29/03/2017 05:26 AST

More details have emerged about the scope and specifics of the proposed value added tax (VAT) regime due to be rolled out in Oman, and the wider Gulf Cooperation Council (GCC) region, effective from January 1, 2018.

According to leading global professional advisory services firm EY, businesses with an annual revenue of over $100,000 will be required to register for VAT purposes once a legal framework for the new indirect tax is formally in place. Registration for VAT is optional for smaller firms generating revenues between $50,000 – 100,000, the firm stated in an advisory to clients.

The revelations come as some GCC member states make stronger headway in their efforts to prime their local populations, and businesses in particular, about the application of the new tax regime ahead of its coming into force early next year.

Earlier last week, authorities in the UAE hosted a briefing session on VAT for government advisors – an event “aimed to send a clear message to the market, which is that VAT is coming and businesses must begin to prepare immediately”, said EY in its advisory. “The UAE (and some unnamed other Gulf Cooperation Council (GCC) Member States) is still on track to implement VAT from 1 January 2018, and it expects to release its domestic VAT Law before the end of the first half of 2017, with detailed Executive Regulations to follow shortly after. Under the GCC VAT

Framework Agreement Member States who do not commence on 1 January 2018 will have up to one year to introduce VAT,” it stated.

In the Sultanate, businesses are bracing for a mid-year announcement outlining the framework for the implementation of Value Added Tax as part of a Gulf-wide initiative. Spurred by calls from EY and other professional services firms, many businesses are gearing up to provide their accounting and audit staff with the requisite insights on the application of the tax, as well as update their accounting systems.

While the standard VAT rate will be set at 5 per cent, member states of the GCC can exercise their prerogative of affixing a zero rate (or an exemption altogether) for the following sectors: Education, Healthcare, Real Estate and Land Transport, according to the EY advisory. Additionally, member states have the right to subject the oil industry, petroleum derivatives and gas to a zero rate of VAT. Individual states also have the option to apply a zero rate of VAT to certain types of foodstuff and medical supplies.

As for financial services, VAT application is more nuanced. The EY advisory explained: “The Member States have the right to exempt financial services from VAT. The term financial services is not defined; but broadly, the exemption will relate to dealings in money, securities, foreign exchange, and the operation and management of loan accounts, deposits, trade credit facilities, and related intermediary services. The exemption is not expected to extend to fee-based services transacted by a financial institution. However, Member States may choose to apply different VAT treatments to financial services if they wish.”

Goods exported to markets outside the GCC will be subject to zero rate of VAT, as will intra-GCC and international transport, according to EY.


Oman Daily Observer

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