The Omani government has now introduced sweeping changes to the income tax law. The changes have been the subject matter of discussion for so many months, and are aimed at increasing tax revenue, improving tax administration, and stimulating SME sector.
The corporate tax rate is increased to 15%, from 12% and basic exemption previously allowed for corporate assesses was discontinued.
These changes become effective from the date of publication in the Official Gazette (i.e. 27 February 2017).
The major changes include:
- An increase in the corporate income tax rate for all tax payers from 12% to 15%
- Lower rate of 3% or nil rate was introduced for SME’S in order to encourage them.
- Removing the basic exemption limit of OMR30,000 previously available to all corporate taxpayers who carry on commercial activities in Oman.
- The changes in the tax rate became applicable for all tax years beginning on or after 1 January 2017
- The period for completion of assessments by tax department had been reduced from 5 to 3 years as applicable from tax year 2017.
- In the case of fraudulent or non-submission of income tax returns the time limit for assessment completion had been reduced from 10 to 5 years.
- Online filing of tax returns was introduced in line with other countries.
- Self-assessment of tax returns to be implemented.
- Various penalties for non-submission and incorrect declaration of income in returns were introduced to legitimise the filing of tax returns.
- Penalties for non-submission of required information called for by the tax authorities including failure to submit information or attend meeting called for by the tax department.
- Criminal punishment was introduced in addition to monetary penalties for wilful default for non-filing of returns and non declaration of correct income etc.
All the taxable entities must register with the Income Tax department by filling up a Business Particulars Form and enclosing various registration documents.
Provisional return of income
It is mandatory for all taxable entities to file within three months of their financial year ending, provisional return of income and pay the income tax i.e. the taxable entities have to make an estimate of taxable income for the accounting year.
Annual return of Income and audited accounts
Annual return of income along with audited accounts is required to be filed within six months of the end of the financial year and should be accompanied with the balance tax payable, if any.
a) Small tax payers
- A new lower rate of 3% on taxable income has been introduced and would apply to tax payers upon meeting the following conditions:
- Applicable to all Omani companies including establishments, partnerships and limited liability companies.
- The capital registered should not be more than RO 50,000 at the beginning of the year.
- Average number of employees not to exceed 15 including all employees (Expat and Omani Employees)
- Revenue of the company or establishment should not exceed RO 100,000 in a tax year.
- The company should not be engaged in the business of banking, insurance and financial institution, public utilities concessions, air and sea transport, and extraction of natural resources or as decided by the Council of Ministers.
- These tax payers are not required to submit audited financial statements instead a declaration in the new return form prescribed by the tax authorities.
- The returns should be submitted within 3 months from the end of the tax year.
- Extending more concession for SME Enterprises a nil rate of tax was introduced for above companies satisfying further conditions for employment of Omanis and engagement of Omani partners or proprietors devoting full time for the business etc.
It is mandatory for the companies to maintain the accounting records along with all supporting documents for a period of 10 years.
The tax payer can choose an accounting period ending of his own choice i.e. it could be 31st December 31st January or 31st March, etc.
In event of company being in liquidation, the accounting period may be for less than 12 months.
b) Other taxes
Oman does not impose estate tax, gift tax or dividends tax. Municipalities may impose certain consumption taxes, including tax on the income categories outlined below:
- 5% on hotel and restaurant bills
- 4% on hotels, motels and tourism restaurants
- Tax at a rate of 2% on electricity bills exceeding RO 50 per month
- Tax at a rate of 5% on lease agreements, payable by landlords
In addition, a border toll fee is levied on all vehicles across all the entry points of the Oman border
c) Custom duties
Customs duty levied at a flat rate of 5% on their cost- insurance-freight (CIF) value. Consumer goods, including food stuffs are exempt from customs duty. Alcohol and tobacco are subject to higher rates of duty.
d) Value added tax (VAT)
The expected introduction of a value added tax (VAT), in 2019, will boost tax revenues and assist the government in funding the diversification programs planned.
VAT is introduced as per the GCC treaty agreement entered into by the member states in Feb 2017.
The draft of the Oman legislation is in the preparation stage and the legislation is expected to be completed by late 2018.
The tax is expected to be in force by 2019.
VAT can provide significant revenue with limited administrative costs.
Latest version updated 11th April 2019