of obtaining AEO certification include simplified verification of documents during customs clearance, exports and imports pass through express lines, priority in inspections, and faster cargo clearance process.
We encourage businesses engaged in import and export activities in Oman to explore the advantages of joining the AEO partnership program. This is a fantastic opportunity to ensure compliance with customs regulations, while benefiting from a strong governance of your international supply chain operations across your business.
Oman introduced excise tax with effect from 15 June 2019. Excise tax is levied at the following rates:
- Tobacco (including tobacco derivatives), pork products, alcoholic beverages, and energy drinks: 100%.
- Sugar-sweetened beverages: 50% (effective from 1 October 2020).
- Carbonated drinks: 50%.
Digital tax stamp scheme for excise products
The OTA has implemented the digital tax stamp system for cigarettes, shisha, and other tobacco products. The OTA now intends to further expand the scheme to include carbonated drinks, energy drinks, and sweetened drinks, in accordance with the below timelines:
- 4 May 2023 (system launch): System became available for requesting tax stamps.
- 20 July 2023 (customs enforcement): Prohibition on import of goods into Oman without tax stamps.
- 12 October 2023 (local enforcement): Prohibition on local trade of goods within Oman without tax stamps.
There are no property taxes in Oman.
Restaurants/cafes located within a tourist area or managed through franchise agreements are required to levy tourism tax at 4%.
Stamp duty / Property transfer fees
Stamp duty is not applicable in Oman. However, a property transfer fee is applicable on transfer of land and property at 3% of the value to be paid to the Ministry of Housing.
Oman does not levy any environmental or green taxes.
There are no payroll taxes in Oman other than social security contributions (see below).
Social security contributions
A 17.5% social security contribution is applicable to employees who are Omani nationals, but not to expatriate employees. The employee pays a contribution of 7% of salary, and the employer pays the balance of 10.5%. The employer is also required to contribute for insurance for work-related injuries in the amount of 1% of the salary of the employee. This brings the total monthly social security and insurance contributions to be made by the employer to 11.5%.
From January 2021, employers and Omani employees are each required to make a monthly salary contribution at the rate of OMR 1 per OMR 100 of monthly salary (or 1% of payment) as part of the job security scheme implemented. This brings the total social security contribution to 20.5% of which the employee pays a contribution of 8% and the employer pays the balance of 12.5%
Municipal taxes apply to the following items:
- Property rents: 3%.
- Hotel occupancy: 5%.
- Leisure and cinema houses: 10%.
As part of the Economic Stimulus Plan (ESP) announced in March 2021, the government announced an exemption from collection of municipal tax and tourism tax up to 31 December 2021. The said exemption has been withdrawn with effect from 1 January 2022, and, as a result, a levy of municipal tax and tourism tax has become effective from such date.