The introduction of VAT in OMAN will change business Finance and Accounting significantly.
WHY YOU SHOULD GET VAT COMPLIANT NOW!
- From 1st April 2021, you need to have a clear idea on whether you need to register for VAT, if your goods or services are zero rated, exempt, partially exempt or taxable, and what is the VAT regards domestic and international trading.
- As final consumers will ultimately bear the cost of VAT, so it is your responsibility to self-assess this VAT correctly, pay VAT calculated to the Tax Authority (TA) and avail the benefit of input VAT returns.
- All taxpayers are required by law to keep appropriate VAT records relating to their calculation of VAT for audit purposes. And they should keep a VAT account. A VAT account is the link (the audit trail) between a business’ records and their VAT return.
- The TA may assess the amount of tax, including the penalty due and tax payable, from a taxable person who fails to file their return, or files an inaccurate return, for any taxable period.
CRITERIA FOR BEING TAXABLE
- Applicable for business which are taxable, zero rated or partially exempt.
- Any business with the taxable turnover exceeding the mandatory VAT threshold of OMR 38,500 in the current month plus the previous 11 months or in the current month plus the next 11 months, needs to Register and Pay VAT.
- Imports are always taxable unless the supply is otherwise specified as exempt. Both VAT Registered and unregistered business are required to pay VAT on imports.
DIRECTION AS THE VAT SOLUTION PROVIDER
Businesses need an Enterprise solutions for e.g. Microsoft Dynamics 365 Business Central, to ensure a seamless and accurate VAT process. Direction has always offered the best solutions that help entrepreneurs focus on their businesses, whilst also complying easily with changing protocols. Direction's years of experience in providing solutions for accounting and tax, and our close partnership with Microsoft will, we are sure, make the journey a seamless experience. Direction offers VAT Implementation, Support and Training at reasonable prices.
UNDERSTANDING VAT IN THE SULTANATE OF OMAN
- Starting on April 1st, 2021 Value Added Tax (VAT) of 5% will be paid and collected at every stage of the supply chain; from a manufacturer’s purchase of raw materials to a retailer’s sale of an end-product to a consumer.
- They will require to generate VAT Invoices and keep records for all applicable Sales transactions.
- There is partial exemption or restriction on the input tax claim if purchase or sale not for business purpose (e.g. for private use like employee vehicles).
- Zero-rated goods and services are taxable supplies at a 0% rate of VAT. Here businesses can still deduct their input VAT and receive VAT refunds.
- Exempt goods and services are not subject to VAT.
- Some supplies are outside scope of Law and therefore not subject to VAT. They are (i) Made by Non-Taxable Person, (ii) Made outside Oman; (iii) Not made in course of economic activity.
- Goods in Oman that are exported, the rate of VAT is 0%.
- Businesses may reclaim their input tax by deducting it from their output tax when completing a VAT return.
- If the VAT from a business’ purchases exceeds the VAT from their sales in any one taxable period, the difference will be refunded by the TA.
- Amount of VAT to be remitted to the TA is the difference between the output tax (VAT charged and collected on sales) and the input tax paid (VAT paid on purchases). This is explained in image below.
KEY COMPONENTS OF THE VAT SOLUTION FOR OMAN
The Microsoft Dynamics 365 & Business Central Solution manages Complex rules for special conditions. It is Well tested, Stable and on a regular upgrade path for VAT functionality.
It Manages quite well transition scenarios and delivers standardized approach to supporting VAT for users to drive business continuity. Also the product is well designed keeping the user experience at the core.
Some Key Components are
- VAT impact Assessment, IT and Process Implementation.
- IT Systems and Financial Accounting to be rebuild to meet VAT requirements.
- Strategic tasks to evaluate the best VAT system design and Implementation Plan, VAT payment and returns filing requirements.
- Changes in tax administrations, logistics flow and Legislation.
- Standard reporting changes as per the VAT guidelines.
- Supply Chain process reassessment and Legal contracts redrafting to meet compliance requirements.
- Ongoing Support Post Go-Live.
- Third party tax reports to audit your existing environment and identity all the financial risk.