On Friday (April 16), Oman enacted the 5% value added tax (VAT) on several goods and services.
This comes after a six-month transitional period for the application of the tax on most goods and services in addition to goods imported into the Sultanate, with some exceptions specified in the law.
5% VAT Enacted on Goods and Services in Oman
The Oman government has expanded the list of goods subject to zero-rate VAT from 93 basic food commodities to 488. Food commodities subject to zero-rate VAT are vegetables, fruits, legumes, grains, dates, spices, oils, fish, red meat and poultry, among others, The National reported.
In line with this, services such as education, health care, and financial services will be exempt from VAT.
The Sultanate is expected to generate about 400 million Omani riyals ($1 billion) in revenue annually, which is equivalent to 1.5 per cent of the total value of the gross domestic product through the new tax scheme.
Meanwhile, all six Gulf countries agreed to introduce a 5 per cent VAT in 2018 after a slump in oil prices hit their revenues. Saudi Arabia, the UAE and Bahrain have already introduced the tax, with Riyadh tripling it in the previous year.
Oman’s economy was hit hard by the coronavirus pandemic and low oil prices. The sultanate’s economy has shrunk by 6.4 per cent in 2020 but is estimated to make a modest recovery to 1.8 per cent growth this year, according to the International Monetary Fund in February.
According to experts, the Oman government will use the tax revenue to develop infrastructure, provide rebates and fiscal benefits to worst-hit industries and offer relief to pandemic-hit businesses.