MUSCAT, JULY 10 – Corporate income tax payable by Omani owned, managed and operated SMEs has been zero-rated in line with the government’s broader strategy to sustain the growth of an entrepreneur-led business culture in the Sultanate, according to a well-known Muscat-based tax expert.
Tens of thousands of businesses and corporate organisations in the Sultanate were required to file their tax returns by the June 30 deadline (extended by a day in light of the intervening weekend holiday). They include an estimated 30,000-plus small and medium enterprises (SMEs) registered as such by the Public Authority for SME Development (Riyada).
But unlike their corporate peers who are liable to pay tax at the rate of 15 per cent of income, SMEs that meet certain criteria are taxed at the rate of 0 per cent, according to Alkesh Joshi (pictured), Partner – Business Tax Advisory Services, EY. They include micro-businesses managed and run by Omanis. “In accordance with the amended Income Tax Law promulgated under Royal Decree 9/2017, Small and Medium Enterprises (SMEs) are now taxed at 3 per cent starting from January 1, 2017. In order for an entity to be considered as an SME, certain prescribed criteria are to be fulfilled. SMEs shall submit only the final return of income within three months from the end of the accounting period along with the statement of income on cash basis. Regulations for deductibility of expenses and losses carry forward are yet to be determined for SMEs. Exemption from 3 per cent tax is provided to SMEs, subject to certain conditions. Therefore those taxpayers (SMEs) who fulfil certain criteria could get a 0 per cent tax rate applicable,” Joshi told the Observer.
Effective from the 2017 Tax Year, all businesses — regardless of their size and earnings — are required to file their returns under the amended law, which effectively scraps off the statutory exemption of RO 30,000 applicable in the past. For the first accounting period, however, a taxpayer may be allowed to file a tax return covering up to a maximum of 18 months, says the tax expert.
“Provisional tax returns are required to be filed within three months after the end of the accounting year and final returns along with audited financial statements within six months from the end of the accounting year. The Income Tax Law does not provide advance payment procedures. Tax due must be paid with the provisional return on an estimated basis and the final tax must be settled along with the final return of income tax,” he pointed out.
The amended Income Tax Law requires GCC country citizens or GCC owned companies to be treated — from the tax standpoint — based on the Economic Agreement entered between GCC member states in 2001.
Significantly, specific tax compliance forms have been prescribed for various categories of taxpayers, including Omani companies, according to Alkesh. Tax compliance forms require taxpayers to provide significant additional information along with tax returns. The forms are electronically also made available on the website of the Secretariat General for Taxation (SGT) at www.taxoman.gov.om.
Furthermore, in line the amended law, a request for a Tax Card may be submitted to the SGT within 60 days from date of incorporation or commencement of business or within one month from date of any change in data of an entity. The allotted card number and date shall be included in all the invoices, contracts and correspondence. “More details like effective date for issue of tax cards will emerge once the Executive Regulations to the amendments per RD 9/2017 are issued,” the expert said.
The amended law also prescribes fines and penalties for those flouting the tax code. “A fine of 1 per cent per month on the unpaid tax is levied on late payments beyond the due dates. Various other penalties may also be imposed,” said Alkesh.
“Under Article 179 of the Income Tax Law, the SGT may impose a fine of up to RO 1,000 ($2,500) for failure to file a provisional, or final, tax return of income for any year within the time specified in the Income Tax Law.”