A Quarterly Newsletter from UAE and Oman

VOL 21 ISSUE 2 April 2019

Oman Update

Amendments to the Executive Regulation to OMAN Income Tax Law

Oman is continuously striving to improve the efficiency and effectiveness of its tax system. Ever since the inception of the taxation system in Oman, numerous amendments were made to the Oman Tax Law and its Executive Regulation. Royal Decree 09/2017 was promulgated on 19th February 2017, by which a number of significant changes were brought in to the Oman Income Tax Law viz. imposition of 10% withholding tax on provision of services, interest and dividend payments etc. Since then, taxpayers were awaiting various clarifications from the tax department on withholding tax and other matters.

Recently, amendments to the Income Tax Executive Regulation were published in the Official Gazette on 10 February 2019, vide Ministerial Decision no. 14/2019. The amendments to the Executive Regulation have provided clarity on various matters ranging from withholding tax, allowability of member’s remuneration as deduction from income, rules for submission of forms or documents through electronic means, introduction of new forms / revision in the existing forms, tax card, tax exemptions, and various other matters.

Most of these amendments will be effective from the date following the date of the publication of the said Ministerial Decision (i.e., from 11th February, 2019) while a few provisions will be applicable retrospectively to tax payers from the tax year beginning from 1 January 2018.

We list some of the major amendments to the Income tax Executive Regulations.

A) Withholding taxes:

  • The regulation confirms that withholding taxes on dividends will be made applicable only when the dividend is paid by joint stock companies or by  investment funds – No withholding tax will be applicable on dividends paid by Limited Liability Companies.
  • Definition of interest has been provided for the application of withholding tax provisions.
  • Following categories of payments or credit, will not be considered as Fees for Provision of Services that fall within the scope of withholding tax;
    • Participation in organizations, seminars, exhibitions and conferences
    • Training
    • Transportation and insurance of goods
    • Air tickets, accommodation expenses incurred abroad.
    • Board meetings
    • Reinsurance payments
    • Any services related to an activity or any property located outside Oman

B) Member’s Remuneration:

Member’s remuneration shall now be allowed as deductible expense subject to existing conditions as under (effective from the tax year beginning on or after 1st January 2018.):

  • For Establishments or Companies not engaged in
    professional activities

    • Actual remuneration paid, or
    • OMR 1,500 per month per member, or
    • 25% of taxable income before claiming such remuneration and adjusting the brought forward losses
      (Whichever is lower will be allowed as a deductible expense)
  • For Establishments or Companies engaged in professional activities
    • Actual remuneration paid, or
    • OMR 3,500 per month per member, or
    • 35% of taxable income before claiming such remuneration and adjusting the brought forward losses.
      (Whichever is lower will be allowed as a deductible expense)

C) Submission of forms or documents through electronic modes:

  • The SGT’s vision of implementing paperless filing of various forms and documents online, brought in by the Amended Tax Law vide Royal Decree  09/2017 is now on the verge of implementation.
  • Lately, the tax department has made it compulsory to file the withholding  return online through the tax portal.
  • The tax portal also has the facility to file the provisional return, annual return of income and other documents online.
  • The authorised person representing the taxpaying entity is encouraged to  obtain the login ID and password for the tax portal. The authorised person will be deemed to be responsible for all the documents or forms uploaded on the tax portal.
  • The taxpayer needs to regularly visit the tax portal and check whether any notice has been issued by the SGT. The date of issue of such notices on the tax portal will be deemed as the actual date of receipt of such document.

D) Introduction of new forms and revision in the existing forms

Various new forms have been introduced and the existing forms have been modified by the tax authorities vide Ministerial Decision no. 14/2019.

E) Tax Card

  • All taxpayers need to make a separate application vide a specified form to the  Secretariat General for Taxation (SGT) to obtain the tax card.
  • Tax card will be issued by the SGT within one week from the date of submitting the application and shall cover the tax card number, taxpayer name, Commercial Registration or License number, expiry date of the card
    and other such relevant details.
  • The card will be valid for a period of 2 years from the date of the issuance which needs to be reapplied in the event of expiry.
  • Quoting of the tax card number while dealing with various organisations/ministries will be necessary.

F) Tax exemptions:

New provisions in the Executive Regulations restrict the tax exemption only to those companies whose main activity is manufacturing and which fulfil certain specified conditions. Further, the tax exemption will be limited to an initial  5-year period only.

G) Other matters:

  • Donations
  • Penalty on auditors
  • Tax on small and medium enterprises
  • Rights and powers of SGT
  • Onsite tax inspections, search and seizures.

[The above note is a limited extract based on a preliminary review of an unofficial English translation of Ministerial Decision No.14/201 and should not,  therefore, be construed as conclusive tax advice. Please seek professional opinion before acting on the above note.]

(This article is compiled by Mr. Abhishek R. Vaishya, Deputy Manager in PKF L.L.C., the PKF member firm in the Sultanate of Oman)