At the core of Oman’s VAT system is the concept of input tax credit. This concept allows a business to recover his VAT paid on purchases/expenses and offset it against the total VAT paid. The most important requirement is that these purchases or expenditures are used directly or indirectly to produce taxable supplies.

Taxable items brought in and sold
If you are a trader who buys or sells taxable items, you have full rights to charge input tax on these purchases. For example, Crystal Enterprises LLP is a distributor of electronic products. They brought in 50 TVs worth OMR 20,000 and paid OMR 1,000 VAT. All these TVs are sold to customers at 5% VAT and are therefore entitled to an input tax credit of OMR 1,000. If you use these for your own use, there is no input tax credit within the scope of your own use.

Goods/services used in the production of finished products.
You are entitled to an input credit for the purchase of raw materials or services used in the production of finished goods. The only requirement for this is that the finished product is a taxable product. In other words, the finished product must not be a product declared tax-exempt.

Farhan Enterprises buys 20 kg of aluminum road for him 1,000 Omani Riyals and pays his VAT of 50 USD. The entire 20kg aluminum street is used to manufacture taxable aluminum ladders. In this case, Farhan Enterprises can claim an input tax credit of OMR 50 as it is used to manufacture taxable supplies.

Business Expenses
Operating a business entails a number of costs. Businesses can claim input tax on expenses incurred in connection with carrying out business activities or providing taxable goods. If you use repair and maintenance services to keep your machinery running, you are entitled to an input tax credit.

Similarly, all such operating expenses are eligible for input tax credit. However, certain expenditures, such as entertainment services, motor vehicles, and food and beverages, are excluded from the input tax credit.

Fixed Assets
Fixed assets are business assets intended for long-term use. These are not intended for sale in the normal course of business operations, but are used or consumed in the business. You are entitled to claim the VAT paid on these investments as an input tax credit. The law allows input tax to be deducted in the first year of capital acquisition. Again, this is based on the intended use over a specific period of time (5 or 10 years depending on the type of asset). If the intended use changes (exemption or persona use), you are obliged to make corresponding adjustments.

How does VAT software help with input tax credits?
There are a number of purchases and expenses that can be claimed for input tax credits, but it is the responsibility of the company to claim this. it is possible

You can also Register for VAT Registration on our website:
https://thevatconsultant.com/