Oman VAT Guide for Capital Asset Adjustments

In May 2022. the Oman Tax Authority (“OTA”) published the VAT Guide for the purchase and use of Capital Assets.

• Capital Assets
  • Tangible and intangible assets
  • Intended for long term use
  • Used as business instrument or investment vehicle
  • Not held for resale during normal economic activity

• Input Tax Deduction on Initial Acquisition
  • VAT incurred by a Taxable Person upon acquisition of a Capital Asset (by purchase, import or construction) may be deducted as Input Tax at the time it is incurred. If used for both taxable and exempt supplies, use proportional deduction.
  • Default method
    • based on ratio of taxable supplies to total supplies

• Change in use of Capital Asset

• Alternative method
  • based on actual use, subject to approval of the OTA

• Arises if the use of the asset changes from making taxable supplies to non-taxable supplies, or vice versa, or if the taxable use percentage changes.

• Adjustment period is 10 years for long-term capital assets, and 5 years for all other capital assets

• Other GCC VAT-Implementing Countries: UAE, KSA and Bahrain
  • Proportional deduction of input tax on capital assets is applied across other VAT-implementing GCC countries. It also follows the same adjustment period, except for KSA which applies 10 years for real estate and 6 years for tangible/intangible assets.

• How can Crowe help?

• Assess the propriety of tax treatment on input tax related to capital assets

• Assist in the application of default or alternative method for input tax recovery.

• Assist in the preparation of VAT returns, properly reporting the input tax related to capital assets, and reflecting the applicable adjustments, if any