Oman’s economy is on the cusp of change as the GCC country charts its recovery plans for the post-pan-demic future. The introduction of value added tax (VAT), which is scheduled for implementation from 16 April 2021, is an important step in this direction. The tax will add OMR300m ($779m) to Oman’s economy this year and help to curb the country’s widening budget deficit as it contends with the financial impact of the coronavirus pandemic and lower crude prices. In the long term, VAT returns will serve as an additional re-source for Oman’s national revenues, helping to enhance the quality of public services; reduce the country’s dependence on oil and other hydrocarbon products as major sources of income; and provide further impetus for talent nationalisation initiatives.
The standard rate of VAT in Oman will be 5%, which is in line with the GCC Unified Agreement. Provisions for lower VAT rate (i.e., zero rating) and exemptions are included in Oman’s VAT law. VAT will impact all de-partments across construction companies in Oman, as well as ongoing and future projects in the country. Every item and element linked to a construction project is likely to be liable to VAT. These individual tax amounts may appear manageable when viewed in isolation, but incorrectly recording these sums could cause significant challenges for project development and finance teams in the new VAT environment.
With VAT law coming into effect on 16th April 2021, all businesses will need to comply to the requirement of accounting, reporting and submitting the VAT return as per the return filing dates. Contractors in Oman must therefore implement specialised software that can equip them for an easy transition into the VAT environ-ment with minimal amendments to their cost accounting and reporting processes.
Why RIB CCS
Candy and BuildSmart have been tailor-made for the construction sector, and can record, report and man-age project progress all the way from initial estimates through to handover.
RIB CCS clients in the UAE experienced immense success with VAT-readiness when tax was rolled out in 2018. For the hundreds of contractors that were already using BuildSmart, VAT calculations were introduced to ongoing and upcoming projects with a quick and easy activation process.
BuildSmart is one of the first enterprise management systems to be VAT compliant and offers the benefit of rapid implementation times, which is essential for construction companies pursuing VAT-readiness in Oman.
More importantly, it helps contractors avoid the cumbersome and cost-intensive task of having to pay for the development of a customised software.
Customers using BuildSmart are buying into a system that has been fine-tuned based on experience gained from years of working closely with contractors. It is, in essence, a ready-to-go platform that is based on best practices and requires minimal changes.
Together, Candy and BuildSmart provide end-to-end coverage that equips contractors to account and report the VAT information correctly and file VAT returns timeously.
How it works
The seamless links enabled by Candy and BuildSmart mean that every process and transaction is properly identified with each incoming and outgoing payment reported on an individual project level. The systems also track transactions for shared project resources, such as equipment or manpower, that are parceled for use across multiple projects.
The ability to collect, report and analyse data at this granular level means project teams can ensure that VAT paid for every item or service can be accurately applied as a tax credit.
RIB CCS BuildSmart caters to the premise that VAT is intended to be borne by the end-user. This means VAT already paid along the way is deducted in real time, with users able to accurately record and report the net tax value that is due to be paid/received.
The Omani angle
Besides the obvious merits of using Candy and BuildSmart as an integrated Cost Management Solution to monitor project finances, there is an additional benefit to their use for contractors in Oman.
Businesses will be required to maintain tax records for a minimum of 10 years as part of the Omani VAT law. This is unlike the record-keeping requirements of VAT laws implemented in other GCC states.
For construction companies in Oman, this makes the adoption of BuildSmart all the more essential given its ability to track, identify and record VAT-applicable transactions.
The complexity of budgeting and financial tracking for construction projects can never be taken lightly, particularly when failure to accurately complete these tasks may lead to non-compliance with tax laws. RIB CCS is ready to assist its Omani clients as they pursue a smooth transition to the new VAT environment with BuildSmart ahead of the VAT rollout on 16 April 2021.
Find out more here
