Thousands of firms set to swell Oman’s tax base

By Conrad Prabhu — MUSCAT: FEB. 25 – Potentially thousands of small Omani businesses that were hitherto exempt from any corporate income tax are now liable to pay tax, albeit at a modest rate of three per cent, effective from the 2017 tax year. The amended tax code, promulgated via Royal Decree 9/2017, effectively brings all of the estimated 120,000 companies registered with the Ministry of Commerce and Industry within the purview of Oman’s tax system.  However, any tax may be payable only if they generate a profit on their turnover, according to a Muscat-based tax consultant.

“Under the amended tax code, all companies registered with the Ministry are now liable to pay income tax. If their turnover is less than RO 30,000, they pay a flat tax of 3 per cent on their profit, but if their income is over RO 30,000, then the enhanced tax of 15 per cent applies,” Davis Kallukaran (pictured), Managing Partner — Crowe Horwath Oman, said. In comments to the Observer, Kallukaran explained that all businesses that have been issued Commercial Registrations (CR) will now be required to submit their balance-sheets for evaluation of their tax status every year. They include companies that were tax exempt in the past because of their modest capital or turnover.

938014“It appears that the government, in its wisdom and given the challenging economic environment presently, perhaps felt it was high time that even small businesses falling under the RO 30,000 income threshold, should make a modest contribution towards nation-building. After all, even small businesses continue to benefit from the world-class infrastructure, communications and other services provided by the Omani government, and I think it’s only reasonable that businesses — small and big — contribute their share towards sustaining economic growth,” he remarked.

Importantly, even companies and organisations that were long exempt from paying income tax, because of the nature of their commercial activities or services, will now fall under the remit of the corporate income tax code.  They include private companies running colleges or educational institutions, hospitals, hospitality projects, nurseries, and so on, said Kallukaran.

Likewise, a number of industries that enjoyed tax holidays extending over a decade and more, as part of the government’s efforts to nurture them in their fledgling years, will no longer enjoy this privilege,  according to the tax expert. Further clarity on the specifics of the amended corporate income tax regime and its implications for Omani businesses in general, will come when the Royal Decree is published in the Official Gazette, he added. The amendments are part of a series of revenue-enhancing measures adopted by the government to help offset a steep decline in the price of crude oil, export revenues from which almost halved over the past two years.  In addition to sizable expenditure cuts, belt-tightening measures and subsidy rollbacks, the government is also preparing to roll-out a new Value Added Tax (VAT) system in conjunction with fellow GCC member states in 2018.