How to File a Tax Return in Oman

This article serves as a guide for taxpayers on how to file a VAT return in accordance with the VAT Law and its implementing regulations. Oman implemented VAT in April 2021. VAT is a consumption tax levied on the value added to goods and services at each stage of production or distribution. The standard VAT rate in Oman is 5%, although some goods and services may be exempt or subject to a reduced rate.

Registration for VAT

VAT is a self-assessed tax. Therefore, businesses are required to continuously evaluate the need to register for VAT. VAT registration is divided into two categories: mandatory registration and voluntary registration. If a taxpayer exceeds the annual mandatory registration threshold, they must register; if they exceed the voluntary registration threshold, they may choose to register voluntarily.

• Mandatory Registration Requirements: If the total value of taxable supplies (raw materials) in the current month and the next 11 months, or the past 11 months, exceeds OMR 38,500, the individual must register for VAT. These assessments must be conducted monthly by those who have not yet registered for VAT.
• Voluntary Registration Requirements: For voluntary registration, an individual can register based on the value of taxable supplies or expenses. For instance, a business that has not fully started its economic activities but intends to do so, and has incurred expenses equivalent to those of a VAT-registered taxpayer above the voluntary registration threshold, can register. If the total value of taxable supplies or expenses in the current month and the next 11 months, or the past 11 months, exceeds the voluntary VAT registration threshold of OMR 19,250, the individual can apply for VAT registration. These assessments must be conducted monthly by those who have not yet registered for VAT.

What is a Tax Return?

A VAT return is a form that must be completed periodically, i.e., every three months, by the taxpayer at the end of each tax period. The VAT return is considered a self-assessment of the VAT payable to the Tax Authority or the amounts receivable from it for the relevant tax period. To determine the taxpayer’s VAT liability, the individual must look at the net VAT after deducting the input tax from any output tax collected. The VAT return is a summary of the value of goods, production tax, purchases, and any deductible input tax incurred by the taxpayer during the tax period, ultimately reflecting the taxpayer’s VAT liability. Failure to submit a VAT return in accordance with the law and regulations may result in penalties. If the VAT return results in a refund of tax collected from taxpayers, the Tax Authority may review the return and conduct inspections to verify the refund. Any refund will be paid directly to the taxpayers.

Preparing the Tax Return

When preparing a VAT return, the type of goods subject to VAT should be considered to determine where VAT should be paid and where it should be collected. The distinctions that need to be made include:

• Taxable Supplies: These include goods purchased or sold within Oman or imported into the country, subject to the standard VAT rate of 5% or 0%. The taxpayer is required to charge 5% VAT on standard-rated goods and 0% on zero-rated goods. For purchasing these supplies, input tax can also be claimed.
• Exempt Supplies: These include goods purchased or sold within Oman or imported into the country that are exempt from VAT. These items are listed in the VAT Law, and taxpayers cannot claim input tax on these goods. They also cannot charge VAT on these goods.
• Out-of-Scope Supplies: Some supplies may be out-of-scope for VAT purposes. These include goods produced outside Oman, goods not produced by the taxpayer, and goods not produced in the course of economic activities as per the VAT Law and implementing regulations.

Filing the Tax Return

Taxpayers must periodically submit their VAT returns through the Tax Authority’s taxpayer portal. Each taxpayer must follow a series of steps to submit their return:

1. Log into your account, go to the VAT return section, and select “Add new return.”
2. Complete the VAT return.
3. If you are eligible for a refund exceeding OMR 100, you can tick the “I want to be refunded” box. If you have a net VAT amount that is refundable, you must download the Taxpayer Checklist Excel sheet from the Tax Authority’s website at www.taxoman.gov.om. Then, you must complete the worksheet and attach it to the VAT return form. This step is optional for taxpayers with payable amounts.
4. After entering all the information and attaching the required annexes, select the “SUBMIT” button. The system will display a confirmation message. After selecting “YES” in this message, the VAT return will be submitted.

Under normal circumstances, VAT on imports is paid along with customs duties upon the goods’ entry into Oman. In special cases, a taxpayer importing goods can defer the payment of import VAT. The VAT amount must then be declared in the VAT return for the period during which the goods enter Oman. To take advantage of this benefit, the taxpayer must visit the Tax Authority and fulfill specific conditions, which may include providing a financial guarantee.

If a taxpayer becomes aware of an error related to the submitted return, they must submit a new and corrected VAT return within 30 days of becoming aware of the error. The corrected return will be considered the primary return.

VAT Periods

When submitting a VAT return, the time of supply rules must be considered. This helps determine which transactions should be accounted for in different tax periods. During each tax period, the taxpayer is required to submit a VAT return for the goods pertaining to that period. The taxpayer must calculate the total VAT collected for the tax period and the input tax eligible for deduction in that period.

The VAT tax period is three months, equivalent to a quarter of the year. The dates of the tax periods are as follows:

• January 1 to March 31 (11 Dey to 12 Farvardin)
• April 1 to June 30 (13 Farvardin to 10 Tir)
• July 1 to September 30 (11 Tir to 9 Mehr)
• October 1 to December 31 (10 Mehr to 10 Dey)

A taxpayer may have conditions for mandatory or voluntary registration and may have registered to submit a VAT return for a specific tax period. The first tax period starts from the effective date of registration until the end of the tax period in which the registration date falls.

Record Keeping

All taxpayers are required to maintain accurate VAT records for audit purposes. These records include any documents used to prepare the VAT return. The information and documents should include:

• Daily logs where taxable transactions are recorded chronologically, along with all documents allowing verification of these activities.
• Principal statements that monitor the opening of accounts and transactions, provided that there is a separate account for each type of goods (taxable or exempt).
• Inventory statements, documenting inventory items, budget, and the total/resulting quantity.
• Records and documents related to the supply of imported and exported goods and services.
• Records and documents related to the supply of goods and services within the Gulf Cooperation Council (GCC) countries.
• Records and documents related to all customs transactions.
• All supporting documents proving goods exempt from VAT according to the executive regulations.
• All tax invoices and other documents issued by the taxpayer.
• All tax invoices and other documents received by the taxpayer.

Penalties

The Tax Authority can impose penalties on individuals who do not submit their VAT returns within the specified legal timeframes, or if their returns contain incorrect information along with other violations. These penalties can include fines and/or imprisonment.