Oman: Capital Assets VAT Guide (Arabic)
The VAT Guide on Capital Assets was recently produced by the Oman Tax Authority (OTA). The guide is only offered in the Arabic; however, an English-language version will be released on the OTA VAT website soon.
What are Capital Assets?
Capital assets are defined under Oman VAT legislation as tangible and intangible assets that are part of a taxable person’s business assets and are designated for long-term use as a business instrument or means of investment. It contains the following items:
- The purchase or acquisition of a land parcel, a building, or both land and buildings together.
- Construction of any structure
Clarifications on the VAT Guide
- Deduction of Input Tax
Input tax on the purchase, import, or building of capital assets is normally deductible if utilized in the manufacture of standard- or zero-rated taxable supply for VAT purposes.
- Partially used Capital Assets
Input tax deductions are permitted proportionately when a capital asset is utilized partly for taxable supply (i.e., mixed-use). This is often calculated by dividing the value of taxable supplies by the total value of taxable and exempt supplies, however alternate ways of calculating deductible input tax may be permitted.
- Adjustment Period of Capital Assets
Capital assets have an adjustment time of
- 10 years for long-term assets (land, buildings, and other immovable property), and;
- 5 years for other capital assets.
If the use of a capital asset changes or a capital asset is disposed of within the adjustment period, an adjustment for input tax may be made using the established formulae. Adjustments may also be required when a capital asset is transferred as part of a going business or when a taxpayer enters or departs a tax group.
How do I figure out how much I owe in VAT on capital assets?
The VAT regulation specifies the technique and formula for calculating the amount that must be changed in order to determine the input VAT adjustment for capital assets.
Formula:
The following steps can help you adjust:
- Calculate the total input VAT on capital goods.
- Divide the total input tax by the asset’s useful life. It is ten years for long-term capital assets and five years for other capital.
- Multiply the result by the change in usage, which is the difference between the initial recovery in the first year and the actual consumption in that year.
- The outcome of the events described above will either be an extra payment (a result that is positive) or a higher reclaimable of input VAT (negative result).
Source: taxoman.gov.om
