The Oman VAT Executive Regulations have been amended | Key changes and impacts

17 October 2022 - The Oman Tax Authority (OTA) has issued Decision No. 456 of 2022, amending the Oman Value Added Tax (VAT) Executive Regulations (Executive Regulations). The Ministerial Decision was published in Arabic in the Official Gazette No. 1463 dated 16 October 2022 and is effective from 17 October 2022. In this alert, we provide a summary of the key changes:

Time limit for issuing tax invoices

The Oman VAT Executive Regulations have been amended to specify a time limit for issuing tax invoices. Article 143 now states that a tax invoice must be issued within 15 days of:

• Making “supplies”, whether these supplies are for a non-taxable person or a taxable person allocating the supplies for personal use;
• Making “deemed” supplies;
• Receiving advance in relation to supplies – whether fully or partially.

Failure to issue valid tax invoices within these timelines could give rise to penalties of OMR 500 to OMR 5,000. We therefore recommend businesses to look at invoicing, procurement, sales and order-to-cash processes, and to assess the impact of VAT time of supply, whilst taking these new deadline provisions into consideration. 

Some key questions that could be considered are:

• When are supplies made for VAT purposes? 
• Are there “deemed” supplies in my business? 
• Is there any deposits or advance payments that were received or paid by my business that need to be invoiced?

Electronic invoicing

• Oman is taking the necessary steps to prepare for e-invoicing, which we understand will be compulsory for all VAT registrants after an initial period of voluntary compliance. Formal dates for implementation are expected to be announced in the next few weeks.
• “Electronic Tax Invoice” has been defined to mean “a tax invoice that is generated in a structured format through electronic means.” These invoices must include the details specified in the VAT Executive Regulations at a minimum and should comply with the requirements of the tax authority.
• Deloitte will keep you updated once the detailed e-invoicing implementation processes, guidelines, and timeline are communicated by the OTA. To prepare your business for this change, you can consider undergoing an impact assessment exercise, to assess whether your current systems and processes are capable of handling electronic invoicing and develop a roadmap for what needs to be done to ensure readiness. 
• It is worth noting that the Kingdom of Saudi Arabia (KSA) has already implemented the first phase of e-invoicing in December 2021 and will implement the second phase in January 2023.

Extension of exemption of financial services provided to non-financial institutions

Prior to this development, financial services provided by banks and financial institutions licensed by the Central Bank of Oman (or “any other competent authority”) were exempt from VAT. 

Article 79 of the Executive Regulations has now been amended to extend the exemption of financial services provided by non-licensed and non-financial institutions. Businesses should therefore consider their own financing and treasury arrangements to assess:

• Whether the VAT exemption applies in their circumstances
• Would this change affect recovery of input VAT on costs?
• Do the partial deduction provisions in the Executive Regulations apply?
• How do the changes impact existing financial, financing and treasury arrangement(s), particularly between intra or intergroup? 
• What about the periods before the change in rules – do transitional provisions apply?

Businesses need to evaluate the VAT position and determine what impact this would have from a VAT compliance perspective.

Recovery of input VAT – documentation requirements

Previously, Article 55 of the Executive Regulations stated that businesses were eligible to recover input VAT on costs when it is based on a full tax invoice that is issued in accordance with Article 144 of the Executive Regulations.  

Article 55 has now been amended. All types of tax invoices (e.g., simplified tax invoices, summary tax invoices) have now been included. Businesses are now able to recover input VAT using the various types of tax invoices, provided that the other conditions of input VAT recovery are met. Businesses should look at this carefully to ensure that they have the right and proper documents in place and that they are recovering all the input VAT they are entitled to.

Clarification on refund by specified persons (e.g., foreign diplomats, international organizations, and the like) 

The Executive Regulations have now been amended to clarify the conditions that need to be met by foreign governments, diplomatic, consular, and military bodies or missions, international organizations, and members of diplomatic and consular corps to claim VAT refunds. 

Refund requests are now based on conditions and controls determined by the OTA in co-ordination with the Foreign Ministry of Oman. They also require the approval of the Oman Ministry of Finance. 

For further details, please refer to Articles 188 and 189 of the Executive Regulations.

Place of supply for provision of telecommunication services

Article 28 of the Executive Regulations, which sets out the provisions for determining “actual usage or enjoyment” of telecommunication services, has now been amended. 

Businesses that are engaged in the telecommunication services should assess the implications this will have on their transaction flows. They also require to make the necessary changes to their systems and processes, to ensure the place of supply is determined accurately for correct charging and reporting of VAT to the OTA.