Conrad Prabhu -
MUSCAT, MARCH 8 -
Islamic finance instruments will be subject to tax under the amended Income Tax Law promulgated by Royal Decree 9/2017 and published in the official gazette last month, according to tax consultants representing leading multinational services firm EY.
The amended statute issues much awaited provisions on taxability of Islamic Finance Instruments, senior executives told a tax seminar hosted by EY’s Muscat office earlier this week. The ‘Breakfast Session’ attracted more than 350 professionals representing various industries and businesses in the Sultanate.
Ahmed al Esry, Market Segment Leader for EY Oman, led the briefings, accompanied by Ramesh L — Executive Director, Manjot Singh — Executive Director, Mohammed Raza — Director, and Alkesh Joshi — Director.
According to EY, the revised Income Tax Law provides some clarity on how Islamic finance instruments will be subject to tax. Whilst the law provides a framework on which instruments will fall within the purview of Islamic finance, it appears that these instruments would be treated at par with conventional banks, it was pointed out.
Income on Islamic finance instruments would be taxed on similar lines as products offered under the conventional banking system. Similarly, provisions on what is deductible has been issued as well as treatment of loan loss provision has been clarified, a member of the EY team said.
Significant changes have been made to the Income Tax law have far-reaching implications, according to EY. Notable changes include the increase in the corporate income tax rate from 12 per cent to 15 per cent, as well as the removal of the RO 30,000 statutory tax exemption limit. The changes in the tax rates are effective for the tax year commencing on or after January 1, 2017.
Likewise, special provisions relating to small establishments have been introduced with a lower tax rate of 3 per cent or nil rate provided certain conditions specified in the RD 9/2017 are fulfilled. Amendments also include widening of the withholding tax base to include payments for interest, dividends and performance of services to non-residents.
Importantly, the revised tax law provides for the issuance of a Tax Residency Certificate (TRC) for tax payers by the Secretariat General of Taxation. Detailed rules governing the issuance of such certificates are expected to be issued shortly, according to EY.
Additionally, tax exemption provisions have been revamped, according to the tax consultants. “Activity wise tax exemptions are now available only for a non-renewable period of five years and that too for taxpayers engaged in industrial activity. However, unlimited exemption applicable to entities engaged in shipping or air transport and income accruing to investment funds will continue to apply,” it was pointed out.
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