Lessons learned from the first year of VAT
VAT in Oman is now over one-year old, and the phased registration of Oman businesses was completed in 2022 (for prior coverage, see the article in the March 2021 issue of Indirect Tax News).
The taxpaying community is coming to grips with VAT and the tax authorities have supported businesses with guidance and clarifications on areas of uncertainty. The tax authorities have also started to implement their VAT control programme and some taxpayers have received email notices for an initial analysis of VAT return declarations. In addition, the tax authorities have sent emails to selected taxpayers instructing them to file a taxpayer checklist with the VAT return, irrespective of the VAT refundable or payable position. It appears the tax authorities have decided to apply this requirement to certain large taxpayers and, going forward, impacted taxpayers will be required to file a taxpayer’s checklist and upload the top seven sales and purchase invoices, along with the VAT return.
The next stage in the development of VAT in the Sultanate could be the introduction of e-invoicing for some taxpayers. It is understood that the tax authorities are in discussion with various IT vendors to draw up the blueprint for e-invoicing, and a framework in the law has been implemented.
To ease the burden arising from excess input tax credits, especially for oil and gas contractors and suppliers, the tax authorities have made efforts over the past year to ensure the timely issuance of refunds. Taxpayers can assist in this process by filing their returns and refund request applications, as well as taxpayer checklists and sample sales and purchase invoices, in a timely manner.
A ministerial decision dated 13 October 2022 amends certain provisions of the VAT Executive Regulations as from 17 October 2022, including the following:
- Place of supply rules for telecommunications services;
- Exemptions for financial services;
- Timeline for issuing tax invoices; and
- Framework for implementing e-invoicing and other administrative rules.
With respect to the exemption for financial services, the Ministerial Decision provides that financial services provided by financial institutions licensed by the Central Bank of Oman and non–financial institutions are exempt from VAT where the income is not in the nature of a fee, commission or discount (previously, the exemption was limited to financial institutions licensed by the bank).