Act now, don’t wait for VAT law, tax expert's advice to Omani firms

Business Tuesday 23/August/2016 21:38 PM
By: Times News Service
Act now, don’t wait for VAT law, tax expert's advice to Omani firms

Muscat: Omani companies are adopting a wait-and-see approach towards value added tax (VAT), instead of tackling it head on, and lagging behind other Gulf countries as a result, according to financial analysts.
The Gulf Cooperation Council needs to prepare for the proposed introduction of VAT, which is expected in January 2018, according to KPMG.
Businesses and individuals need to VAT-proof their lives and livelihoods as the new tax—likely to be around 5 per cent—will directly impact almost all aspects of buying and selling.
Ashok Hariharan of KPMG noted that in Oman, businesses have not been as proactive as some of the larger businesses in the United Arab Emirates in terms of getting ready for VAT implementation.
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“Given that there will be significant constraints on information technology vendors, as well as VAT consultants, it is important that businesses start planning for VAT implementation now rather than wait for relevant legislation to be issued,” he stated.
“Businesses would also need to build an appropriate input tax credit allocation model, particularly when they have both exempt and taxable supplies.”
January 1, 2018 deadline
The GCC countries have been maintaining that VAT would be implemented from January 1, 2018.
If this target date is met, then businesses will have only around 16 months to be VAT savvy.
A number of large business groups and multinational companies in the region are already taking steps to get ready. While the GCC framework agreement and the individual country VAT legislations are yet to be finalised, there are a number of things businesses could do now to get ready for VAT implementation, according to the report.
As far as GCC governments are concerned, apart from the legislation, each GCC country would need to ensure that sufficient personnel are recruited for administering VAT and they are sufficiently trained so that they are able to assist businesses implement VAT efficiently.
“Further, each GCC state would need to ensure that appropriate IT systems are put in place to handle VAT returns and refunds as a manual filing process will not work for VAT.
“If a particular GCC country concludes that the target of January 1, 2018 cannot be achieved, then their implementation would be delayed by a few months or even a year.”
5 per cent VAT
Hariharan explained that VAT is likely to be introduced at the rate of 5 per cent and it will apply to supplies of all goods and services. As far as goods are concerned, it would be a tax over and above the customs duty, which is currently paid on the import of goods. There are likely to be certain supplies, for example basic food, which would be taxed at a zero rate.
Sherry L. Colbourne, managing partner, Start up Oman, said: “No, SMEs are not prepared for VAT. SMEs would have to work with their accountants to understand the impact and then implement changes in their IT infrastructure in order to ensure that VAT is executed properly. I’m hoping the government would work to create information sessions that would help SMEs understand the implication of VAT on various sectors.”