Oman will start implementing a 5 per cent value added tax (VAT) from April 16, according to a statement by the Oman News Agency on Sunday. The tax will help the Sultanate generate about 400 million Omani riyals ($1 billion) in revenue annually, which is equivalent to 1.5 per cent of the total value of gross domestic product. 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 last year. Saud Al Shukaili, head of the tax authority, said regulations related to registration, tax payments and the collection of VAT have been issued. “All preparations and requirements have been completed and VAT will come into force starting April 16,” he said in a statement published by the Oman News Agency. Mr Al Shukaili said the government has provided ample time for businesses to set up their accounting systems and other necessary procedures for tax compliance. Ninety-three commodities, along with medicines and medical equipment, are subject to zero-rate VAT. Services such as education, health care and financial services will be exempt from VAT. 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 estimated to make a modest recovery to 1.8 per cent growth this year, the International Monetary Fund said <a href="https://www.thenationalnews.com/business/economy/imf-projects-oman-s-non-oil-economy-will-grow-by-1-5-in-2021-1.1165114">last month</a>. 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, Reuters reported earlier this month, quoting state TV. Oman will also cut rent at the Duqm Special Economic Zone and industrial areas until the end of 2022.
