As Oman is all set to welcome the new tax reforms with the introduction of Value Added Tax (VAT). it is a little difficult at this point to predict what lies ahead for one of the most prominent and flourishing sectors in the economy, namely hospitality and tourism, once the VAT in Oman comes into the picture.
Who is exempted from VAT in Oman?
You are exempted from VAT in Oman if you meet the following criteria:
The businesses whose annual value of supplies is below the voluntary registration threshold of 19,250 OMR are exempt from VAT registration. Businesses that are engaged in making only zero-rated supplies may request a VAT registration exemption.
How will VAT in Oman Impact Your Travel Business?
VAT will probably acquire remarkable changes in the way business is being done by travel & hospitality firms. It will influence them to revamp their supply chain and marketing strategy. . For this reason, the impact of VAT on this sector needs to be closely monitored. The industry is expecting that the government will strike a balance and will not saddle the hospitality and tourism industry with too many extra costs in order to avoid a large impact on the consumer which may lead to a decline in demand.
People hailing from the tourism and hospitality industry are well aware that it is not a sector that can be presented as a whole from the purview of VAT. It is known as a mainstream area for goal weddings, shopping celebrations and games occasions.
How Will VAT in Oman impact the Tours and Travel Business?
When it comes to tours and travel there are various things to take into consideration, while deciding on VAT risk. Particularly for air travel, there are several charges ranging from excess baggage charges, cancellation charges, and no-show charges, to onboard food and beverage charges each of which has different tax treatments.
Sub-Divisions of Tourism & Tour Operators
The tourism sector primarily consists of the following sub-divisions: tourism and tour operators, airlines, hotel industry etc. The range of tourism and hospitality services under these categories is quite vast and may include the following –
- Transportation services
- Tour packages
- Hotel accommodation services
- Restaurant meals
- Ticket fares
- Entertainment costs (telephones, internet, television, recreational fees and several other conferencing activities, exhibitions, etc.)
- Service charges
- Agency services (acting as an agent or principal).
The reason the intricate nature of the hospitality and tourism businesses contributes heavily to the implementation of the VAT is essential to recognize the different kinds of transactions that may have been taking place within the industry, but also the connections that are formed as an inevitable outcome of making these transactions.
Impact of VAT in Oman On The Tourist
When a domestic tourist deals with a travel ‘agent’ for a package on an overseas trip, the said agent is liable to look after every aspect of the tourist’s requirements. For example, a travel agent books an overseas flight and will also arrange for the accommodation and important aspects for the tourist overseas. The services offered would probably be considered zero-rated from the perspective of Oman as the basic supply will take place offshore.
The handling of the charges made by the ‘agent’ for the services he provided, might, however, be dependent on whether the ‘agent’ is serving in the role of an actual agent or as a principal. In this case, it is the tourist’s movements that in multiple ways will define whether supply will be zero-rated or should be brought under the VAT system at standard cost, rather than the VAT status of the travel agent.
With VAT Implementation, large organisations, hotels, travel agencies etc have already begun preparations for VAT implementation as it needs major changes in their IT systems. But a large number of smaller travel agents will face some difficulty in clearly understanding their liabilities and complying with them.
Travel businesses should be prepared for quantum shifts
Your travel business should be prepared for quantum shifts in how the operations are being carried out. This is when Systrix can be beneficial to address your VAT requirements within the hospitality and tourism industry.