2020

According to news reports, in a statement issued by the Saudi state news agency, Mohammed Al-Jadaan, the Finance Minister of Saudi Arabia, has announced an increase in the rate of VAT from 5% to 15% in Saudi Arabia from 1 July 2020.

The announcement comes after Saudi Arabia posted a budget deficit of USD 9.07 billion in the first quarter of 2020 and is reported to have cancelled/postponed certain operating and capital expenditure and also cut allocations on projects worth USD 26.6 billion.

The austerity measures are intended to help Saudi Arabia stabilize non-oil revenues and cope with public finances currently pressured by low oil prices and Covid-19. This, however, comes as an unexpected move after the recent tax announcements by the General Authority for Zakat and Tax easing tax return filing, tax payment and penalty provisions to help businesses navigate the impact of Covid-19.

The move also seems to be a deviation from the Common VAT Agreement of the States of the Gulf Cooperation Council (GCC Common VAT Framework Agreement) that only empowers member-states to levy VAT at the standard rate of 5% on taxable supplies that are not specifically exempt or zero rated (Article 25).

To access our detailed tax alert on the implications of the increase in the VAT rate in Saudi Arabia please click here.

Development in the UAE

The United Arab Emirates (UAE) introduced VAT on 1 January 2018, the same time as Saudi Arabia, and is faced by similar economic pressures. However, according to recent news reports, in an official statement issued after the announcement by Saudi Arabia, UAE’s Ministry of Finance has confirmed that they have no current intentions to increase the rate of VAT.

Budgetary Challenges in Oman

Oman, like many other countries in the region and outside, is significantly challenged with the sharp slump in international oil prices and the economic instability created by Covid-19 that continue to impact the country’s credit rating. Since the beginning of 2020, the Ministry of Finance has issued many circulars and a set of directives to government units to reduce the volume of spending. In April 2020, the Ministry of Finance announced a cut of OMR 500 million in the State Budget.

Oman has been preparing for the introduction of VAT for quite some time. This includes drafting the VAT law and executive regulations, as well as having systems in place to implement VAT when the government takes a decision on the implementation date. In an interview with Bloomberg at the World Economic Forum 2020 in Davos earlier in January this year, His Excellency Ali bin Masoud Al Sunaid, Minister of Commerce and Industry in Oman, confirmed that Oman would introduce VAT “sometime during the beginning of 2021”.

Given recent unexpected challenges, Oman may consider the possibility of implementing VAT more quickly, in a phased manner. In this case, businesses may not have a long period of time to prepare for implementation. 

Would you please tell us a bit about Azooz, and a bit about yourself as well, as a new member of the OABC?

Azooz is an online delivery app that was created with a vision to enable the Omani producers/manufacturers to sell their products directly to the consumers in Oman. For example, through Azooz,

1. A customer in Madinat Qaboos is able to order a fresh chicken from a farm in Ibra and get it delivered within few hours of ordering.
2. A home-based business lady is selling her spices directly to a customer in AL Mouj
3. And many more examples like this

Whether small or big, Omani manufacturers/producers have a direct reach to customer’s homes through Azooz and are benefitting by more volumes and margins.

As Managing Director of Al-Hathaifa (and AZOOZ), I have been in Oman for last 22 years and started my journey from the oilfield to now a business that is unconventional and challenging in many ways.  The vision of Azooz is shared by my Omani partner and a great set of advisors who always are trying to bring a new dimension in Azooz. We have plans to work very closely and develop home-based businesses, SMEs, and hopefully will create an ecosystem for better reach for their businesses. We also have plans to bring models based on subscriptions, that will bring next level of convenience to consumers in Oman.

What has the day-to-day work been like in the past few months, and how does it compare to the work before COVID19?

We had rolled out Azooz in the month of January among friends and relatives, and from there has been no looking back. We have had great response from our customers and people have reached out to us to help us develop Azooz. With COVID-19 reaching Oman in March, we did not blindly start delivering everything, we stuck to our core cause of supporting Omani products.

Adding new vendors, deliveries, and procurement during COVID-19 challenged us in various ways. One thing that we have been constantly doing is sticking to our core belief of enabling Omani companies and Omani manufacturers/SMEs. We have some large enterprises and some small producers but we can proudly say that we have been doing our part successfully. Our vision is not restricted to the COVID-19 situation, we are focused on enabling Local Producers/Manufacturers in the long run.

How do companies register with Azooz to begin offering their products via the platform?

For the companies who wish to be our partners, simply send us a message on help@azooz.online. Our Vendor Development Team will assist them in completing the listing process. For customers who wish to order, simply download the app available on iOS and android platforms or through our site www.azooz.online.

What is the biggest challenge you are facing during this Pandemic? 

We have been facing various challenges during this excruciating time. The biggest one is receiving goods that we need for our business. Like eco-friendly bags, we are unable to procure them currently due to the lockdown. Similarly, some vendors are unable to deliver products that are already listed on our site. Movement limitation, workforce restriction, lack of labor has impacted all of our vendors and their product availability. Despite these challenges, we are trying our best to deliver what we commit to our customers.

Do you have any advice to those looking to start something new in Oman?

At present, in my opinion, any new business should be started to solve a problem. Money should not be the only motivation when starting any business, one has to ask what impact the business will have on the country’s economy and to the people in general.  There is a tough competition outside and one must be prepared to compete with some very intelligent people who keep you alert and on your toes at all times.

Anything else you’d like to add?

We want support from our customers as Azooz belongs as much to the customers as it belongs to us. We will make mistakes like everyone else, but we promise to learn from them and try not to repeat those errors again. We want our customers to be patient with us and we will ensure that the money they spend goes to Omani producers/manufacturers. In the long term, everyone will reap the benefit of an app that truly supports the Omani economy.