Introduction of staggered VAT registration by Oman Tax Authority

The Oman tax authority recently introduced staggered VAT Registration by Oman Tax Authority. This step would be helpful to both – the entities as well as to the Oman Tax Authority to phase out the registration and introduce VAT in Oman more efficiently. The following table shows the staggered VAT registration structure:

The phased approach will lead to certain impacts as follows:

On Entities registering in the Initial Phase for VAT in Oman

• Entities will be required to get their full system ready for implementing VAT from 16thApril 2021 as they would have to charge VAT on all transactions w.e.f 16th April 2021
• All imports into the country wef sixteenth April 2021 will have an extra effect of 5% VAT. It stays not yet clear whether the Opposite Charge Component and import related VAT payments would be encouraged through the VAT returns. On the off chance that it isn't empowered, there would be additional cashflows for VAT payments on import which can be asserted therefore through the returns.
• Declarations from their suppliers would be required by these entities in the event that they are not needed to register for VAT, as these suppliers would not charge VAT on their suppliers s.
• These entities would need to survey their contracts quickly to guarantee that they can charge VAT after sixteenth April 2021. On the off chance that the contracts are quiet and they can't arrange the terms with their clients, the provisions after sixteenth April 2021 would be presumed to be inclusive of VAT and this might impact their margins.

On Entities registering in the Subsequent Phases for VAT in Oman

• These entities will get more time to get their framework ready for VAT
• Declarations of VAT non-applicability will be required to be issued by these entities to their customers who are already registered for VAT
• 5% VAT on imports will have to be borne by these entities because they are not registered. This would lead to increased costs especially for the sales during the period that they are not registered for VAT. But the input VAT credit for stock held and sold subsequent to their effective VAT registration date would still be available.
• VAT would be incurred on their local purchases and services from their suppliers registered for VAT. Input VAT credit on their stock and expenses primarily related to further taxable supplies subsequent to their VAT registration date would be available. This would require these entities to track their input VAT incurred during the period of non-registration so that they could analyze the input VAT credit that they can take subsequent to the VAT registration date.
• These entities will have extra time to inculcate VAT clause in their contracts so that their margin is not impacted. Moreover in case of VAT registered suppliers , they could choose to consider their contracts as being inclusive of VAT, in case the VAT clause is not specified in the contracts entered before 16thApril 2021. This would be valid for sales which they are likely to make after 15th April 2021 and before their VAT registration, as this could lead to increased costs in case VAT is levied on the pre VAT prices by their VAT registered suppliers.

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