KPMG in Oman summarizes developments regarding Excise tax, Value Added Tax (VAT) and Withholding tax.
Oman is getting ready administratively to implement a ‘Selective Goods Tax’ also referred to as the ‘Excise tax’ early 2019. This tax is primarily aimed at certain goods considered harmful to human health and environment and certain luxury goods. The proposed Excise tax will be in accordance with the Common Excise Tax Agreement of the States of the Gulf Cooperation Council (GCC). This Excise Tax has already been made effective in the UAE, KSA and Bahrain in 2017. According to media reports , Oman’s State Council had on 2 July, 2018, discussed the draft Excise Tax law referred to it by the Council of Ministers along with the reports of the State Council’s Economic Committee and Majlis Al Shura. Also, the Ministry of Finance (MoF) has recently confirmed that Excise Tax is likely to be implemented in Oman in early 2019. Excise Tax is likely to be levied on alcohol and pork, in addition to carbonated drinks, energy drinks and tobacco products and gradually also extended to certain luxury goods.
Oman is also continuing to take steps to be administratively ready to implement VAT, based on the Common VAT Agreement of the States of the GCC. It is likely that the introduction of VAT in Oman may be deferred to the latter half of 2019. Ministerial Decision No. 64/2018 of the Ministry of Finance provided for the addition and disclosure of revenue collection from both Excise Tax and VAT in the Oman Budget for 2019. According to recent media reports, the MoF has confirmed preparations to target VAT implementation in Oman for September 2019, though the actual date of enforcement is currently under review. The MoF has identified 94 essential goods and/or services that are likely to be zero rated and sectors such as education, health care, transportation and real estate that are likely to be wholly or partially exempted.
Mandatory electronic filing of withholding tax returns
In February 2017, Royal Decree 9/2017 mandated electronic filing of income-tax returns, for which the Secretariat General for Taxation (SGT) launched a portal later that year. This included a then optional provision to submit withholding tax (WHT) returns online. The SGT recently announced2 that taxpayers must submit WHT returns exclusively through the online portal with effect from 1 November 2018, in an effort to simplify tax compliance and phase out paper filing.
Taxpayers yet to obtain their portal login credentials must do so immediately, so as to submit WHT returns online.
Taxpayers may face challenges if a reduced rate is applicable on specified foreign payments (e.g. tax treaty relief), as the online form does not currently allow deviations from a set WHT rate (10% as per the Oman tax law). The online form includes ‘consideration for provision of services’ as a category, introduced following the widening of the scope of WHT in February 2017. However, it omits the titles ‘interest’ and ‘dividend’ as specified categories of payments. In these cases, until the SGT resolves these administrative gaps, taxpayers will need to furnish submissions with underlying documents to substantiate their WHT compliance.
In our previous editions, we had highlighted the development with respect to withholding tax on services and KPMG Oman’s assistance to companies in seeking specific written clarifications from the Oman tax authorities on this matter. KPMG Oman recently assisted a client engaged in the Insurance sector in procuring a formal clarification from the Oman tax authorities that no withholding tax would be applicable on reinsurance payments made to foreign vendors. The much awaited Executive Regulations clarifying the scope of withholding tax are yet to be issued.
1Source: Times of Oman https://timesofoman.com/article/137425