VAT Fines & Penalties

Non-compliance of VAT: Stringent fines and penalties

Under the VAT regime, taxable persons including business corporates need to be aware of the provisions of the VAT Law that can invite administrative fines and penalties for non-compliance. Administrative penalties are additional amounts payable by a person and may also attract imprisonment for breaching the provisions of the VAT Law. Today’s discussion will reveal these provisions and keep us vigilant on any deviation from the Law. Let us look into the most important Articles as below:

Art. 100 of the VAT Law:

• Imprisonment – 2 month to 1 year, and or
• Fine – RO 1,000 to RO 10,000

The above penalties will arise under following circumstances:

Responsible Person & Information

• If a taxable person fails to identify a responsible person and responsible person fails to notify to the Tax Authority on his replacement, in his absence from the Sultanate of Oman for more than 90 days.
• In case of request by the Tax Authority to see the responsible person and the person fails to appear in front of tax authorities.
• Failure to inform the tax authority regrading changes or updating the data with tax authority.

VAT Compliant Invoicing

VAT compliance begins with VAT invoicing. Every single invoice generated or transaction recorded must be done in a VAT compliant way. The invoice should be as per the tax invoice format published by the Tax Authorities.

• Any failure to maintain tax invoices or correct accounting records, import & export documents related to the tax return, or
• Issuing tax invoices with the incorrect tax amount will also attract the penalty.

Tax Return & Supporting Documents 

Failure to submit a Tax Return for any Tax Period within the deadline.

Not cooperation with Tax Authority

Any action by the taxable person to prevent the tax authority officer or delegates to perform the required assessment, also failure to provide the tax invoices, accounting books, data, records required by the tax authorities will attract penalties.

Further, there more rigorous penalties as below:

Art. 101:

• Imprisonment – 1 year to 3 year, and or
• Fine – RO 5,000 to RO 20,000

VAT Registration

Deliberate failure to register with the tax authority within the time frame provided by the Tax Authority in accordance with the threshold criteria and the Ministerial decision no. 3/2021.

Incorrect Tax Return

• If a taxable person deliberately submits the incorrect tax return or forged the supporting accounting documents to reduce the tax due amount.
• In case of someone deliberately motivates the taxable person in submitting returns or records or other documents that are incorrect.

Assessment by the Authority

If a taxable person deliberately destroys, hide or dispose any documents, records, accounts, lists or any other document requested by the Authority for submission in case of assessment, within (1) year from the Authority’s notification receipt date.

It is important to know that in the case of repetitive non-compliance, the court may double the penalty and increase the imprisonment to the maximum of the legal threshold of punishment but not exceeding half this threshold.

As we know that the Executive regulations are still awaited and the same shall provide more clarity on the administrative penalties that may be imposed on the violator. It is advisable to the taxpayer to be aware of the consequence of non-compliance for the VAT law and should seriously look-forward for timely registrations and VAT impact assessment in their organizations.