Applicability of VAT on imports into Oman

Muscat: Value Added Tax (VAT) is a consumption-based tax. It is applied to goods and services sold to consumers. It is imposed and collected at every stage in the production and distribution chain. It is also applicable to imports into the Sultanate. Sultanate imports a wide variety of goods ranging from the animal, animal products, food stuff, beverages to minerals, chemicals, plastics, wood, leathers and textiles items, and from construction materials, precious metals to vehicles, plants and types of machinery. In 2019, Sultanate imported 33.11 billion kg goods making its import bill to OMR9.22 billion.  April 16, 2021, when VAT will be effective in Oman, businesses will pay 5 per cent VAT on goods imported into the Sultanate in addition to import custom duty [or duty].
The entry of goods, in any way by air, sea or land, into the Sultanate, will be treated import for VAT purpose and along with duty, this entry will now attract VAT also. If goods enter into the Sultanate under custom duty suspension then these will not attract VAT and duty both. Let’s understand a bit what is custom duty suspension. It is relief under custom law which allows importers to import without paying duty. For instance, bonded warehouses where imported goods are stored first without paying duty for unpacking, repacking, packaging, bringing goods into export condition etc. and then goods are exported from the Sultanate. In such cases, VAT will not be payable. However, if goods are taken out from custom duty suspension [in above example from bonded warehouse] for Oman domestic market then it will be treated import into the Sultanate and both duty and VAT will be payable.
VAT will become due on the date goods enter into the Sultanate. For VAT purpose taxable value of imported goods would be the customs value of goods according to customs law plus custom duty and any other taxes or charges payable on import of goods.
Generally, importers need to pay VAT at the time of import of goods and it is collected by custom authority on behalf of the tax authority. However, importers have the right to apply to the tax authority for the deferment of VAT payment and if deferment is granted then they can pay VAT at a later stage along with VAT return.
The considerable point in favour of importers is that they would be able to recover input tax paid on imported goods. Conditions of the same will be specified in executive regulations.
VAT law provides reliefs as well to importers from payment of VAT. They do not need to pay VAT on zero-rated and exempted goods. Importing personal or used household items, gifts, specified goods for people with a special need, goods for non-profit charities and returned goods will be free from VAT. Imported goods for use of diplomatic and consular bodies, international organisations, armed forces and internal security forces are exempted from VAT.
Normally, goods are free from VAT if imported from outside the country to free zones. Also, the transfer of goods between Free Zones does not attract VAT subject to some compliance. Supplying goods outside the free zone is treated import and VAT are payable.
Importantly, importers in any industry will have to maintain proper up to date records and accounting books containing transactions related to the import of goods. Also, they will have to retain proper record including but not limited to tax invoices, accounting records, books, custom documents related to import or export of goods for up to 10 years.
CA. Sarweshwar Biyani, M. Com, Chartered Accountant [FCA], Cost & Management Accountant [FCMA] Vice President – Finance and Accounts, SV Pittie Sohar Textiles [FZC], Sohar Free Zone.