April 09, 2017

Muscat - A senior Ministry of Finance official has said that the new tax law announced by the government plugs a loophole in corporate taxation.

In the old tax law, which was issued in 2009, companies which earned less than RO30,000 in profits were exempted from paying taxes. So some large corporates used to set up subsidiaries solely for the purpose of lowering their tax outgo.

Addressing a symposium ‘Changes to Oman Income Tax Law’ on Thursday at the Oman Chamber of Commerce and Industry (OCCI), Saud al Shukaili, the secretary general of taxation, Ministry of Finance, said, “Governments have no choice but to refine their tax laws to prevent revenue leakages and ensure that their tax regimes are...consistent with best practices.”

Out of the 300,000 registered companies, only 80,000 are registered for taxes, and less than 10,000 of those actually paid tax, according to Davis Kallukaran, managing partner, Horwath Mak Ghazali.

Now, the tax rate has been set at 15 per cent across the board, except for small companies which employ 15 employees or less. For them, the rate has been set at three per cent subject to certain conditions including income less than RO100,000.

The new law is a lot more strict and harsher with penalties. Companies have until December 31 to close their books and file provisional returns by April 31, 2018, according to Horwath tax advisor M K Sreedhar.

Final returns will be determined on June 30. Those who are late face a fine of RO100-RO2,000. All returns must be done electronically, and any errors must be corrected within one month. Incorrect declarations are subject to a fine of between 1-25 per cent of the difference.

Intentional lack of compliance results in one to six months jail and fines of RO500-RO20,000. New companies must register for taxes within 60 days of opening. A grace period is only offered to new manufacturing companies, who have a non-renewable year period of five years.

The government is in the process of distributing tax cards to every company. The symposium was organised by OCCI along with Crowe Horwath to understand how the new tax system will work.

Officials also said that the new tax rate, which is an increase from 12 per cent, is still low compared to the 30-40 per cent in many other countries. “The changes that we have introduced to our tax law are coherent with the best practices and take into account major tax regimes and policies being pursued worldwide,” Shukaili said.

© Muscat Daily 2017