Overview
The introduction of value-added tax at a rate of five percent on 16 April 2021 represented a landmark moment in Oman’s fiscal reform journey. As the last Gulf Cooperation Council member to implement VAT, Oman had the benefit of learning from the experiences of neighbouring states. The tax diversified government revenue away from volatile oil income and aligned the Sultanate with regional commitments under the GCC Unified VAT Agreement. Implementation was carefully managed to minimise disruption to businesses and consumers.
Key Points
VAT applies to most goods and services at the standard five percent rate, with zero-rating for exports and specified essential supplies including basic foodstuffs, healthcare, and education. Small businesses below the registration threshold are exempt. The Oman Tax Authority developed digital registration and filing systems that enable online compliance. Extensive awareness campaigns and transition periods helped businesses prepare for the new obligations. Refund mechanisms ensure that export-oriented businesses do not bear irrecoverable tax costs.
Current Status
VAT has become a significant and growing source of non-oil revenue, with collections consistently exceeding initial projections. Compliance rates are high, supported by digital filing systems and enforcement actions against non-compliant businesses. The Tax Authority has issued numerous guidance notes addressing sector-specific questions. The introduction of VAT has also improved business record-keeping and financial transparency across the economy.
Vision 2040 Context
VAT is a structural component of the Vision 2040 fiscal framework, providing a predictable, broad-based revenue stream that reduces dependence on oil prices. The tax underpins the government’s ability to invest in education, healthcare, infrastructure, and innovation while maintaining fiscal balance. As the economy grows and diversifies, VAT revenue will expand accordingly, providing an increasingly important foundation for public finance.