Relief as municipal fees increase postponed

The government has finally provided some kind of relief to companies by deciding to postpone the implementation of certain municipal fees and taxes.
The move to raise the licence fee and impose additional tax on tenancy agreement by some municipalities drew flak not only from small and medium enterprises (SMEs) but also other organisations, including the Oman Chamber of Commerce (OCCI).
Although the decision, taken by Financial Affairs and Energy Resources Council at a meeting held on the weekend, allows companies time until July 1. Experts opine that small enterprises with marginal income should be fully exempted from the fee hike.
“Small enterprises with less income should be totally excluded from the fee-rise,” said Rashid bin Amer al Musalhi, a member of the OCCI.
He said many companies registered in several parts of the country are mostly shops run by individuals and are not making much profit.
“It will be difficult for them to pay the additional fees and tax. These should be decided in proportion to the size and income of a company,” he opined. The council also decided to set up a working group of parties, including the OCCI, to assess the impact of these decisions.
Last year, a decision was issued by the Minister of Commerce and Industry and Chairman of Public Authority for the Development of SMEs (Riyada) Board of Directors Dr Ali bin Masoud al Sunaidy, amending the classification of SMEs based on the number of workers and annual turnover.
According to the decision, a micro enterprise has one to five workers and annual sales of less than RO 100,000; a small enterprise has six to 25 workers and annual sales of RO 100,000-500,000; and a medium enterprise has 26 to 99 workers and annual sales of RO 500,000 and less than RO 3,000,000.
“Imposing tax and collecting more fees will sound the death knell for many SMEs,” said Sulaiman al Wahaibi, a wholesale foodstuff dealer in Ruwi. According to data from the National Centre for Statistics and Information, there was a 35.2-per cent fall in the number of SMEs at the end of June 2017.
SMEs account for more than 90 per cent of total businesses in Oman and their contribution to the national GDP is expected to witness a significant growth in the coming years.
Khalid bin Safi al Haraibi, Acting CEO of Riyada, expects a significant growth in the sector in the current year. “The 2018 budget targets economic diversification, increase in employment rates, medium-term fiscal and economic stability and aims to increase Oman’s growth rates through stimulation of the private sector. The success of the budget will have a reflection on SMEs,” Al Haraibi told the Observer.
Last year, the government raised income tax rate for companies and removed exemptions for small firms.
According to the decision, the income tax rate for Omani and foreign companies had increased from 12 per cent to 15 per cent under a Royal Decree issued on February 19.
A previous exemption from income tax for firms earning less than RO 30,000 per annum was also removed with a new reduced rate of 3 per cent now applied from the start of the 2017 tax year.
In the beginning of this year, Mohsin bin Mohammed al Sheikh, Chairman, Muscat Municipality, issued a decision on the determination of fees and charges, insurance and financial guarantees to be obtained by the municipality.
This is based on the special law of the financial system of the Diwan of Royal Court issued by Royal Decree 128/91, and the Municipal Law of Muscat Municipality promulgated by Royal Decree 38/2015 and the Local Order No 1/2003 on the collection of fees.
The tax includes an up to a 2-per cent increase in electricity prices based on usage and taxes on international hotels, restaurants and tourist and entertainment centres.