VAT is a transaction based indirect tax, and commonly referred to as a type of general consumption tax. In a country which has a VAT system, it is imposed on most supplies of goods and services that are bought and sold. VAT is charged at each step of the ‘supply chain’. Ultimately, end-consumers generally bear the VAT cost while registered businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.

There are two VAT rates applicable within Oman:

• the standard rate of VAT – 5%; and
• the zero rate of VAT – 0%.

In addition, a certain category of supplies will be “exempt” from VAT.

VAT is charged on the value of goods and services. When adding VAT to the price of goods or services, the registered business should multiply the amount by the applicable VAT rate (e.g. 5%).

If the price already includes VAT, divide the price by 21 (for the 5% VAT rate) to find out the VAT amount. Subtracting this amount from the VAT-inclusive price, will give the VAT-exclusive value of the supply.

Yes. Sohar Islamic, a VAT registered business, is required to charge and collect VAT on its taxable supplies of goods and services made in Oman. The VAT charged will then be remitted to Oman Tax Authority.

A supply of financial products/services by Sohar Islamic conducted in return for an explicit fee, charge, discount, commission, or similar shall be subject to VAT. However, supplies of other financial services if remunerated by way of an implicit margin (such as interest & profit) shall not be subject to VAT as these qualify to be treated as exempt supplies. Similarly, VAT would be applicable under an Islamic financial arrangement to give an outcome comparable to that which would be the case for their non-Islamic counterparts.

Where services are supplied to a recipient that does not have a place of residence in Oman, and who is outside the states at the time services are performed, these supplies may be zero-rated.

Sohar International Bank has one VAT Registration Number, which applies to all branches in Oman. Kindly refer to the above section for our VAT Registration Number.

The repayment of the principal amount borrowed from the bank will not constitute consideration for a supply and hence will fall outside the scope of VAT. This means that VAT would not be payable in addition to the principal amount borrowed. If additional services are rendered as part of the transaction (for example administration fees) these may be subject to VAT.

Any deposits into or withdrawals from current, deposit or savings accounts shall not be subject to VAT. However, if there a service charge or fee imposed by the Bank, then these services shall subject to VAT.

No. However, for further details of fees and charges you may refer to the Service and Tariff Guides published in the Bank’s website.

No, the VAT treatment for a fee should be similar irrespective of the channel.

Taxable goods and services are charged VAT at the rate of 5%. The frequency of VAT entries shall correspond with the frequency of bank charges. Where, for example, a fee is being imposed on a monthly basis, VAT will be imposed on a monthly basis as well. For other fees, such as credit card fees, VAT will be charged as a separate entry for each transaction where it is applicable.

If a taxable fee or charge is cancelled and/or unsuccessful, the corresponding VAT amount paid by the client shall also be refunded. Kindly note that there could be a processing or administrative fee associated with the cancellation which could be subject to VAT.

Taxable goods and services are subject to VAT at the rate of 5%. Say, for example, if Sohar Islamic levies a VAT- exclusive fee of 2 OMR for 25 leave cheque book, VAT on this service fee would be 2 OMR * 5% = 0.100 OMR. Total amount payable to Sohar Islamic inclusive of VAT would be 2 OMR + 0.100 OMR= 2.100 OMR.

The imposition of VAT is governed by the VAT Decree-Law, and it’s Executive Regulations. Banks are not allowed to waive the imposition of VAT payable in respect of taxable supplies provided to its clients.

Supply of financial products/services by Sohar Islamic conducted in return for an explicit fee, charge, discount, commission, or similar shall be subject to VAT. Where Sohar Islamic levies explicit fees for Outward/ Inward Remittance Advice Requests, standard rate of VAT would be applicable.

Where fees are paid in a foreign currency, the VAT amount payable to Sohar Islamic would be in foreign currency.

Based on the VAT legislation, when issuing tax invoice to the client, Sohar Islamic is required to convert foreign currency to local currency (OMR) based on the rates prescribed by the Central Bank of Oman.

Foreign currency exchange is typically on an implicit margin basis and would be exempt from VAT. Any service fees relating to the foreign currency exchange will however be subject to VAT.

Where a reversal of a transaction is applied, the original exchange rate shall be used for reversal of the VAT amount.

No VAT shall be due on supplies of goods and/or services which have been completed before 16 April 2021. Where, however, the supply continues before 16 April 2021 and after, VAT may be payable on the portion of the service rendered after 16 April 2021.

The VAT legislation prescribes that commission on issuance of trade guarantees shall be subject to 5% Oman VAT. Commission on Trade Guarantee issuance is charged by banks to their clients to cover the continuous risk during the lifetime of this product and therefore, are in scope of the transitional rules.

Therefore, where payments are received before 16 April 2021, but effectively relate to services after 16 April 2021, VAT may be payable on the portion of the service received after 16 April 2021 (if any). Therefore, Sohar Islamic will be required to raise an additional invoice for VAT on fees paid before 16 April 2021 but which relate to services also performed after 16 April 2021.

Where you are a corporate client of the Bank, or an individual client you will receive a tax invoice from Sohar Islamic within 14 days after the end of each calendar month. Where you would like to receive a separate tax invoice, kindly send a request to VATINFO@soharinternational.com and we shall send you your tax invoice accordingly.

For the avoidance of doubt, clients will continue to receive their monthly bank statements.

A valid tax invoice is a document that will serve as evidence for an input tax claim by a VAT Registrant from Oman Tax Authority.

It should contain all information as prescribed by the VAT-Decree Law and the VAT Executive Regulations, such as (but not limited to) a supplier’s VAT Identification Number (VATIN), the client’s VAT Identification Number (VATIN) (if applicable), the appropriate VAT rates and the amount of VAT payable by the client.

If you are registered for VAT with the OTA and you have not provided us with your VAT Identification Number (VATIN), please immediately send the following to VATINFO@soharinternational.com so that we can include your VATIN on all future tax invoices:

• You’re VATIN along with a copy of the VAT Registration Certificate
• Your Sohar Islamic Account Number (if not available, please provide us your most recent transaction reference);
• Legal Name of the entity to which you are registered at Sohar International Bank.

Tax invoices shall be provided to our clients either in hard copy or electronically.

A tax credit note is issued only when where the value of a supply of an original charge that was subject to VAT has reduced or cancelled. The frequency of reversal of VAT entries shall correspond with the frequency of reversal of charges.

Financial services conducted in return for a fee, commission, discount, and rebate or similar shall be subject to VAT. As a vast majority of services provided by our Custody department such as Safe Keeping Fees, Portfolio Fees, Trade settlement fees, Transaction fees etc. is fee or commission based, VAT would be applicable.

Products offered by our Cash division follow the same rules for financial services as our other products. In general, all fees and commissions such as Domestic transfers RTGS and Cashier Order charged by the Bank shall be subject to VAT. However, if you are established outside Oman, VAT may not apply as the services are likely to be treated as “exported” from a VAT perspective meaning it qualifies for a zero-rated treatment.

Generally, all fees and commissions charged for trade finance products and services such as Trade structuring fees, facility fees, commission on issuance of guarantees etc. are subject to 5% VAT. Exported services, however, will be subject to 0% VAT (‘zero-rated’). The interest / profit charged on the financing of the trade finance product and services are VAT exempt.

Where Sohar Islamic is providing services to clients established outside Oman, then these services may qualify for zero rated treatment and will not attract any VAT.

VAT should only be applicable on financial services where these are conducted against an explicit fee or commission. Where financial services are conducted on an implicit margin, interest- or spread-basis, and these services should be treated as VAT Exempt.

With Derivatives, Foreign Currency Exchange services or the provision of Swaps typically the latter is the case and, as such, no VAT should be applicable on these products. However, where there is an administration / processing type fee associated with one these products, which are both examples of explicit fees, VAT would be applicable on the fees charged.

Islamic Finance Financial Markets Transactions shall be treated in parity with conventional Financial Markets transactions.

Islamic banking products are subject to the same VAT treatment as conventional products in order to ensure tax neutrality. Where, in example, a service charge or fee (including Wakalah fee) is being charged to the client, it shall be subject to VAT.

In case of any queries, please send your queries to VATINFO@soharinternational.com or your usual points of contact. For further information, please visit the website of Oman Tax Authority https://tms.taxoman.gov.om

Sohar Islamic will continue updating its website (https://www.soharislamic.com/) with new developments relating to the introduction of VAT in Oman.