The rapid spread of the novel coronavirus (Covid-19), which has been declared a pandemic by the World Health Organization, is adversely affecting economies and businesses around the world. Governments are announcing relief measures to mitigate its economic impact and help individuals and businesses navigate these unprecedented times.

This newsletter highlights the key economic and tax measures taken by the government of Oman in response to the outbreak:

1.    Economic measures

On 18 March 2020, the Central Bank of Oman (CBO) announced a comprehensive incentive package to inject additional liquidity of more than OMR 8 billion (USD 20.78 billion) into the economy. Key measures announced as part of the package include:

• Lower capital conservation buffers by 50%, from 2.5% to 1.25%

• Increase the lending ratio/financing ratio by 5%, from 87.5% to 92.5%, on the condition that this additional scope be reserved for lending to productive sectors of the economy, including the healthcare sector

• Accept requests for deferment of loans/interest (profit for Islamic financial institutions) for affected borrowers, particularly SMEs, with immediate effect for the coming six months without adversely impacting the risk classification of such loans

• Defer the risk classification of loans pertaining to government projects for a period of six months

• Local banks to consider reducing existing fees for various banking services and avoid introducing new fees in 2020

• Reduce the interest rate on repo operations by 75 basis points, to 0.50%, and increase the tenor of repo operations up to a maximum of three months

• Decrease interest rate on discounting of government treasury bills by 100 basis points, to 1.00%

• Reduce the interest rate on foreign currency swap operations by 50 basis points and increase in the tenor of swap facility up to a maximum period of six months

• Lower the interest rate on rediscounting of a bill of exchange and promissory note (with two signatures) by 100 basis points, to 3%

• Decrease the interest rate on rediscounting of a promissory note with acceptable guarantee by 100 basis points, to 3.25%

• Reduce the interest rate on rediscounting of a promissory note accompanied by trust receipt by 125 basis points, to 3.50%.

In addition to the above, on 23 March 2020, the CBO announced additional measures urging banks to identify the ‘most critical functions’, which need to be carried out without disruption, and provide suitable staff (and backup), both at the premises and working from home.  These functions, at a minimum, should include:

• Remittance services provided by local banks should be at minimum cost in view of the closure of money exchanges, as per the directives of the Supreme Committee
• Banks to waive charges levied on point of sale (POS) transactions

• Use of old cards to be enabled under prompt notification to customers wherever debit/credit cards could not be renewed, or renewed cards could not be delivered to customers

• Separately, the CBO has further extended the deadline for the completion and submission of audited financial statements/net worth statements for borrowers to 30 June 2020.

2.     Tax relief measures

The following corporate tax relief measures were announced by the government on 31 March 2020:

• Deferral of tax return filing and payment of tax by up to three months from the due date

• Exemption from all fines and penalties related to such deferred filing and tax payments

• Tax deductions for all donations or contributions made toward handling the COVID-19 pandemic, in accordance with the prescribed rules under the income tax law and the executive regulations

• Other measures include flexible tax payment mechanisms; extension of timelines for filing objections against tax assessments; and additional time to submit supporting documents and clarifications for ongoing objection proceedings. Refer to our Tax flash for further details.

In addition to above, other tax measures announced by the government included:

• Exemption from tourist and municipality tax (applicable at 4%) for restaurants until 31 August 2020
• Exemption from municipality tax (applicable at 5%) for commercial establishments until 31 August 2020.

3.    Customs-related measures

The Omani customs authority has announced that where the importer is unable to obtain or produce the necessary authorizations (i.e., documents and certificates of the goods from the exporting country), the relevant goods will still be cleared.

Further, the current requirement to obtain a guarantee for the non-submission of original legalized documentation has been waived until further notice.

4.    Other relief measures

• Postpone loan instalments/premiums for small and medium establishments, i.e. fees payable to Al Raffd Fund, for the next six months
• Defer loan instalments/premiums payable to Oman Development Bank during the next six months 
• Grant rent exemption to factories in industrial cities for a period of three months
• Exempt companies from Commercial Register renewal fees for the next three months
• Car (automobile) sale agencies and finance companies to postpone instalments/premiums of cars for a period of three months.

5.  Conclusion

The Covid-19 pandemic, and precautionary measures taken by the Sultanate of Oman, have affected the normal operations of the business sector and given rise to various challenges. With a view to mitigating the effects of these precautionary measures, the government has introduced a number of relief initiatives to relax statutory and regulatory compliance for businesses. These measures would also likely help in the management of financial and operational burdens.