26 February 2017
Syed Haitham Hasan
Muscat: Oman and its residents will be the long term winners when the new income tax regime kicks in, according to experts.

A Royal Decree to be published today will increase income tax from 12 per cent to 15 per cent and axe exemptions for industries like mining and hospitality. 

Small businesses will also be expected to contribute to the growth of the economy as Oman steers itself away from a dependence on oil.

The increase in income tax, to 15 per cent, means the rate is still considerably lower than most countries, the government points out.

Experts have hailed the tax law amendments announced by the Secretariat General of Taxation at the Ministry of Finance last week, saying such a law would bring all corporates together to help build the nation.

Details about the changes are expected to be made public today when the Official Gazette is published but major amendments will include cancelling the threshold limit of OMR30,000 while increasing the tax rate from 12 per cent to 15 per cent and taxing sectors that were previously exempted.

Alleviate undue pressure

Smaller scale firms will be taxed at just three per cent to alleviate undue pressure on small businesses.

“It is an opportunity for the corporates to contribute to the development of the Omani society that has allowed them to enjoy a long period of tax free or low tax environment,” Alkesh Joshi, Director, Tax Advisory Services at Ernst and Young, said.

“Profitability will be affected but any significant impact on financial performance of a firm is unlikely with a three per cent increase,” he added.

Joshi said there will be a “negligible” impact on foreign investment, given that the amended rates will still be much lower than an average 25 per cent income tax rate prevalent in most countries across the globe. The tax law changes are expected to aid the government in funding infrastructure to accelerate diversification and fund government facilities in healthcare, transport and education.

Profit generating

According to Davis Kallukaran, Partner at Crowe Horwath, income tax law aims to involve every profit generating business in the nation building exercise and is a good move on the part of the government.

“Currently, only a few businesses are paying taxes and, that too, if they have a taxable income of over OMR 30,000.The government is investing billions of rials in providing state of the art infrastructure facilities across the country for developing commercial activities.

“The government’s charges for maintaining the active status of business enterprises in Oman is very minimal, compared to similar charges levied in other countries. The government has to look for alternative sources of revenue to fund various infrastructure projects, and one of them is income tax,” he said.

The amendments are aimed at updating an old tax law and are part of the fiscal austerity measures started last year to support the country’s economy after hydrocarbon revenue fell by nearly 75 per cent in two years. The Budget 2017 predicted a deficit of OMR3 billion, taking into account the amended corporate tax law and other taxes that are yet to be implemented.

© Times of Oman 2017