Taxes, serving as a primary source of revenue for a nation's government, are levied upon corporations irrespective of the residential status or nationality of the citizen.
The government of Oman is shifting its focus towards generating revenue from non-oil sources. Consequently, the country's administration has implemented extensive reforms to the income tax law.
After months of speculation, these reforms are designed to enhance tax administration, boost tax revenue, and encourage small business activities.
Therefore, if your interest lies in comprehending Oman's tax laws and the procedures for filing them, we will elucidate the process of filing corporate taxes in Oman.
Filing Corporate Taxes in Oman
According to Omani Taxation Laws, it is mandatory for all taxpayers to submit two returns for the relevant tax year on the specified forms to the General Secretariat.
1. Provisional Return
The provisional return must be submitted prior to the final three months of the taxation year. It is the responsibility of the establishment to report its taxable income for the accounting year and to self-assess the tax liability in the provisional return. The determination of tax liability is based on the activity detail returns, the final account of the company, and both provisional and annual returns submitted by the taxpaying establishment.
2. Annual Return
The annual return of the company is due before the final six months of the accounting year. The establishment is required to disclose its annual income and the tax liability as per its self-assessed estimate in the annual return. A licensed auditor is mandated to accompany the audited documents for these returns. The two types of annual returns for an establishment are delineated as follows:
- No audited accounts are required for establishments with a maximum capital amount of OMR 20,000.
- For establishments with a capital amount exceeding OMR 20,000, the submission of the attached final audited accounts is mandatory.
Should there be a failure to submit the returns within the stipulated time frame, the Secretary-General of Taxation is legally authorized to impose a fine of up to OMR 2,000. Additionally, the law permits the imposition of penalties in the event that the final return does not accurately reflect the establishment's real income.
Changes to the Omani Corporate Tax
Royal Decree No. 9/2017, issued on the 26th of February, 2017, and subsequently published in the Official Gazette, introduced a series of significant tax reforms. The primary changes encompass the following:
- The basic income tax rate has been increased from 12 percent to 15 percent. For individual taxpayers with small incomes, the income tax rate is set at 3 percent.
- The Value Added Tax (VAT) has been extended to include dividends, payments for services, and interest, with the rate now at 10 percent.
- The exemption threshold, which was initially set at OMR 30,000 (approximately USD 78,000), has been abolished.
- A mandatory tax card is now required for all taxpayers.
- Dividend and interest received by non-residents are subject to the Value Added Tax (VAT). The rate remains at 10 percent.
- The scope of tax exemptions has been limited exclusively to the manufacturing sector for a period of five years.
- The introduction of self-assessment for tax filing aims to enhance the accuracy and precision of tax returns.
- Non-residents who avail of certain benefits are now liable to a withholding tax of 1 percent.
- The penalty for failing to file tax returns by the designated deadline has been increased from OMR 1,000 to OMR 2,000.
- The penalty for not submitting required information to the taxation authority or failing to attend scheduled hearings has been raised from OMR 2,500 to OMR 5,000.
- A penalty of OMR 3,000 may be imposed for non-compliance with Executive Regulations or administrative decisions.
- The taxation of Islamic financial transactions has been incorporated to align with banking income streams.
These changes represent a pivotal moment in the landscape of Corporate Taxation in Oman, and it is imperative for every entrepreneur or business individual to be well-versed in these reforms to accurately file taxes for their establishments. The filing of tax returns is a critical process that significantly influences the operational dynamics of a business. Errors or inaccuracies in tax assessment or filing can have severe consequences, potentially leading to the downfall of a company.
Therefore, it is advisable to seek professional assistance for the preparation of your establishment's annual tax returns. This will not only alleviate the burden on your time and efforts but also allow you to allocate these resources towards the expansion and enhancement of your company's market presence.
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