Muscat: The Sultanate of Oman announced that it will introduce 5 per cent Value Added Tax (VAT) in 6 months' time. His Majesty Sultan Haitham bin Tariq issued a Royal Decree this evening to implement the Value Added Tax (VAT) by April 2021 in the country. It will implement the tax on most of the goods and services with exceptions in essential services according to a video presentation broadcasted on the state-run Oman TV.
"Introducing VAT is another important and positive sign to the market that Oman is looking to progress with a much needed fiscal reform programme after announcing spending cuts this year" comments Monica Malik, a chief economist at Abu Dhabi commercial bank. The rigorous measures announced immediately intend to help the state secure and manage the public finances currently pressured by the drop in oil prices and the prevailing COVID-19 uncertainty.
Facing a 2.8 per cent economic contraction this year and a government shortfall of 16.9 per cent of Gross Domestic Product (GDP), according to the International Monetary Fund (IMF), Oman has already cut its financial leakage caused by the given unexpected challenges. The state considers the possibility of VAT measures more quickly to affect the nation's overall credit rating.
With the execution of the new decree, the state will also become the fourth among the Gulf States to have introduced VAT after K.S.A, the U.A.E and Bahrain, with Riyadh tripling it this year. Although the GCC countries had decided upon a 5 per cent VAT implementation as part of the 2016 VAT union agreement (GCC Common VAT Framework Agreement), Oman, Qatar and Kuwait have not introduced it yet.
The items that are not covered under VAT are:
Basic food commodities.
Medical care services and related goods and services.
Education and related goods and services.
Financial services.
Undeveloped lands (vacant lands)
Resale of residential properties.
Passenger transport services.
Renting real estate for residential purposes.
Supply of medicines and medical equipment.
Supply of investment gold, silver and platinum.
Supplies of international transport and interchange of goods or passengers and the supply of related services.
Supply of rescue and aid aircraft and vessels.
Supply of crude oil, petroleum products and natural gas.
Supplying means of sea, air and land transport for the transport of goods and passengers for commercial purposes and the supply of goods and services related to transport.
Supplies for people with disabilities and charities.