Muscat: Consumers in Oman may have to pay more for goods and services from the UAE if Omani importers are not vigilant, as the UAE starts implementing the value-added tax (VAT) from today, experts have warned.
The Gulf Cooperation Council (GCC) VAT framework stipulates that exports will be zero rated until all countries begin implementing the consumer tax. However, as Oman has deferred its implementation to 2019, prices of products imported from the UAE may be taxed by vendors there and trickle down to consumers in Oman.
“Ideally, exports must be taxed zero per cent, but there is a possibility that traders may not apply the regulation properly and tax Omani vendors who will be buying products to sell in Oman. Importers from Oman need to be vigilant in their transactions, as it may impact their profitability and sales,” said Alkesh Joshi, Director of Tax at EY.
Around 80 per cent of the products imported into Oman are from the UAE, and any change in the law may affect the prices of products, especially of building and manufacturing materials, dramatically, said Joshi. “Importers need to check if the supply chain model is still valid in the VAT era. If not, they will need to realign it with the new regulations that kick in from today in the UAE,” he added.
Omani businesses that operate in the UAE or Saudi Arabia will also be subjected to the standard VAT rate of five per cent. They will also have to apply for VAT and file returns to the respective governments there.
The implementation of VAT is likely to have a major impact on the residents around the border areas, who will need to decide whether to buy products in Oman or the UAE.
Residents travelling to the UAE will also be affected as they will now need to keep extra cash to fund their activities.
“If you travel to the UAE now, you will end up paying five per cent more than the usual amount, so there will be an effect on tourists and business travellers,” noted Joshi.
Pre-VAT sales soared in the UAE as residents rushed to stores on the last day of tax-free shopping. Electronic goods, food items and other daily use products are being taxed in the UAE. A similar but not identical kind of regulation is expected in Oman, one which will also address loopholes in the laws in UAE and Saudi Arabia.