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Tax flash: Oman Excise and VAT implementation update

Excise and VAT implementation update

Ministry of Finance in Oman confirm preparations to target implementation of Excise in early 2019 and VAT implementation in September 2019.

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On 25 September 2018, the Oman Chamber of Commerce and Industry hosted a special session on Value Added Tax (VAT). The session was attended by senior representatives of the Majlis A’Shura (the Lower House of the Omani Council), the Ministry of Finance (MoF) and the Capital Market Authority.

During the session, the panel debated the timing of VAT introduction in the Sultanate and its impact on a recovering economy, such as Oman. After the session, representatives of the MoF also addressed questions regarding the introduction of a selective tax, i.e. excise tax.

Takeaways on VAT

Members of the Gulf Cooperation Council (GCC) are implementing VAT under the auspices of the Common VAT Agreement of the States of the GCC. Saudi Arabia and the United Arab Emirates (UAE) introduced VAT as of January 2018.

Oman was originally expected to implement VAT in January 2019. During the session, representatives of the MoF confirmed preparations to target VAT implementation for September 2019, however the actual date of enactment is currently under review.

The MoF also identified 94 essential goods and/or services that are likely to be zero rated. In addition, specific sectors - including education, health care, transportation and real estate – maybe partially exempted.

Takeaways on excise tax

Members of the GCC are implementing excise tax under the umbrella of the Common Excise Tax Agreement of the States of the GCC. The Agreement allows member states to levy excise tax on goods deemed detrimental to health and/or the environment, as well as luxury goods. Bahrain, Saudi Arabia and the UAE introduced the levy on carbonated drinks, energy drinks and tobacco products during 2017.

Oman was originally expected to implement excise tax in June 2018. After the session, the MoF representatives stated it is likely to be implemented in early 2019. They also mentioned that Oman is likely to expand the scope of the levy to cover alcohol and pork, in addition to carbonated drinks, energy drinks and tobacco products. Eventually it is likely to extend it to certain luxury goods, as well.

Next steps

The MoF is expected to conduct VAT awareness sessions as the implementation date approaches. However, these taxes are transactional in nature and, as seen by businesses in Saudi Arabia and the UAE, have far reaching effects on functions/disciplines throughout an organization. Therefore, the run up to implementation requires a great deal of preparation. In order to ensure a smooth transition, it is important for businesses in Oman to:

  • Finalize excise and VAT implementation strategies
  • Identify contracts that need an excise and/or VAT review
  • Initiate training/awareness
  • Assess the financial, legislative and IT-related impact these taxes will have on the business

From our experience in other markets, excise tax and/or VAT implementation will have immediate effects on consumer behavior. It is of utmost importance for companies to assess their business direction and plan strategically.

© 2018 KPMG, an Oman member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( “KPMG International”) A Swiss entity. KPMG and the KPMG logo are registered trademarks of KPMG International.

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

 

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