VAT in Oman

Value Added Tax (or VAT) is a tax on the sale of most goods and services. It will be implemented in Oman on the 16th April 2021. The UAE, Saudi Arabia and Bahrain have already implemented VAT whilst it is expected that Kuwait and Qatar will follow soon.

VAT is an indirect tax. An indirect tax is a tax which is collected from customers by businesses (e.g. MetLife) and is passed on to the government. This tax will be used by the government to pay for public services- hospitals, schools etc.

The standard rate of VAT is 5%. Some goods and services will be subject to VAT at 0%, and others will be exempt from VAT or outside the scope of VAT altogether.

VAT registered businesses will charge and add VAT to the value of goods and services they provide to customers.

For policies billed after 23th of April 2021, if the product is subject to VAT, the premium payment will be subject to an additional 5%. This VAT will be paid by MetLife to the tax authorities.

Businesses like MetLife will essentially be acting as the tax collector. Businesses will be responsible for collecting this tax from customers and passing this on to the government.

Life insurance will not be subject to VAT (i.e. VAT exempt) and general insurance (A&H and group medical) will be subject to VAT at 5%.

If your policy will be subject to VAT (i.e. general insurance policies), we will send to you a follow-up communication with the details of the new premium.

CMA fees for general insurance is 1.6% and for life insurance is 0.55%. There will be no change to CMA fees once VAT is implemented. For general insurance policies, VAT will be charged on top of CMA fees.

For insurance products subject to VAT, VAT will be due on the portion that relates to the period starting 23th April 2021. Therefore, even though you have already paid the premiums for the period post 23th April 2021, VAT will still apply.

• FOR INDIVIDUALS (transitional policies)- MetLife will absorb the VAT on premiums which were due prior to 16th of April 2021 in respect of the billing period starting before but finishing after 16th April 2021.
• FOR INDIVIDUALS (policies which are billed post 23 April 2021)- on the next billing cycle, starting after the 23th April 2021, you will be provided with a VAT invoice which will show the premium plus VAT on your taxable policy. In effect if your premium is subject to VAT, your premium will increase by 5%. Please note that this VAT is then payable by MetLife to the tax authorities. So for example, if your billed premium (which is a non-life policy) is currently OMR 1,000, on the next billing cycle post 23th of April 2021, the total cost will be OMR 1,050 which is split into the following:
  - Premium of OMR 1,000
  - VAT of OMR 50- this VAT is collected by MetLife and paid to the Tax Authorities.

Life policies will not be subject to VAT and the premiums will remain the same.

Yes, if the policy is subject to VAT we will send to you a Tax invoice. From 23th of April you will find that the premium notice document will be slightly amended. This is to ensure that it includes all the information that is required in a valid VAT invoice.

It is this VAT invoice (rather than a receipt) which will show the premium and VAT amount payable. The receipt will show the premium inclusive of VAT (if applicable)

If you as an individual move out of the Oman but within the GCC, VAT will still apply.

If VAT was applied on the original premium, then any surrender of policy will also include VAT.

Will VAT be applicable only on the initial premium set in the contract? What about excess premiums, is it also subject to VAT?

Policy/ certificate holders can only claim back VAT paid if the policyholder is VAT registered, have a valid VAT invoice and the policy/ certificate taken was for the purpose of their business and not blocked from input tax recovery.

If the riders have separate prices on the policy, then the life policy will be an exempt service and the non-life rider will be subject to VAT. MetLife will be required to apportion the single charge. The proportion for the exempt service will not be subject to VAT while the proportion for the rider will be subject to VAT at 5%.