Value Added Tax (VAT) | Oman Arab Bank

Dear Valued customers,

We trust this message finds you well.

As you are aware, Oman’s taxation framework has undergone some recent changes. These changes include, among other things, the introduction of the Value Added Tax (the “VAT”) starting 16 April 2021 through the VAT Law issued by virtue of Royal Decree No. 121/2020 and Oman Tax Authority Decision No. 3/2021 (the “VAT Legislation”).

The VAT is a consumption tax, which means that it applies to most goods and services purchased and availed by consumers within the Sultanate. The VAT Legislation sets the standard rate of this tax to 5% except where certain goods and services are either specifically exempted or zero rated.

Our systems will be designed to ensure that VAT is charged, collected and deposited on accrual or receipt basis (whichever is earlier) in accordance with the VAT Legislation. We will, therefore, be issuing valid tax invoices charging VAT at applicable rates on all our banking products and services starting 16 April 2021 in order to be VAT compliant.

As we, in Oman Arab Bank, care about your banking experience with us, we would like to bring to your attention the following points that we deem important in light of the recent changes:

If you are a retail customer,

Please note that our banking products tariff has changed, please click on this link to get yourself acquainted with our new banking products tariff list after the introduction of the VAT, that is all you need to do.

If you are a corporate customer,

The new VAT-inclusive tariff list of our corporate banking products is available on this link . We also require your cooperation to achieve the following:

Make sure you are registered as per the VAT Legislation. We recommend you obtain professional advice to check whether you are subject to VAT registration;
Complete the VAT Information Collection Form that you can download by clicking on this link , have it signed, scanned and sent to us via e-mail to vat-registration@oman-arabbank.com by 31^st May 2021;
If you do not wish to submit the VAT Information Collection Form (downloadable through the above link) via e-mail, then you can fill it up and submit it to your Oman Arab Bank branch by 31^st May 2021;
If you do not share with us the information required in the VAT Information Collection Form, we will not be able to provide you with valid tax invoices; this may result in unnecessary and unrecoverable cost for your company;

If you are a borrowing corporate customer,

In addition to the preceding points applicable to all our corporate customers, please note that:

The terms and conditions of your facilities agreements with us have changed to be in line with the new VAT framework;
Please click on this link to see the changes to your facilities agreements; and
You may have received an email or a courier in this regard; if you did so, please comply with the instructions described therein.

We hope that this message helps you have a better understanding on your banking relationship with us in light of the new VAT framework, and if you have any questions please click on this link to get some responses to frequently asked questions in this regard.

Thank you for choosing Oman Arab Bank.

Best regards.

Legal

CREDIT FACILITIES AGREEMENT – GENERAL TERMS AND CONDITIONS

AMENDMENT SHEET

Effective from 16 April 2021, the following language is hereby incorporated and deemed as an integral part of your Credit Facilities Agreement – General Terms and Conditions with Oman Arab Bank SAOG by virtue of Article 20.2 thereof:

In Article 2 (DEFINITIONS), the following is hereby added:

Para. 2.15

“Oman VAT Law” shall mean any Royal Decrees, Ministerial Decisions and official rules and regulations issued by any competent official authority in the Sultanate of Oman that are imposing or relating to the imposition or administration of a value added tax or goods and services tax in the Sultanate of Oman and any regulation made under the aforementioned rules and regulations.

Para. 2.21

“VAT” shall mean value added tax, goods or services tax or any similar tax imposed in accordance with the provisions of the Oman VAT law.

An Article 22 (TAX-RELATED MATTERS), is hereby added as follows:

Unless herein stated to the contrary, and otherwise provided in this Agreement, any amounts payable by the Customer under this Agreement shall be exclusive of any taxes including by way of example VAT.

Where VAT is payable by the Customer under this agreement, the consideration – notwithstanding the definition of “consideration” in Oman VAT Law – for the services and/or transactions contemplated under this Agreement (VAT exclusive) shall be increased by an amount equal to the amount of VAT applicable at the prevailing rate according to the applicable Oman VAT Law at the time the services and/or transactions are supplied and/or consummated.

Any amounts of VAT due to OAB from the Customer under this Agreement shall be payable within thirty (30) days from the earliest of the date of the VAT invoice or of the supply and/or consummation of the services and/or transactions contemplated under this Agreement.

The remaining terms and conditions shall remain unchanged.

Hamida Al Balushi
Head of Credit Administration Department
For Oman Arab Bank SAOG

Collection Form

Frequently Asked Questions

OMAN ARAB BANK VAT FAQs

What is VAT?

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.

Why is the Oman implementing VAT?

The Sultanate of Oman provide citizens and residents with many different public services – including hospitals, roads, public schools, parks, waste control, and police services. These services are paid from the government budgets. VAT will provide the country with a new source of income which will contribute to the continued provision of high-quality public services into the future. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

What is the rate of VAT?

There are two VAT rates applicable within Oman

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

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

Is VAT applicable on all the products and services provided by Oman Arab Bank?

Yes. Oman Arab Bank being a VAT registered business is required to charge and collect VAT on its taxable supplies in Oman

Is it mandatory to pay VAT?

Exceptions to VAT are only by law, and the Tax Authority publishes these. There is a possibility for business owners to claim back their VAT payments, provided they have registered for VAT and meet the requirements. For further details, please visit https://tms.taxoman.gov.om/portal/web/taxportal/vat-tax

I am a business owner. I have registered with the Oman Tax authority and have received my certificate and VAT registration no. Do I need to share this with Oman Arab Bank?

Yes, once you receive your Tax registration number (VATIN) you are required to send it to us. This is important for us to update your account details and ensure that your VATIN is reflected in your monthly invoice. Currently this VAT registration no can be shared with your dedicated relationship/account manager.

I am a Corporate C How will VAT affect me?

In line with Government mandate, starting 16 April 2021, VAT at 5% will be added to any service charge when you conduct any transaction that attracts VAT

Will I be charged VAT on Credit Card Transactions?

No, VAT does not apply on Credit card transactions, however will apply in the case of Annual fees, payment or any other applicable service charges.

How is VAT added to goods and services?

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.

Is Oman Arab Bank required to charge VAT?

Yes. Oman Arab Bank, 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 the ‘OTA (OMAN TAX AUTHORITY)’).

Are services rendered by Oman Arab Bank subject to VAT?

A supply of financial products/services by Oman Arab Bank conducted in return for an explicit income where the payment of the consideration is as a fee, commission or commercial deduction shall be subject to VAT. However, supplies of other financial services if remunerated by way of an implicit margin (such as interest) shall not be subject to VAT as these qualify to be treated as exempt supplies.

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

When I repay an amount borrowed from the Bank (for example a loan or an amount on credit card), will I be required to pay VAT in addition to the amount borrowed?

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.

Is VAT applicable on withdrawals made from Current, Deposit or Savings Accounts?

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.

Will I be notified of the fees and charges that are subject to VAT prior to the transaction? For example, in ATM, branches or online banking, etc.

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

Will the VAT treatment change for transactions performed via different channels?

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

How will Oman Arab Bank apply VAT on its charges?

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.

What is the bank’s Tax Registration Number?

The bank’s Tax registration number is [OM1100005523].

How will VAT be charged if I make the same type of transaction several times?

VAT is a transaction based tax. Accordingly, VAT (if applicable) will be levied on each instance of a transaction i.e. if monthly bank fees are levied, then VAT will be levied on each monthly fee charged by the bank.

Will there be VAT charged on withdrawals made through an ATM?

VAT will not be charged on the withdrawal amount. However, any withdrawal fees charged will be subject to VAT.

Will VAT charges be refunded if my transaction is cancelled or unsuccessful?

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.

Can Oman Arab Bank waive the VAT amount payable by me?

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

Remittances

Is VAT applicable for all local payments made and / or received (e.g. telegraphic transfers & Online Banking)?

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

How will VAT be charged where I have paid fees in a foreign currency?

Where fees are paid in a foreign currency, the VAT amount payable to Oman Arab Bank would be in foreign currency. Based on the VAT legislation, when issuing tax invoice to the client, Oman Arab Bank is required to convert foreign currency to local currency (OMR) based on the rates prescribed by the Central Bank of Oman.

How are foreign currency exchange transactions treated from a VAT perspective?

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.

If VAT is reversed on a fee paid in a foreign currency, which exchange rate will be used to reverse the VAT amount?

If the foreign currency transaction and its corresponding fees is reversed, then the original exchange rate shall be used for reversal of the VAT amount charged on the fees”

Will I receive a tax invoice from Oman Arab Bank?

Yes every transaction where VAT is being levied from Oman Arab Bank, the tax invoice will be emailed to your registered email within 72 hours of transaction

Where you would like to receive a separate tax invoice, kindly send a request to

VAT@oman-arabbank.com and we shall send you your tax invoice accordingly.

I am a corporate customer, can I claim VAT on my banking expenses?

If you are an Oman VAT-registered business, you will be able claim the VAT incurred in respect of banking expenses, subject to certain conditions being met:

You are in possession of a valid tax invoice;
You paid the consideration amount; and
The VAT incurred is in respect of the making of taxable supplies.

What is the purpose of a valid tax invoice?

A valid tax invoice is a document that will serve as evidence for an input tax claim by a VAT Registrant from OTA (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 registration number, the client’s VAT registration number (if applicable), the appropriate VAT rates and the amount of VAT payable by the client.

How is VAT charged on Cash management products and services?

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.

Trade Finance

Are Trade Finance products subject to VAT?

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 is VAT exempt.

I am a business established outside Oman, acquiring services from the trade division of Oman Arab Bank, would I need to pay VAT in Oman on the services I am acquiring?

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

For any additional queries please contact us on vat@oman-arabbank.com

General Transitional Rules

Will there be VAT charged on supplies with contracts and agreements entered into prior to 16 April 2021, but straddles 16 April 2021?

E.g. for Safe Deposit Box charges, charged on 1st January 2021 for the entire year?

In the event a supply straddles the time between pre and post VAT, the proportion of the supply that falls under the VAT effective period will attract VAT. For example – if a customer has a safe deposit box, which is effective 1 January 2021 to 31 December 2021, and the fee is OMR 120 p.a. VAT will apply for the period between 16 April 2021 to 31 December 2021, and VAT should be calculated on OMR 85 (i.e. 120* 8.5/12).