New IT Law for corporates to come into force from January 1

By V L Srinivasan

Muscat, Dec 30: Entering a new era of corporate taxation, the sultanate is ready up to implement the new Income Tax (IT) Law which will come into effect from January 1.

The government has already conducted a seminar for business houses in the sultanate to explain the salient features and also the benefits that can be accrued out of the new Income Tax Law. Even some private firms held similar programmes to clear doubts among the corporate houses.

The new Act, which is aimed at attracting foreign direct investment (FDI), is a blend of two existing tax legislations - one for corporate tax including the tax on foreign companies operating in Oman, and the other for profit tax on establishments in Oman that are owned by either Omani or foreign individuals.

At present, foreign companies, operating in Oman through permanent establishments, are taxed between 5-30 per cent depending on their incomes. "Under the new IT Law, the tax rates have been harmonised and it will be 12 per cent for all firms irrespective of their country of origin. We feel that non-discrimination will ensure more foreign investments into the sultanate," H E Saud bin Nasser al Shukaily, secretary general of taxation, Ministry of Finance, told Muscat Daily.

The existing laws had some ambiguities which were set right by implementing the new Act. After the sultanate became a member of World Trade Organisation (WTO), there was a need to update the existing laws.

"The other reason which necessitated the introduction of the new Income Tax Law is the development of the country's economy and also the growing number of companies," he said.

Another important step in this direction was entering into the Avoidance of Double Taxation treaty, which was signed with 32 countries. The process of signing similar agreements with 20 more countries is under various stages progress. The new law also provides relief to Omani companies when they invest outside and pay taxes on overseas income both here and in the host country. This will be in the form of deduction of the overseas tax paid against the tax payable in Oman and will be given whether Oman has a double taxation treaty with the host country or not.

The new Income Tax Law is a sequel to Royal Decree No 28/2009 which was issued in June this year. Under the new law, the system of income taxation will be changed to the ‘global system of taxation.’