Background:
The tax card, as a concept, was introduced in February 2017 through Royal Decree (RD) No. 9/2017, which amended the existing Income Tax Law (the amended Tax Law). The purpose is to mention a tax card number on all correspondence, invoices and contracts entered into by the taxpayer. Further, the ministries, government bodies, other units of state-owned apparatus and companies owned by the government (to the extent of at least 40%) are required to obtain a copy of the tax card before dealing with any taxpayer. Failure to comply with the relevant provisions carries a maximum fine of OMR 5,000.
As per RD 9/2017, the effective date of implementation of provisions relating to the tax card was to be decided by the Minister of Finance. In the present context, this is the Head of the Tax Authority, following the establishment of the new structure of the Tax Authority (TA), which has been granted an autonomous status.
Subsequently, in February 2019, rules related to tax cards were introduced as part of the procedural amendments to the Executive Regulations to the amended Tax Law made through Ministerial Decision
No. 14/2019 (MD 14/2019). Amongst others, MD 14/2019 provided certain important clarifications with regard to the tax card such as:
- Form prescribed for applying for a tax card (Form 11)
- Details to be mentioned on the tax card
- Validity period of the tax card, including the manner in which it would be issued (paper/smart card)
- Renewal procedure associated with the tax card
- Surrender of the tax card in the event of cessation, dissolution or liquidation of the taxpayer
However, MD 14/2019 did not specify the date from which the tax card provisions become effective and the prescribed fees.
Latest development:
The TA has issued Decision No. 27/2020, published in the Official Gazette on 7 June 2020, as per which tax card provisions have been made effective from 1 July 2020. Further, a nominal fee of OMR 10 has been prescribed for issuing the tax card.
What’s next:
The timeframe within which the taxpayers must apply for a tax card has not been explicitly addressed. However, we expect the TA to start accepting requests for tax cards effective 1 July 2020.
Once the tax card provisions become effective, the requirement for obtaining a Tax Clearance Certificate (which is currently required for various purposes, such as obtaining a visa clearance from the Ministry of Manpower, tender submission, etc.) is likely to be done away with, which would be more convenient for the TA as well as the taxpayer. Also, it will be mandatory to quote a tax card number on all correspondence by taxpayers. The requirement to obtain a copy of tax cards by the ministries and other public bodies from tax payers would result in increased tax transparency and compel all taxpayers to be registered with the TA and comply with the provisions of the tax law.