Other BriefingsOman Unveils VAT Refund Scheme for Tourists: Expected Impact on Retail and Tourism
Oman’s planned VAT refund scheme for tourists is a targeted reform designed to boost visitor spending, support domestic retailers, and align the Sultanate with GCC and global tourism best practices. Set against a backdrop of regional competition, the initiative complements broader tax modernization efforts while maintaining fiscal neutrality.
Oman is preparing to introduce a value added tax (VAT) refund scheme for tourists, marking a targeted policy adjustment aimed at strengthening the Sultanate’s appeal as a shopping and travel destination. The proposed mechanism would allow non-resident visitors to reclaim VAT paid on eligible retail purchases upon departure, bringing Oman into closer alignment with international tourism and retail practices while addressing a competitive gap in the Gulf region.
The reform is unfolding against a backdrop of intensifying regional competition for tourist spending, particularly in retail-heavy segments such as luxury goods, fashion, and consumer electronics. As neighboring markets continue to enhance tax incentives and visitor-friendly consumption policies, VAT refund schemes are increasingly viewed as a standard tool for attracting high-spending travelers and extending dwell time in destination markets.
For Oman, the policy objective is twofold. On the demand side, the scheme is intended to enhance the overall visitor experience by reducing the effective cost of retail purchases for tourists. On the supply side, it aims to support domestic retailers by improving their competitiveness vis-à-vis regional peers, encouraging higher transaction values, and reinforcing tourism-driven consumption as part of the Sultanate’s broader economic diversification strategy. In this article, we provide an overview of the proposed scheme, as well as implications for adjacent sectors.
Oman’s tourism and retail sectors: Strategic context
Tourism has become a central pillar of Oman’s economic diversification strategy, with the government prioritizing high-value, experience-driven travel segments over mass tourism. The Sultanate has steadily expanded its tourism offering across cultural heritage, nature-based travel, luxury resorts, and cruise tourism, positioning itself as a premium destination within the Gulf rather than a volume-driven market.
Retail activity is closely linked to this strategy. Tourist spending is concentrated in urban centers such as Muscat, as well as in airports, integrated tourism complexes, and high-end retail environments catering to international visitors. While Oman’s retail market is smaller than those of some regional peers, it benefits from relatively strong purchasing power among visitors, particularly in luxury goods, jewelry, fashion, and specialty consumer products.
However, the absence until now of a VAT refund mechanism has placed Omani retailers at a comparative disadvantage when competing for discretionary tourist spending, especially against destinations that actively promote tax-free shopping. In this context, the introduction of a VAT refund scheme addresses a structural gap rather than introducing a novel incentive. It enhances price competitiveness, supports higher transaction values, and strengthens the linkage between tourism growth and domestic retail performance.
From a policy perspective, the reform also complements Oman’s broader push toward formalization, digital compliance, and value-added services within its tax and commercial ecosystems. By embedding the VAT refund scheme within a modernized tax administration framework, Oman is seeking not only to attract tourists, but to do so in a way that reinforces regulatory transparency, private sector participation, and long-term sustainability in both tourism and retail development.
VAT refund scheme for tourists: Official announcement
The Oman Tax Authority has formally announced plans to introduce a VAT refund scheme for tourists, underscoring the government’s intent to enhance the competitiveness of Oman’s tourism and retail sectors while aligning with international tax and tourism practices.
The announcement was made during the Tax Authority’s inaugural media briefing, which reviewed tax system performance and outlined future priorities. The Authority confirmed that agreements with specialized service providers are being finalized, with discussions focused on refund percentages and cost structures, pointing to the adoption of a commission-based model.
Expected design of Oman’s VAT refund scheme for tourists
While the final operational framework has yet to be published, available information and international precedents suggest that Oman’s VAT refund scheme will largely replicate established global models, particularly those already implemented across the GCC. In practice, this would place the Omani system broadly in line with the operational approach adopted by Saudi Arabia following its VAT refund rollout in 2025.
At its core, the scheme is expected to be designed around a limited set of clearly defined principles. Refund eligibility would be restricted to non-resident tourists, with VAT recovery applying only to physical retail goods that are exported from Oman in the traveler’s personal luggage. Validation and processing would take place at designated exit points, most notably international airports, where purchases can be verified prior to departure.
Anticipated eligibility criteria
Under the expected framework, eligible persons would be non-resident visitors departing Oman, excluding citizens and residents. Eligible goods would likely include standard retail products such as clothing, luxury items, electronics, and other consumer goods intended for personal use.
Consistent with international practice, services would be excluded from the refund mechanism. This would extend to hotel accommodation, restaurant services, transport, and other tourism-related services, as well as consumables that are used within the country. These exclusions reflect both administrative practicality and the difficulty of verifying exportation.
Operational and commercial structure
A minimum per-invoice spend threshold is expected to apply, although the precise amount has yet to be confirmed. Such thresholds are commonly used to balance administrative efficiency with the policy objective of encouraging higher-value retail spending.
Refunds are likely to be processed through a combination of digital platforms and physical refund desks at airports, allowing tourists to choose between electronic reimbursement and immediate cash or card-based refunds. Operational responsibility is expected to be outsourced to specialist VAT refund operators, following the standard international model.
Retailer participation would almost certainly be voluntary, with only accredited and compliant merchants permitted to offer VAT refund services. This opt-in approach reduces compliance risks and ensures that participating retailers meet documentation and invoicing standards.
Commission-based refund model and fiscal implications
The Tax Authority’s references to agreeing on “cost and percentage” strongly indicate that Oman will adopt the globally prevalent commission-based refund model. Under this structure, tourists receive only a portion of the VAT paid, with the remainder retained by the refund operator to cover administration, technology, and processing costs.
For tourists, this means that the effective refund received will be lower than the headline VAT rate, but still sufficient to act as a purchasing incentive. From a fiscal perspective, the model helps preserve revenue neutrality by ensuring that the scheme does not generate a net fiscal burden for the government, while avoiding the need for direct public funding.
Oman’s tax system performance and modernization context
The VAT refund initiative is being introduced against a backdrop of improving tax performance and accelerated modernization of Oman’s tax administration. In 2025, total tax revenues reached approximately OMR 1.37 billion (US$3.57 billion), with income tax contributing OMR 658 million (US$1.71 billio), VAT OMR 631 million (US$1.64 billion), and excise tax OMR 84 million (US$218.4 million).
Tax registrations have also expanded rapidly since 2021, with income tax registrations increasing by 88 percent, VAT registrations by 120 percent, and excise tax registrations by 222 percent. This expansion reflects both economic growth and improved compliance capacity.
In parallel, the Omani Tax Authority has been rolling out a series of administrative reforms, including electronic invoicing systems, the Ta’akad verification application, enhanced tax risk management tools, and the adoption of artificial intelligence to improve audit targeting and compliance monitoring. These digital capabilities are likely to play a critical role in supporting the integrity and scalability of the VAT refund scheme.
Alignment with GCC tourism best practices
VAT refund mechanisms are widely regarded as a standard feature of mature tourism economies, particularly in Europe, East Asia, and major global shopping hubs. Within the GCC, their adoption has become increasingly important as countries compete for high-spending international visitors.
Also read: Saudi Arabia Introduces Comprehensive Amendments to VAT Implementing Regulations
Evidence from comparable markets suggests that VAT refunds can materially increase retail spend per visitor, particularly in luxury and discretionary categories. Beyond their direct economic effect, such schemes also function as a strategic signal, reinforcing a jurisdiction’s reputation as a visitor-friendly and internationally aligned destination.
Implications for retailers, investors, and service providers
For retailers, the scheme offers an opportunity to capture higher transaction values from tourist customers, particularly in premium segments. However, participation will likely require compliance with invoicing standards, refund documentation rules, and audit requirements, making internal readiness a key consideration.
For investors and service providers, the rollout creates potential entry points in VAT refund services, fintech-enabled payment solutions, and compliance technologies. Secondary benefits are also expected for airport retail, luxury retail clusters, and tourism-linked commercial developments.
Strategic Outlook: Tourism-led retail growth in Oman
The VAT refund scheme should be viewed as part of Oman’s broader economic diversification strategy, where tourism and services are expected to play an increasingly important role. Its interaction with digital tax infrastructure may also accelerate broader compliance modernization across the retail sector.
In the medium term, the policy is likely to support higher visitor spending and improve Oman’s competitive positioning relative to regional peers, particularly if implementation is efficient and refund processes are perceived as user-friendly.
Conclusion
The planned VAT refund scheme represents a targeted, market-oriented tax reform aimed at enhancing Oman’s attractiveness as a tourism and retail destination. By balancing competitiveness with revenue protection and administrative efficiency, the initiative reflects a pragmatic approach to tax policy in a highly competitive regional environment. As neighboring markets continue to refine their own incentive frameworks, Oman’s positioning will increasingly depend on execution quality as much as policy intent.
Dezan Shira & Associates supports domestic and foreign investors operating in Oman with tax, regulatory, and compliance advisory services, including VAT structuring, indirect tax compliance, and transaction advisory. For further information on how Oman’s proposed VAT refund scheme for tourists may affect your business, retail operations, or investment strategy, please contact our GCC-based team here.
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