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