Question

For each independent case listed below, answer the related question(s). You must show your calculations and provide explanations (i.e definitions, methods) where needed to support your answers. Caps company rents a building on March 12019 and starts the business on June 15, 2019. The company estimates a monthly income of OR 4,500 from selling taxable supplies. State when (i.e. date) and why, if at all, the company is liable to register for VAT.

Answer 1

The company Caps company becomes liable to register for VAT once its annual income from taxable supplies exceeds the VAT registration threshold, which in Oman is OR 38,500. Based on monthly earnings of OR 4,500, the liability to register arises by the end of July 2019; practically, however, the threshold would be reached around mid-April 2020.

Step-by-step explanation:

The company Caps company would need to register for VAT once its taxable supplies exceed the mandatory registration threshold in the relevant jurisdiction. Assuming the situation is based on Omani regulations where the VAT registration threshold is OR 38,500 annually, we would calculate whether the company meets this threshold.

As the company estimates a monthly income of OR 4,500 from selling taxable supplies, annual income would be OR 4,500 x 12 months = OR 54,000. Since the company's estimated annual taxable supply exceeds the threshold of OR 38,500, they are liable to register for VAT. The date of liability to register for VAT would be one month from the end of the month when the threshold was exceeded, assuming an immediate start was on June 15, 2019. Therefore, the registration should occur by the end of July 2019.

However, since the company began on June 15, 2019, and VAT is calculated on an annual basis, the company would likely reach the threshold around mid-April 2020 since for the year June 15, 2019, to June 15, 2020, they would have collected 12 x OR 4,500 = OR 54,000.