Oman’s VAT guide for the oil and gas sector for 2022

Oman’s Oil and Gas sector is one of the key drivers for country’s economic development. According to the Omani 2022 Budget, oil and gas industry accounts for 68% of the Sultanate’s earnings. Oil, oil derivatives, and natural gas are all entitled to a zero-rated VAT in accordance to the Omani VAT Law. 

On January 6, 2022, the Omani Taxation Authority (TA) issued a VAT Guide, written in English, that clarifies the implementation of VAT legislation in the Oil and Gas business. The Guide covers critical practical issues and provides further interpretation and guidance for the Sultanate’s oil and gas industry.  

GUIDE’S OVERVIEW 

• Fundamental legal provisions and definitions. 

• • All conditions under Article 93 of ER* must be fulfilled to any domestic supply of goods or services.  

• • Article 93 (3) also states that the ‘supplier and the customer must be registered and licensed by the Ministry of Energy and Minerals (MEM) to carry out primary and intermediate activities…’  

• VAT treatment of the following: 

• • Scope of supply for crude oil, oil derivates, natural gas, and related goods and services that are applicable for zero-rated VAT. 
  • Detailed scope of operations in the upstream, midstream, and downstream sectors. 
  • Transactions involving the government in sovereign and “on-sovereign” capacity, including royalties or fees paid to the Ministries 

• • Business deals involving joint venture partners 
  • Transactions involving operators 
  • Operator procurements and their transactions with affiliates 
  • Contractors and sub-contractors’ supply. 

• Clarifications on the transit and storage of goods.
• Regulations governing the source of supplies.
• The handling of imports of goods and equipment into Oman. 
• Supply of aviation and marine fuels.  
• Requirements for invoicing and reporting. 
• Processes for payment and refund. 
• Auditing regulations and TA inspections. 
• Penalties for late filing, late payment, and non-compliance. 

It is important to note that the guide is not a substitute for the VAT Law or its executive regulations. By providing a detailed interpretation of Article 93 of the Omani VAT Executive Regulations (*ER), the tax authorities clarify the conditions for zero rating supplies within the oil and gas sector. Additional requirements for applying the zero rating in the upstream and midstream transactions were also specified. For upstream/midstream work, contractors must provide their Joint Suppliers Registration System (JSRS) certification as evidence of ‘MEM license’ for VAT registration. As a result, firms must evaluate their VAT status considering the clarifications to ensure compliance. 

Source: tms.taxoman.gov.om