A Complete Guide to Oman VAT – Registration, Compliance & Filing (2025)

A Guide to Oman's Value Added Tax (VAT)

The introduction of Value Added Tax (VAT) in Oman on 16 April 2021 was a significant step in moving forward with the Sultanate's fiscal diversification vision, within the context of the broader economic integration policy goals of the Gulf Cooperation Council (GCC). Being a general consumption tax, VAT is imposed on the supply of most goods and services in Oman and imports. The OTA administers the tax and requires business enterprises with revenue levels beyond thresholds to register, charge, collect, and remit VAT to the state. For any company operating business within Oman, a good understanding of the VAT regime—ranging from registration to compliance procedures and dealing with various supplies—is no longer an option but a part of corporate governance and prudent finance. This guidebook provides a comprehensive overview of the Omani VAT regime so that companies can transfer their obligations with ease and precision.

Recent Changes

The Omani VAT regime is recent and continues to be clarified and updated by the Tax Authority, so businesses must follow these changes on the official channels.

1. Clarification of Zero-Rated Supplies: The OTA published in detail all of the conditions to apply the zero rate on certain supplies in the healthcare and education sectors.  
2. Electronic Invoicing Requirements: Although electronic invoicing is not yet required, the OTA is moving towards digital transformation and has encouraged businesses to adopt electronic invoicing systems, which will be compliant with upcoming standards.  
3. Cross-Border Services: The Service recently provided additional clarity on the place of supply rules for services provided to or received from non-residents. This impacts the application of the Reverse Charge Mechanism.  
4. New Penalties and Waivers: The OTA also clarified how new penalties will be applied and the processes to submit a voluntary disclosure for correcting an error on previous returns.

Businesses should continue to monitor the official Oman Tax Authority website for all public clarifications and guides.

Scope and Applicability

VAT is levied on all Taxable Supplies of goods and services made in the Sultanate of Oman by a Taxable Person in the course of their economic activity. It also applies to the importation of goods into Oman.  

• Taxable Person: Any person engaged in an economic activity who is registered or required to be registered for VAT. This includes individuals, companies, and other legal entities.  
• Economic Activity: Any activity conducted regularly, continuously, and independently, including commercial, industrial, agricultural, professional, or service activities.

VAT Registration

Registration is the first critical step towards compliance.

1. Mandatory Registration:

A person must be registered for VAT if, in a period of 12 months, their taxable supplies and imports exceed OMR 38500. Additionally, a company must register if the taxable supplies it is supplying are expected to exceed such amount in the next 12-month period.

 2. Voluntary Registration:

Registration can be done voluntarily by a taxpayer if the total of his taxable supplies and/or expenses is over OMR 19,250 in a 12-month period.

 3. Non-Resident Registration:

Non-resident enterprises selling taxable supplies in Oman will also be required to have a resident Fiscal Representative and be registered for VAT regardless of turnover.  

Taxable Supplies and VAT Rates

It is imperative to recognize different types of supplies in a bid to implement VAT appropriately.  

1. Standard-Rated Supplies (5%):

This is the default rate. Most supplies of goods and services in Oman are subject to VAT at the standard rate of 5% unless specifically exempt or zero-rated.  

 2. Zero-Rated Supplies (0%):

VAT is due at 0%, meaning the supplier does not charge VAT to the customer but can reclaim the VAT they have paid on business costs that are relevant. Key categories include:  

• Basic food items (as specified in a negative list)  
• Medical supplies and services  
• Supplying crude oil, oil derivatives, and natural gas  
• The supply of investment gold, silver, and platinum  
• International transport of goods and passengers  
• The supply of sea, air, and land means of transport for the transport of goods and passengers

 3. Exempt Supplies:

No VAT is charged on the supply, and the supplier cannot reclaim VAT on related costs. This typically leads to a hidden VAT cost. Key exemptions include:  

• Financial services (as specified)  
• The supply of residential real estate (sales and leases)  
• Undeveloped land (bare land)

VAT Compliance Process

The ongoing compliance cycle involves several key activities.

1. Issuing Tax Invoices:

A registered entity should present a proper tax invoice for all taxable supplies rendered to another taxable person. Each invoice should have enough details, i.e., e.g., names and addresses of the supplier and buyer, their Tax Identification Number (TIN), description of goods/services, VAT amount, etc.  

 2. Filing VAT Returns:

Registered persons must file periodic VAT returns (Form VAT 201) with the OTA. The tax period can be monthly or quarterly, as determined by the OTA. The return summarizes all output tax (VAT on sales) and input tax (VAT on purchases) for the period.  

 3. Paying VAT Due:

The VAT liability (Output Tax minus Recoverable Input Tax) owed to the OTA should be sent to the OTA prior to the filing deadline.  Where input tax exceeds output tax, the company might be eligible for a refund.  

 4. Timing: The VAT payment and return must be made to the OTA on or before the last day of the subsequent month following the end date of the period of tax. For example, for a quarter period that ended on March 31, the VAT return would have to be paid to the OTA on or before April 30.     

 5. Records: Taxable persons must retain all accounting and related business records, including tax invoices, for ten years after the last tax year end.  

Comprehending Output Tax and Input Tax

This is the core VAT mechanism.

1. Output Tax:

This is the VAT that a registered company can impose on its customers on its taxable supplies (sales of services and goods). It is a company liability because it is charged on behalf of the government.  

Example: If a company is selling goods whose value is OMR 1,000, it will have to charge 5% VAT; therefore, the bill will be OMR 1,050. The OMR 50 is to be paid as Output Tax to the OTA.

 2. Input Tax

This is the VAT which an enrolled business remits to its suppliers against its taxable spending (e.g., raw materials, rent, utility bills, professional fees). It is a resource for the business as it can recover the same from the OTA under the proviso that the spending was for the sake of making taxable supplies.  

Example: If the same organization buys office stationery for OMR 200 + OMR 10 VAT, then the OMR 10 is Input Tax, recoverable by it.

Special Schemes and Mechanisms

Reverse Charge Mechanism (RCM):

For certain supplies, the liability to account for VAT is shifted from the supplier to the customer. This is common for:

• Services received from a non-resident supplier who is not registered in Oman.  
• The supply of crude oil, oil derivatives, and natural gas between registered persons.

Under RCM, the customer must account for the output tax and can simultaneously claim it as input tax, resulting in a neutral effect for fully taxable businesses.  

VAT Groups:

Two or more resident legal persons that are closely connected by capital or control may request to be treated as a VAT group. This simplifies compliance since transactions between groups are primarily ignored for VAT purposes.

Penalties for VAT non-compliance

Category of Offense	Description	Penalty
Administrative Penalties	General violations of VAT law and executive regulations.	A fixed fine ranging from OMR 500 to OMR 10,000, depending on the nature of the offense.
Incorrect Tax Declaration	Errors on the tax return, including understating output tax or overstating input tax.	A fine of 1% to 25% of the tax amount that was incorrectly declared.
Tax Evasion	Deliberate acts to evade tax payment.	A fine of 300% of the tax amount that was evaded or attempted to be evaded.
Criminal Prosecution	Serious offenses are referred for legal action.	Fines ranging from OMR 1,000 to OMR 20,000 and/or imprisonment for 2 months to 3 years. These penalties can be doubled in case of a repeated offense.

Conclusion

The introduction of VAT in Oman is an essential part of the country’s long-term economic vision; to develop a sustainable stream of revenue for public services and reduce dependence on hydrocarbon revenues. For businesses, the principal motivating factor for compliance is a statutory obligation, but good management of the process does lead to optimised cash flows through appropriate input tax recovery. Good adherence to the VAT law provides the dual advantage of avoiding significant financial and reputational damage due to penalties and building credibility and trust in your Oman business. It is important to realise that registration, categorising supply, and submitting returns are not simply a compliance activity. It is a critical business function that requires thoughtfulness and accuracy. Any business that is seeking stability and growth in the changing Omani economy must approach VAT with proactivity.

FAQs

1. What is the late VAT registration penalty in Oman?

A penalty of OMR 1,000 is imposed for failing to submit the VAT registration application within the legal timeframe. Furthermore, if the violation continues after notification, an additional penalty of OMR 100 per day is applied, up to a maximum total cap of OMR 10,000.

2. Are there any mandatory e-invoicing legislations in Oman?

To date, Oman has not implemented mandatory e-invoicing. However, OTA encourages e-bookkeeping, as each electronic invoice must contain all of the mandatory fields defined by statute.

3. What is the application of the Reverse Charge Mechanism with regard to imported services?

If your business in Oman purchases services from a foreign supplier, you must self-account VAT using the RCM. You declare the 5% VAT as output tax on your return and, if you are fully taxable, claim the same amount as input tax in the same return, resulting in no net payment.

4. Can a small business deregister VAT?

Yes, it is possible for the VAT registration of a business to be revoked when the taxable supplies and expenses over the previous twelve months have fallen below the voluntary registration threshold (OMR 19,250) and are expected not to exceed the compulsory registration threshold in the future.

5. How do zero-rated supplies differ from exempt supplies?

For zero-rated supplies, the supplier charges a VAT rate of 0% to the customer but can recover all their input VAT on expenses related to the supply. So, for the customer, the supply is effectively VAT-free. For exempt supplies, the supplier does not charge VAT to the customer, but cannot recover any (related) input VAT on expenses for the business related to the supply. So, for the business, there is an outlay or expense.

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