Implications of VAT in Oman for financial services

Bhawna ChopraBhawna Chopra    30 January 2021
Implications of VAT in Oman for financial services

Oman's VAT law states that, in accordance with Article 47, financial services are exempt.

It has been specified that the regulations will include further conditions and details related to the exemption from financial services.

VAT Treatment

Exempt Services

Based on the VAT treatment in KSA, Bahrain and the UAE, the same treatment is required to be followed in Oman and only interest or margin based financial services will be treated as exempt services. The specific criteria to be enforced in Oman will be verified by regulations. The input VAT on the supply of excluded services cannot be recovered.

The standard rated services

Generally speaking, if financial services are offered with an explicit charge or commission, they would be subject to VAT at the normal rate of 5%. These regular rated supplies include bank fees, remittance fees, processing fees for loans, annual card fees, etc. Oman is required to follow the same treatment, but the legislation will confirm specifics.
It is possible to recover the input VAT on costs completely related to normal rated supplies.

Zero-rated Services

The supply of financial services to a recipient located outside GCC/Oman will be subject to a zero VAT rate (0%)

Issues regarding irrecoverable VAT I

rrecoverable VAT can be a major expense to financial institutions and may have a potential effect on their pricing policies. This will include an early assessment of the cost of VAT and the bottom-line effects.

Allocation of Input VAT

The monitoring and distribution of input VAT between taxable supplies and exempt supplies is often a complex problem for financial institutions. Each GCC country has released its own input vat delivery system, which companies will need to use to measure the recoverable amount of input vat incurred on overheads. The system to be implemented in Oman will be validated by regulations.

Mixed supply

Any financial services which consist of a variety of components ('bundled services') which, if supplied separately, may be subject to different VAT care.

In order to decide the right VAT treatment of certain packaged facilities, it will be important to analyze such characteristics in order to determine if certain VAT treatments will apply.


Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

You can access Law including Guidelines, Cabinet & FTA Decisions, Public Clarifications, Forms, Business Bulletins for all taxes (Vat, Excise, Customs, Corporate Tax, Transfer Pricing) for all GCC Countries in the Law Section of GCC FinTax

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