Amendments in Oman Tax Law

Introduction

The Sultanate of Oman has recently issued a new Royal Decree which bought a wide-ranging impact on the existing income tax law in the country. This law was published in the official gazette on 26^th February 2017. This article aims to share the major highlights and the impacts of the newly introduced amendments.

The major Amendments

The rate of corporation tax is increased to 15 percent from 12 percent. Accordingly, the new standard rate of 15% will apply for corporate taxation. Also, the minimum threshold limit of the OMR 30,000 has been abandoned by the recent amendments.

However, the small and medium scale enterprises have been granted some relief by allowing them to pay tax at a reduced rate. A reduced rate of tax at flat 3 percent rate will be charged from the small and medium scale businesses.

There will also be an increased filing requirements and stricter penalties for failure to fulfill the filing obligations. The defaulters can be punished by fines or imprisonment or both. Therefore, the corporates in the region should be prepared to bear extra compliance cost for filing of returns and avoid punitive actions against them.

The treatment of Withholding Tax

The new amendments now include some new sources of income which are now subject to withholding taxes. Income like receiving dividends, interest on investments and payments for services rendered are now included in the purview of withholding tax. These regulations are effective from the date of publication of new amendments in the official gazette. It is important to note that all the Omani companies paying dividends to their foreign investors are now subject to this provision. It is an important change and it will be interesting to watch out for future regulations affecting cross border corporate structuring and financing arrangement. Another notable fact is that companies situated in the free zones in Oman will not be affected by these changes.

What you Should Do?

If you are a business registered in Oman, these new amendments are certainly going to affect your business. We would like to list out a few important considerations for you to ensure your business do not face any legal complications.

1. Review of your existing agreements with vendors outside Oman as they are now subject to withholding taxes in Oman.
2. Checking the details of investors and lenders of the company. The payment of dividends and interest are now also subject to withholding tax in Oman.
3. What are the tax exemptions or discretionary treatments enjoyed by the company? Will the new amendments affect these benefits in any way?
4. Negotiate your existing cross border arrangements with vendors and investors to reduce your tax liability.

Conclusion

The new amendments will increase the burden of taxes on the corporates but the business in the region should support the Governments initiative towards a more sustainable economy. These changes will increase source of revenue generation for the government which will ultimately be passed on to the residents and business by economic reforms.

Please feel free to contact us at [email protected] for making your business 100% law complaint and avoid penal provision.