Oman: Key changes to income tax law

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On 26 February 2017, the Oman Government has passed a Royal Decree 9/2017 in the Official Gazette with a number of significant changes to Income Tax Law 2010. The major changes passed by the Royal Decree are following:

  • An increase in the corporate tax rate from 12% to 15% for tax years beginning on or after 1 January 2017;
  • A 3% rate of income tax may apply for certain small taxpayers;
  • The statutory exempt threshold of OMR 30,000 (US$78,000) has been eliminated.
  • Dividend and interest payments to nonresidents are now subject to 10% withholding tax and withholding tax will be due on payments made on or after 27 February 2017.
  • Payments for services to nonresident entities are subject to 10% withholding tax.
  • The withholding tax exemption for payments from Ministries and Government institutions has been eliminated.
  • Tax exemption is restricted to the manufacturing industry only for a non-renewable period of 5 years, and subject to compliance with certain conditions.
  • The law begins self-assessments as the basis of tax declarations.
  • The law contains provisions to ensure that Islamic financial transactions are taxed in accordance with their fundamental substance in the same way as conventional financial transactions.

Penalty

Failing to file returns by the due date the maximum penalty is increased from OMR 1,000 to OMR 2,000 and if tax payer fails to submit information demanded by the tax office or to attend scheduled hearings, the maximum penalty is increased from OMR 2,500 to OMR 5,000. A penalty may be imposed for failure to comply with the administrative decisions and Executive Regulations up to OMR 3,000.

Intentional refusal to submit tax returns or other requested information is subject to imprisonment for a period of 1 to 6 months and/or a fine of OMR 500 to 20,000. A next offense within 2 years may increase the period of imprisonment to 3 to 12 months and the fine to OMR 2,000 to 30,000. The intentional inaccurate tax returns or concealment of documents and records are subject to imprisonment for a period from 6 months to 3 years and/or a fine of OMR 5,000 to 50,000.

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