PHOTO
30 July 2016
Muscat - Supplies and services provided by Oman's thriving tourism and hospitality sector will be liable to a five per cent Value Added Tax (VAT) when the new tax regime is implemented across the Gulf Cooperation Council (GCC) region effective from January 1, 2018. According to a key tax expert, the proposed tax -- part of an effort by Oman and the Gulf states to bolster national revenues to offset the sharp decline in hydrocarbon export earnings -- will apply to a wide range of services and goods supplied by the tourism industry.
"It is likely that VAT will be applicable to the majority of supplies made within the tourism sector, including (but not limited to) hotel accommodation, catering/restaurant services, transport (for example, airport buses, taxis), sightseeing tours, admission to activities and attractions; and sale of goods (ie souvenirs)," said Finbarr Sexton (pictured), MENA Indirect Tax Leader at EY, a global provider of assurance, tax, transaction and advisory services.
According to Sexton, VAT is imposed on the supply of all goods and services which are supplied by a VAT registered entity, except where the goods / services are covered by a specific zero rating (ie VAT is applied at a 0 per cent rate) or exempted (no VAT charged).
"At this stage, it is not expected that the common supplies made by businesses in the tourism sector will benefit either from zero rating or exemption. It is therefore likely that VAT at the standard rate (currently expected to be 5 per cent) will be charged on the majority of supplies," the tax consultant explained.
Ratification of the draft GCC VAT Framework Agreement and the subsequent publication of Oman's domestic VAT legislation are still awaited. Experts however believe that the proposed VAT system will be broadly modelled and implemented on the lines of the EU VAT system.
Asked if the application of VAT is likely to dampen the Sultanate's tourism appeal, Sexton replied: "At this stage, it is not possible to conclusively predict the impact of VAT on Oman's appeal as a tourist destination. However, whilst the introduction of VAT may result in an additional cost to tourists (ie with a 5 per cent VAT charge added to the majority of supplies), a number of jurisdictions which have large tourism industries currently operate similar VAT or GST (Goods and Services Tax) regimes. Based on experience in these other locations, it would not appear that the introduction of VAT or GST has negatively impacted the appeal of these countries as tourism destinations. Examples of such locations include the EU, Australia and Malaysia."
Citing a recent report by BMI Research, Sexton pointed out that international arrivals into Oman are projected to increase by 3 per cent in 2016. Furthermore, the continued growth of international tourism to Oman is also likely to be strengthened by a number of initiatives to improve air travel connections to the country. Notable examples are the new flight routes between Europe and Oman by Oman Air and to destinations in Asia Pacific with Kuwait Airways.
Importantly, international tourists who are non-GCC residents will have the opportunity to obtain a refund of the VAT incurred on their purchases of goods in Oman that will be transported out of the GCC as part of the tourist's personal belongings, according to the tax expert.
However, in order for the VAT refund to be applicable a number of conditions will apply. For example, the goods must be used for non-business purposes. Items purchased must be transported outside of the GCC region within three months from the date of purchase. Additionally, purchased items must not be consumed whilst located in the GCC.
"The tax refund procedure should assist in reducing the additional costs which will be borne by non-GCC tourists," Sexton remarked.
Explaining the implications of VAT for GCC residents arriving into Oman, the consultant stated: "Although tourists from other GCC Member States will not be eligible to obtain such refunds, it is worth noting that these individuals would already be incurring VAT on their purchases in their own GCC Member State (as VAT will be applied across the GCC as a whole). Therefore, Oman would not be made 'more expensive' for GCC residents to travel to as they would already be incurring VAT on purchases made in their home country."
Muscat - Supplies and services provided by Oman's thriving tourism and hospitality sector will be liable to a five per cent Value Added Tax (VAT) when the new tax regime is implemented across the Gulf Cooperation Council (GCC) region effective from January 1, 2018. According to a key tax expert, the proposed tax -- part of an effort by Oman and the Gulf states to bolster national revenues to offset the sharp decline in hydrocarbon export earnings -- will apply to a wide range of services and goods supplied by the tourism industry.
"It is likely that VAT will be applicable to the majority of supplies made within the tourism sector, including (but not limited to) hotel accommodation, catering/restaurant services, transport (for example, airport buses, taxis), sightseeing tours, admission to activities and attractions; and sale of goods (ie souvenirs)," said Finbarr Sexton (pictured), MENA Indirect Tax Leader at EY, a global provider of assurance, tax, transaction and advisory services.
According to Sexton, VAT is imposed on the supply of all goods and services which are supplied by a VAT registered entity, except where the goods / services are covered by a specific zero rating (ie VAT is applied at a 0 per cent rate) or exempted (no VAT charged).
"At this stage, it is not expected that the common supplies made by businesses in the tourism sector will benefit either from zero rating or exemption. It is therefore likely that VAT at the standard rate (currently expected to be 5 per cent) will be charged on the majority of supplies," the tax consultant explained.
Ratification of the draft GCC VAT Framework Agreement and the subsequent publication of Oman's domestic VAT legislation are still awaited. Experts however believe that the proposed VAT system will be broadly modelled and implemented on the lines of the EU VAT system.
Asked if the application of VAT is likely to dampen the Sultanate's tourism appeal, Sexton replied: "At this stage, it is not possible to conclusively predict the impact of VAT on Oman's appeal as a tourist destination. However, whilst the introduction of VAT may result in an additional cost to tourists (ie with a 5 per cent VAT charge added to the majority of supplies), a number of jurisdictions which have large tourism industries currently operate similar VAT or GST (Goods and Services Tax) regimes. Based on experience in these other locations, it would not appear that the introduction of VAT or GST has negatively impacted the appeal of these countries as tourism destinations. Examples of such locations include the EU, Australia and Malaysia."
Citing a recent report by BMI Research, Sexton pointed out that international arrivals into Oman are projected to increase by 3 per cent in 2016. Furthermore, the continued growth of international tourism to Oman is also likely to be strengthened by a number of initiatives to improve air travel connections to the country. Notable examples are the new flight routes between Europe and Oman by Oman Air and to destinations in Asia Pacific with Kuwait Airways.
Importantly, international tourists who are non-GCC residents will have the opportunity to obtain a refund of the VAT incurred on their purchases of goods in Oman that will be transported out of the GCC as part of the tourist's personal belongings, according to the tax expert.
However, in order for the VAT refund to be applicable a number of conditions will apply. For example, the goods must be used for non-business purposes. Items purchased must be transported outside of the GCC region within three months from the date of purchase. Additionally, purchased items must not be consumed whilst located in the GCC.
"The tax refund procedure should assist in reducing the additional costs which will be borne by non-GCC tourists," Sexton remarked.
Explaining the implications of VAT for GCC residents arriving into Oman, the consultant stated: "Although tourists from other GCC Member States will not be eligible to obtain such refunds, it is worth noting that these individuals would already be incurring VAT on their purchases in their own GCC Member State (as VAT will be applied across the GCC as a whole). Therefore, Oman would not be made 'more expensive' for GCC residents to travel to as they would already be incurring VAT on purchases made in their home country."
© Oman Daily Observer 2016
