Oman introduced 5 per cent VAT on Friday, according to a <a href="https://omannews.gov.om/Arabic_NewsDescription/ArtMID/437/ArticleID/30801/%d8%a7%d9%84%d8%b3%d9%84%d8%b7%d9%86%d8%a9-%d8%aa%d8%a8%d8%af%d8%a3-%d8%a7%d9%84%d9%8a%d9%88%d9%85-%d8%aa%d8%b7%d8%a8%d9%8a%d9%82-%d8%b6%d8%b1%d9%8a%d8%a8%d8%a9-%d8%a7%d9%84%d9%82%d9%8a%d9%85%d8%a9-%d8%a7%d9%84%d9%85%d8%b6%d8%a7%d9%81%d8%a9">statement</a> by the Oman News Agency. 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. The Oman government has expanded the list of goods subject to zero-rate VAT from 93 basic food commodities to 488. Food products subject to zero-rate VAT are vegetables, fruits, legumes, grains, dates, spices, oils, fish, red meat and poultry. Services such as education, health care and financial services will be exempt from VAT. The tax will help the Sultanate generate about 400 million Omani rials ($1 billion) in revenue annually, which is equal to 1.5 per cent of the total value of gross domestic product. All six Gulf countries agreed to introduce VAT of 5 per cent in 2018 after a slump in oil prices hit their revenue. Saudi Arabia, the UAE and Bahrain began applying the tax, with Riyadh tripling it last year. Oman’s economy was hit hard by the coronavirus pandemic and low oil prices. The sultanate's economy likely shrank 6.4 per cent in 2020 but is expected to make a modest recovery to 1.8 per cent growth this year, the <a href="https://www.thenationalnews.com/business/economy/imf-projects-oman-s-non-oil-economy-will-grow-by-1-5-in-2021-1.1165114">International Monetary Fund said</a> in February. The country’s current account deficit is also estimated to have widened from 5.4 per cent of GDP in 2019 to 10 per cent in 2020, mostly because of lower hydrocarbon exports, according to the Washington-based lender. Oman is also taking other measures to strengthen its balance sheet. Earlier this year, the country took a decision to remove electricity and water subsidies for Omanis and residents as well as for all government entities, private companies and industries. It also aims to diversify its economy away from oil and is offering long term residency permits for foreign investors. Saud Al Shukaili, head of the tax authority, said all necessary preparations and requirements for the introduction of VAT had been completed. This includes the issuance of a law related to the tax, the setting up of accounting systems, tax authority training on how to apply the levy, the preparation of a manual of VAT-related work procedures and the drafting of a guide on registration procedures. Mr Al Shukaili said all companies, irrespective of the value of their taxable supplies, were required to have registered for VAT from February 1 this year. Small establishments and companies were granted time to set up their accounting systems and other necessary procedures for tax compliance. There will be a compulsory VAT registration threshold of 38,500 rials a year and a voluntary registration threshold of 19,250. Companies and people that need to register for tax are permitted to do so in a phased manner. Those with an annual value of taxable supplies above 1m rials were required to sign up between February 1 and March 15, and will be considered to have registered from April 16. Those with taxable supplies between 500,000 rials and 1m rials need to register between April 1 and May 31, with their VAT registration coming into effect from July 1. Similarly, taxable persons with supplies valued between 250,000 rials and 500,000 riyals can register between July 1 and August 31. They will be considered to have registered from October 1. Companies with supplies between 38,500 rials and 250,000 rials need to sign up between December 1 and February 28, 2022. Their registration is active from April 1, 2022. “Implementing VAT is the right move for Oman to sustain growth for its pandemic-hit economy. VAT will bring significant revenue to the Oman government in the range of 4bn riyals to 5bn riyals a year and this will grow by 5 per cent to 10 per cent every year,” Anurag Chaturvedi, managing partner at Chartered House Tax Consultancy, told The National. He said that the Oman government will use the tax revenue to develop infrastructure, provide rebates and fiscal benefits to hard-hit industries and offer relief to businesses affected by the pandemic. Taxpayers have the right to object to the tax assessment within 45 days. They have the right to appeal before a grievance committee within 45 days from the date of notification, said Mr Al Shukaili. The taxable person must display the VAT registration certificate in a prominent place at the company headquarters, while the tax identification number and registration certificate should be recorded in all correspondence, invoices or documents the company or person issues, and on declarations and notifications submitted to the Oman Tax Authority. Consumers can report breaches of the law either to the tax authority or to the Consumer Protection Authority.