|19 May, 2019

Tax suspension in Oman to revive investor confidence

The government has decided to suspend 10% tax on dividend and interest income for a period of three years as of May 6

An investor talks on his mobile phone, whilst working on his computer, on the trading floor of the Muscat Securities Market (MSM) in the Commercial Business District of Ruwi in Muscat, October 2, 2007. Image for illustrative purposes.

An investor talks on his mobile phone, whilst working on his computer, on the trading floor of the Muscat Securities Market (MSM) in the Commercial Business District of Ruwi in Muscat, October 2, 2007. Image for illustrative purposes.

REUTERS/Stringer
Muscat - Market experts have welcomed Oman government’s decision to suspend 10 per cent withholding tax on dividends and interest paid by the listed companies to investors. They said the new move will help revive investors’ confidence and encourage foreign investments in the Muscat Securities Market (MSM).

The Capital Market Authority (CMA) on Wednesday announced that the government has decided to suspend 10 per cent tax on dividend and interest income for a period of three years as of May 6. CMA said that the three years period could be extended. The decision is aimed at offering incentives to attract more foreign investments in Oman’s capital market.

Joice Mathew, head of research at United Securities, said this step can be regarded as a positive gesture towards foreign investors in the country. “This definitely sends the right signal to the yield-seeking investors. It is one of the most welcome step that would reduce confusion in the minds of these investors,” he said.

Echoing similar views, Gulf Baader Capital Markets (GBCM) in a research note said, “We believe this removal of 10 per cent withholding tax is a positive event for MSM and a confidence boosting step to ignite a revival in MSM’s performance.”

Since the revision in the Omani Tax Law (announced in February 2017), when the 10 per cent withholding tax on dividends and interests and other services were introduced, the MSM witnessed a sharp correction led by a selloff from foreign investors. Since the first quarter of 2017, foreign portfolio/strategic investors net outflow remains at about US$420mn, shaking investor confidence, according to GBCM.

Ubhar Capital in its weekly report on Saturday said that the taxation on dividends, although not significant for government in terms of revenue, was a deterrent for foreign investors. “We believe this is a great development for boosting foreign investment in Oman, which in the past three years has witnessed net outflow of RO254mn.

“We see the removal of taxation on dividends as one of the biggest developments of this year and would be taken very positively by the foreign investors. We believe it will support the trades, market depth and liquidity,” Ubhar Capital added.

Sameer Kattiparambil, vice president – research at EFG-Hermes Oman said, “Overall it’s a positive news as this would bring in some interest from foreign investors, especially towards few sustainable dividend payers.”

The Muscat Securities Market recorded negative trends during the last four years amid macroeconomic challenges, weak investor sentiments and selling pressure from foreign investors. The benchmark index of MSM has further declined 11.5 per cent year-to-date during 2019.

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