Taxes, one of the primary sources of revenue for the government of a country, are applied to companies regardless of the residential status and the nationality of the citizen.
The Omani government is trying to focus more on revenue from non-oil sources. The country’s government has introduced broad tax changes to the income tax law.
After intense speculation for many months, the changes aim at improving tax administration, increasing tax revenue, and stimulating small business activities.
So, if your point of interest is into knowing Oman Tax laws, the procedures to file them, let us understand how to file corporate taxes in Oman.
Filing Corporate Taxes in Oman
Omani Taxation Laws state that all taxpayers required to submit two returns for the relevant tax year on the specified forms to the General Secretariat.
1. Provisional Return
Provisional returns to be filed before the last three months period of the taxation year. The establishment details about the taxable income for that accounting year and the tax value that is self-assessed by the establishment itself in the provisional return. The taxes are levied based on the Activity detail returns, Final account of the company, provisional, and annual returns of the taxpaying company.
2. Annual Return
Annual Returns of the company to be filed before the last six months of the accounting year. A taxpaying establishment mentions its yearly income and the payable tax due according to the self-assessed estimate. A licensed auditor will be accompanying the audited documents. The two types of annual returns for any establishment are as follows.
No audited accounts are necessary from an establishment with a maximum capital amount of OMR20,000.
Attached final audited accounts are necessary for establishments with a capital exceeding OMR20,000.
In case of failure of payment of the returns mentioned above within their respective time limits, the Secretary-General of Taxation is lawfully permitted to enforce a fine of up to OMR2000. If the final return does not reveal the real income, the law allows imposing a penalty.
Changes to the Omani Corporate Tax
Royal Decree No. 9/2017, on 26th February 2017, published in the Official Gazette, an introduction of a few broad tax changes. The essential items include the following.
- The basic income tax rate has increased from 12% to 15%.
- For individual small taxpayers, the income tax rate is at 3%.
- WHT extended 10% to dividends, payments for services, and interest.
- The exemption threshold, which initially was OMR30,000, which approximates to about 78,000 USD, has been removed.
- Tax cards for all taxpayers.
- Dividend and interest payments made for non-residents are now subject to WHT (Withholding Tax).
- The Withholding Tax rate stays at 10%.
- The tax exemptions have been limited only to the manufacturing sector for a five-year non-renewable period.
- Self-assessment of tax filing for improved accuracy and precision is introduced.
- Any provisions availed by the non-residents are subject to 1-% withholding tax.
- The minimum penalty in case of the failure of filing tax returns by the due date has been increased from OMR1000 to OMR2000.
- In case of failure of submission of the information required by the taxation authority or to attend the scheduled hearings has increased from OMR2500 to OMR5000.
- In case of failure of compliance with the Executive Regulations or administrative decisions, a penalty of OMR3000 may be imposed.
- Provisions for the taxation of the Islamic financial transactions are included in line with the banking income streams.
- Changes like provision for Withholding Tax will be implemented with immediate effect from the date the decree was published in the Oman Government Gazette.
- An electronic tax return filing system is to be introduced following the rules to be set out by the Ministry of Finance.
- Tax exemptions for mining, operation of hotels and tourist villages, the export of locally manufactured goods, agriculture, fishing, and education is no longer available.
These are some of the critical changes in Corporate Taxation in Oman that every entrepreneur or a business person must know to file taxes for their establishment. Tax filing is a significant activity that significantly affects the working of the business. Even minor mistakes or errors while assessing or filing of the taxes can be fatal and can also lead to the declination of the company itself.
Hence, it is suggested to take some professional assistance for filing your establishment’s annual tax returns. It also would free your efforts and time to do the job, which you can use to grow your company’s status in the market.
For taxation needs for your UAE based company read our blogs on taxation services in Oman, and get useful insights on taxation in the UAE, five things expatriates should know. To have a word with our experts contact us.