The Oman Tax Authority (OTA) has issued Decision No 456/2022 (Decision) in Arabic to amend certain provisions of the Oman Value Added Tax Executive Regulations (VAT Executive Regulations) for the Oman VAT Law (VAT Law). The Decision was published in the Official Gazette on 16 October 2022 and comes into effect on 17 October 2022.
Summary of amendments to the VAT Executive Regulations
1. Electronic Tax Invoice
The Decision amends Article 1 of the VAT Executive Regulations to define an Electronic Tax Invoice.
2. Place of supply of wired and wireless telecommunication services
Article 28 of the original VAT Executive Regulations provided that the place of supply of wired and wireless telecommunication services should be the place of actual use or benefit of such services along with the basis of determining such place.
The Decision amends Article 28 of the VAT Executive Regulations to provide that the place of actual use or benefit of wired and wireless telecommunication services should be determined as follows:
Type of supply |
Place of supply |
Supply of services through fixed communication tools that require the actual presence of the customer |
Specific geographical location where the tools are located |
Supply of services through mobile networks |
Country that owns the international symbol of the electronic chip used by the customer |
Other cases |
Customer’s place of residence determined by the supplier based on information provided by the customer validated according to usual commercial security procedures |
With this amendment, the place of supply of services provided through mobile networks is changed from the place in which the mobile network is used to receive such services to the place that owns the international symbol of the electronic chip used by the customer for such services.
3. Documents to recover input VAT
The Decision amends Article 55 of the VAT Executive Regulations which lists the documents a Taxable Person should retain to recover input VAT, to replace ‘original Tax Invoices’ with ‘Tax Invoice issued in accordance with Chapter Eight of these Regulations’.
4. VAT exemption for financial services
Article 47(1) of the Law read with Article 79 of the VAT Executive Regulations exempts certain financial services from VAT.
Article 79 of the original VAT Executive Regulations limited the VAT exemption to banks and financial institutions licensed by the Central Bank of Oman or any other competent authority which is established to conduct banking businesses.
The Decision amends Article 79 of the VAT Executive Regulations to clarify that financial services supplied by all Taxable Persons (i.e. not just banks and financial institutions) are exempt from VAT, except where financial services have been provided against consideration such as a fee, commission, or commercial deduction.
A similar amendment has been made for financial services supplied under Islamic financial arrangements where, by virtue of the amendment, the supplier does not need to be licensed to conduct Islamic financial business for financial services to be exempt from VAT.
5. Timelines for issuance of tax invoices and other related documents
The Decision amends Article 143 and Article 146 of the VAT Executive Regulations to provide that a Tax Invoice and Simplified Tax Invoice should be issued within 15 days from the date of events specified in Article 143 of these Regulations.
Similarly, the Decision amends Article 150 of the VAT Executive Regulations to provide that a Summary Tax Invoice should be issued within 15 days from the end of the month in which supplies are made.
Prior to this amendment the VAT Law or VAT Executive Regulations did not prescribe a timeline for the issuance of Tax Invoices.
6. Issuance of Tax Invoices, Debit Notes, and Credit Notes in electronic format
The Decision amends Article 143 and Article 146 of the VAT Executive Regulations to provide that a Tax Invoice and Simplified Tax Invoice should be issued in an approved electronic format and with additional requirements specified by the OTA.
The Decision amends Article 155 of the VAT Executive Regulations to provide that where the original invoices were issued in electronic format, the adjustment document (viz. Tax Debit/ Credit Note) should also be issued in electronic format.
7. Approval for issuance of a Simplified Tax Invoice
The Decision amends Article 146 of the VAT Executive Regulations to remove the requirement for Taxable Persons to obtain approval from the OTA for issuing a Simplified Tax Invoice.
8. VAT refund to foreign governments and related bodies
The Decision amends Article 188 of the VAT Executive Regulations to remove the conditions (except the condition of reciprocity) for granting VAT refunds to foreign Governments Diplomatic, Consular and Military bodies or Missions, International organizations, and members of the Diplomatic and Consular Corps accredited by the Sultanate of Oman.
Such VAT refunds will be processed according to the conditions and controls determined by the OTA with the Ministry of Foreign Affairs and approved by the Ministry of Finance provided the refund application is submitted in accordance with the procedures specified by the OTA.
9. Failure to issue Tax Invoices and Electronic Tax Invoice
The Decision amends Article 202 of the VAT Executive Regulations to penalize failure to issue a Tax Invoice or an Electronic Tax Invoice in accordance with the requirements specified in the VAT Executive Regulations and by the OTA with an administrative penalty of Omani Rial 500 to 5,000.
Key considerations for businesses
This is the first time the OTA has amended the Oman VAT legislation since its implementation on 16 April 2021. Some of these amendments (e.g. issuance of tax invoices within 15 days) replicate clarification already issued by the OTA in sector-specific VAT Guides or privately, while others are in anticipation of potential tax reforms.
Key considerations for businesses include:
1. The issue as to whether VAT exemption for financial services is available only to licensed banks and financial institutions has been finally clarified. Taxable Persons other than banks and financial institutions that have taken a different VAT position will need to assess the impact of the amendment.
In addition, whether receipts from the acquisition, issuance, or sale of shares or interest on bank deposits of a non-financial institution arising from the ownership of such instruments will be exempt or outside the scope of VAT still needs to be clarified.
2. Since all Tax Invoices (including Tax Invoices, Simplified Tax Invoices, and Summary Tax Invoices) issued in accordance with Chapter Eight of the VAT Executive Regulation are now eligible documents for the purposes of recovering input VAT, Taxable Persons that have parked / foregone input VAT incurred on such documents may review the possibility of recovering such input VAT, subject to normal recovery rules.
3. Saudi Arabia has already begun the implementation of e-invoicing. The United Arab Emirates and Bahrain are likely to announce their strategy for digital reporting/ e-invoicing soon. The introduction of provisions on electronic tax invoices in the VAT Executive Regulations is indicative of the OTA’s intention of implementing e-invoicing in Oman in the future.
Implementation of e-invoicing can have a significant impact/change requirement on existing ERP systems as well as business processes. Therefore, it is critical that Taxable Persons prepare/budget for such implementation.
4. Amendment of provisions related to timelines for issuance of Tax Invoices and penalties for failure to issue Tax Invoices require Taxable Persons to review their processes to ensure that the issuance of valid Tax Invoices is within the specified timeline and the Tax Invoices are reported in the VAT returns for the correct period. Non-compliance could result into additional tax and administrative penalties.
The other issue that remains is whether these amendments are prospective or retrospective. While one would expect prospective application, the possibility of the OTA arguing that these are clarificatory in nature and therefore retrospective cannot be ruled out. Therefore, it is recommended that businesses assess their exposures (if any), for the past, present and future.
KPMG has a dedicated team of experienced indirect tax specialists based in Oman supported by a larger, experienced regional team. If you need assistance with VAT or other indirect tax related matters in Oman, please reach out to your advisors at KPMG or the contacts mentioned below.
