PHOTO
27 September 2016
Muscat: Oman's government will have to take a series of measures before introducing value added tax (VAT), a tax expert has said.
This would include the introduction of new information technology systems for enabling monthly/quarterly returns of companies and by providing training to people to work at the Ministry of Finance, said the expert.
VAT regime
"The most important thing is the information technology system. The VAT regime, unlike corporate tax, will involve the filing of tax returns on a monthly basis or possibly on a quarterly basis," said Ashok Hariharan, partner and head of tax, KPMG in the Lower Gulf.
Gulf Cooperation Council (GCC) states, including Oman, plan to introduce the new tax system by January, 2018.
"We have to wait and see how the government is going to introduce the VAT law. If it is on a monthly basis, companies will have to file 12 returns (in a year)," he added, while addressing a recent seminar on the VAT implementation roadmap.
IT system
The IT system of the Ministry of Finance will have to be linked to the Customs Department of the Royal Oman Police (ROP) because some of the VAT collection processes will be carried out through the customs, particularly with respect to the import of goods.
Another important area is the appointment and training for people. "There is a need for enough people within the tax department to be able to manage a new tax system, such as VAT. The authorities need to recruit people and should provide training," added Hariharan.
A number of GCC countries, including Oman, have already been working on having their draft legislations in place.
The legislative process will need to be efficiently handled so that the relevant legislations can be issued sufficiently before the target implementation date of January 1, 2018.
This is critical as businesses need sufficient time to implement value added tax.
Different categories
Hariharan also noted that VAT is not a cost for the business enterprise, rather a levy on consumers.
Business enterprises are generally grouped into three categories for the purpose of levying value added tax, which is also known as the Goods and Services Tax (GST) in several other countries. These groups are--standard rated supply, zero rated and exempted.
Hariharan said GCC states are expected to come up with a framework agreement on VAT in the fourth quarter (any time between October and December) of this year.
The intention of all GCC states is to simultaneously introduce the VAT scheme. It is for this reason that the GCC states have for the last decade been working on a common GCC framework for implementing VAT.
"It will be a broad principle that GCC states will have to follow to ensure that it is consistent across the region," added the KPMG's Hariharan. "There are a number of areas where policy options are left to the individual GCC states to decide on."
It is, however, not certain whether all the GCC states will be ready for the targeted implementation date of January 1, 2018.
"Further, while the conclusion of a GCC VAT framework agreement will be immensely useful, it remains to be seen as to what policy options are left to individual GCC countries to take," he noted in response to the Times of Oman's queries.
If there are areas where options are left to individual GCC states, as is likely, then it will add to the complexity of the VAT compliance across the region as businesses would need to understand the differences in VAT legislations between different GCC countries.
Currently, it is envisaged that the registration thresholds will be $1 million (mandatory) and $500,000 (voluntary).
While VAT is not a tax imposed on business, it can become a mechanism for the government to collect VAT from the final consumers. This would imply a cash flow burden on businesses if customers do not pay VAT on time or if input VAT refunds due from the government are delayed. It also adds to the compliance cost for businesses.
Muscat: Oman's government will have to take a series of measures before introducing value added tax (VAT), a tax expert has said.
This would include the introduction of new information technology systems for enabling monthly/quarterly returns of companies and by providing training to people to work at the Ministry of Finance, said the expert.
VAT regime
"The most important thing is the information technology system. The VAT regime, unlike corporate tax, will involve the filing of tax returns on a monthly basis or possibly on a quarterly basis," said Ashok Hariharan, partner and head of tax, KPMG in the Lower Gulf.
Gulf Cooperation Council (GCC) states, including Oman, plan to introduce the new tax system by January, 2018.
"We have to wait and see how the government is going to introduce the VAT law. If it is on a monthly basis, companies will have to file 12 returns (in a year)," he added, while addressing a recent seminar on the VAT implementation roadmap.
IT system
The IT system of the Ministry of Finance will have to be linked to the Customs Department of the Royal Oman Police (ROP) because some of the VAT collection processes will be carried out through the customs, particularly with respect to the import of goods.
Another important area is the appointment and training for people. "There is a need for enough people within the tax department to be able to manage a new tax system, such as VAT. The authorities need to recruit people and should provide training," added Hariharan.
A number of GCC countries, including Oman, have already been working on having their draft legislations in place.
The legislative process will need to be efficiently handled so that the relevant legislations can be issued sufficiently before the target implementation date of January 1, 2018.
This is critical as businesses need sufficient time to implement value added tax.
Different categories
Hariharan also noted that VAT is not a cost for the business enterprise, rather a levy on consumers.
Business enterprises are generally grouped into three categories for the purpose of levying value added tax, which is also known as the Goods and Services Tax (GST) in several other countries. These groups are--standard rated supply, zero rated and exempted.
Hariharan said GCC states are expected to come up with a framework agreement on VAT in the fourth quarter (any time between October and December) of this year.
The intention of all GCC states is to simultaneously introduce the VAT scheme. It is for this reason that the GCC states have for the last decade been working on a common GCC framework for implementing VAT.
"It will be a broad principle that GCC states will have to follow to ensure that it is consistent across the region," added the KPMG's Hariharan. "There are a number of areas where policy options are left to the individual GCC states to decide on."
It is, however, not certain whether all the GCC states will be ready for the targeted implementation date of January 1, 2018.
"Further, while the conclusion of a GCC VAT framework agreement will be immensely useful, it remains to be seen as to what policy options are left to individual GCC countries to take," he noted in response to the Times of Oman's queries.
If there are areas where options are left to individual GCC states, as is likely, then it will add to the complexity of the VAT compliance across the region as businesses would need to understand the differences in VAT legislations between different GCC countries.
Currently, it is envisaged that the registration thresholds will be $1 million (mandatory) and $500,000 (voluntary).
While VAT is not a tax imposed on business, it can become a mechanism for the government to collect VAT from the final consumers. This would imply a cash flow burden on businesses if customers do not pay VAT on time or if input VAT refunds due from the government are delayed. It also adds to the compliance cost for businesses.
© Times of Oman 2016
