Income Tax in OMAN

Who is liable to Pay Tax?

The following entities are liable to pay Tax

• Establishment that carries on commercial, industrial or professional activity independently.
• The Omani company, whether commercial, civil or otherwise.
• A permanent establishment of a foreigner who is active in the Sultanate through a fixed place, whether directly or through an agent of his. In its judgment, any foreign person shall perform advisory services or other services in the Sultanate for at least 90 days within a period of 12 months
• Enterprise: The individual institution or the Omani company (General partnership, or Limited partnership, limited liability) in which the following conditions are met:

1. 1. • To limit their practice to commercial, industrial, artisanal or service activities and to exclude professional activity, air and sea transport activities, banking and insurance business, financial institutions, and the extraction of natural resources.
      • The capital registered in the Commercial Register at the beginning of the tax year shall not exceed R.O. 50,000.
      • The gross income achieved at the end of the tax year shall not exceed R.O. 100,000.
      • The average number of employees during the tax year should not exceed (15) Employees.

Registration

Every taxpayers shall be registered with Tax Authority through notification of the relevant data on the form prepared for this purpose within sixty days from the beginning of its establishment or commencement of the activity, whichever is earlier, whether by presenting the risks directly at the Tax Authority’s headquarters or registering through its electronic portal. In case of failure to register, the law shall authorize the Chairman of Tax Authority to impose a fine not exceeding RO 2,000.

Tax Return

The law requires all Taxpayers (except the Enterprise) to submit two returns for any tax year to the Tax Authority on the forms prepared for this purpose:

• • • The provisional return is submitted within three months of the end of the tax year.
    • The final return shall be submitted within six months of the end of the tax year. The audited accounts shall be accompanied by an auditor licensed by law to practice his profession of accounting and auditing in the Sultanate.

The law exempts the enterprise from submitting the provisional return, but the final return should be submitted within three months from the end of the tax year, and the law exempts the enterprise from submitting audited accounts.

Taxpayers may submit the declaration either directly at the secretariat’s office or fill out the declaration forms via their electronic portal.

In case of failure to submit the provisional or final return within the time limit of each of them, the law authorizes the Tax Authority to impose a fine not exceeding R.O. 2000, and a fine may be imposed if the real income is not declared in the final return.

Taxable Income

Where any taxable person is subjected to tax, his income shall be taxable and shall mean the total income derived from any activity or sources in or outside the Sultanate and includes all profits or gains resulting from the activity of any kind, including capital gains and any accidental income, The award shall be the deduction and loss according to the law and any income exempted by law or other law.

Current Tax Rates

The tax rate as of tax year 2017 tax year is as follows:

• Enterprise                                                                    3%
• Other Taxpayers                                                         15%

Companies engaged in the field of oil exploration is 55% with respect to income from the sale of oil 

What are the Deductable Expenses?

• • • The deductible expenses are those incurred for the purpose of producing the gross income, whether paid or not. The following expenses may not be deducted:
    • Expenses not related to the production of the gross income.
    • Reserves and provisions other than the provision for loan losses in the case of banks and financial institutions licensed to practice banking businesses in Oman and certain technical provisions of insurance companies.
    • Capital expenditures, except those deductible under the Law.
    • Expenses related to the production of the exempted income under the Law or any other Law.
    • The income tax payable or paid in the Sultanate or in any other country.
    • Costs or losses, if such costs were recovered or compensated under a contract, an insurance policy, a judicial ruling, etc.
    • A loss resulted from the disposal of securities listed in Muscat Securities Market.
    • Any amounts considered by the Secretariat General for Taxation as not reasonable by reference to the value of the services rendered or other consideration related to such services.

What are the Income Exempt from Tax

• • • Dividends received by an establishment, an Omani Company or a permanent Establishment from its shares or contributions to the capital of any Omani Company.
    • Profits or gains from disposal of the securities listed in Muscat Securities Market.
    • Income earned by the Omani corporation or company from practicing maritime transport activity.

• • • Income derived by any foreign person from the exercise of maritime or air transport activity subject to reciprocity.
    • Income generated by investment funds established in the Sultanate in accordance with the Capital Market Law or the funds established abroad to deal with Omani securities listed on the Muscat Securities Market.
    • Exemption of industrial projects (industrial enterprises) for five years (non-renewable) in accordance with the rules and conditions approved by the Council of Finance and Energy Resources.
    • Exemptions shall be applied only by a decision issued by the Minister responsible for financial affairs, in accordance with the conditions and controls and following the procedures prescribed by the executive regulations of the law

Procedure for carry forward of losses

• A loss incurred in the previous years may be carried forward and deducted in the subsequent years for a period of five years commencing from the end of the tax year in which such loss was incurred. However, a loss incurred in an activity exempted under this Law or any other Law may not be carried forward and deducted, except under the following paragraph.
• In the case of establishments and Omani Companies with temporary exemption in accordance with the Law, their net loss incurred during the first five years of the exemption period may be carried forward and deducted in the subsequent years until the entire amount of the net loss is set off.

Tax Assessment Procedure

The Tax Authority will make tax assessment on any taxpayer that is liable to furnish the return of income in accordance with the Law.

Where a taxpayer submits the final return of income, the assessment shall be made within three years from the end of the tax year in which the taxpayer submits the final return of income. If no assessment is made during the said period, the taxable income or the loss mentioned in the return of income shall be considered as an assessment.

In the case where no return of income is submitted, the assessment shall be made within ten years from the end of the tax year for which the return of income is required to be submitted. 

Tax Authority serves the notice of assessment on the taxpayer normally by post to its last address known to the Authority. The assessment is made in writing and includes, in particular, the amount of the taxable income or the loss along with the date of assessment, the amount of the tax payable and the due date of payment.

Tax Payment and Tax collection

• • • The Law requires the taxpayers to pay the tax due and payable, either as per the provisional or final return or as per the tax assessment on the date specified by the Law thereto. Non – payment of tax shall result in:
    • Imposing an additional tax at 1% per month of the unpaid amount of tax due and payable. This tax is calculated for the period extending from the date on which the tax is due to the date of the payment.
    • Collecting the tax forcibly by adopting the procedures specified for the administrative enforcement under the System for Collection of Taxes, Fees and other Amounts Payable to the Units of the Administrative Apparatus of the State.

Tax Dispute

The Law grants the right to taxpayer to object before the Chairperson of Tax Authority against the tax assessment or any decision disputable under the Law within 45 days from the date of notification of such assessment or decision. The Law also permits the taxpayer to contest against the decision issued by the Chairperson before the Income Tax Committee formed in the Ministry of Finance within 45 days from the date of serving the notification of such decision.

The Law permits the taxpayer to file tax suit before the Primary Court against the decision issued by the Tax Committee within 45 days from the date of serving the notification of the Committees decision. Either the Tax Authority or the taxpayer may contest against a judgment issued by the Primary Court through appeal before the Court of Appeal and then before the Supreme Court. The provisions of the Civil and Commercial Procedures Law shall apply for matters not covered in the Law, when hearing and making final judgment over the tax suit.

TAX refund

Under the Law, the taxpayer has the right to obtain the refund of the excess tax paid by making an application to Tax Authority within five years from the end of the tax year in which the right of refund arises. Non – submission of such application within the specified time shall result in losing the right of refund. 

When withholding tax is applicable

A tax is levied on certain types of income that are realized in the Sultanate for any foreign person who does not have a permanent establishment on the following:

• • • Royalties
    • Consideration for conduct of research and development.
    • Consideration for the use or the right to use computer software.
    • Fees for management or performance of services
    • Dividends on shares or interests

Any taxpayers or any Ministry, organization, public institution or other public legal entity or other administrative unit of the State shall pay or credit in the account any amounts of income referred to above, shall deduct at the rate of 10% of the total amount paid or credited and shall submit to the Secretariat General within a period not exceeding fourteen days from the end of the month in which the payment or the account was made, on the form prepared for this purpose.