Royal Decree No. 118/2020 (“RD 118/2020”) published in the Official Gazette on 20 September 2020 has amended the Income Tax Law (“ITL”). Major amendments include enabling provisions to facilitate AEOI between tax jurisdictions, introduction of tax residency provisions and the requirement to file only one tax return but within four months from the end of the relevant tax year or accounting period. These as well as other major amendments are analyzed below:
1) AEOI: The ITL has been amended to empower the government to conclude bilateral and multilateral agreements and also join existing international agreements dealing with taxation matters. This facilitates not only conclusion of bilateral or multilateral tax treaties but also allows automatic exchange of information, further discussed below:
- The ITL now provides for collection of information and documents to facilitate exchange of information with other tax jurisdictions. Following this, TA Decision 78/2020 has been issued by the Head of the TA identifying “Reported Financial Institutions” (further defined under such decision) as “appointed persons” who are responsible for collecting, keeping and submitting specified information to the TA within the prescribed timelines.
- The TA is empowered to directly require licensed banks to provide information about any person for the purpose of adhering to international agreements dealing with taxation matters to which Oman is a signatory. Further, the licensed bank is not permitted to inform/notify its client about the same.
- Penalty provisions under the ITL have been amended to cover “appointed persons”, if they do not comply with the new provisions.
- The TA is also authorized to conduct search proceedings at the concerned person’s premises to obtain the above information.
The above amendments confirm the importance the government is giving to create a tax transparent environment in collaboration with other jurisdictions to identify arrangements or transactions resulting in tax avoidance.
2) Residency provisions: For the first time, specific provisions have been introduced in the ITL to determine the residential status of persons:
- A natural person is considered to be a resident of Oman if he stays in Oman for 183 days or more continuously or intermittently during the relevant tax year.
- A juristic person is considered to be a resident of Oman if it is incorporated in Oman in accordance with the applicable laws and regulations or the place of effective management is in Oman.
- The reference to “Non-Resident” has been inserted in the ITL specifically with regard to withholding tax (“WHT”) provisions wherein the term “foreign person” now stands replaced with “non-resident”. This would imply that a foreign individual person staying in Oman for 183 days or more would be a “Tax Resident” in Oman and accordingly, should now not be made subject to the WHT provisions in Oman. This is particular relevant for passive income such as dividends or interest [which are currently under suspension until 5 May 2022].
- The concept of “Residency” is important to establish residence under Common Reporting Standard and also to avail benefits under tax treaties Oman has concluded.
3) Only one tax return now required but this needs to be submitted within four months from the end of the relevant tax year or accounting period
- The amended tax law has, with effect from tax years beginning on or after 1 January 2020, removed the requirement to file a provisional return of income and settle taxes on the estimated income within three months from the end of the relevant tax year or accounting period. Taxpayers are required to file only one tax return within a period of four months from the end of the relevant tax year or accounting period. Tax is also now required to be paid within this period of four months. Previously, the time period for filing the final return and paying the balance tax was six months.
- While the requirement to do away with the filing of dual returns is welcome, this would imply that audits of financial statements would need to be completed before the expiry of four months from the end of the relevant tax year or accounting period to allow enough time to prepare the tax return and meet the deadline.
4) Appellate proceedings: The Income Tax Committee to which appeals are required to be filed against the “Objection” decisions of the Head of the TA is now named as the Tax Grievance Committee. Tax Appeals are also referred to as Tax Grievances.
- The Tax Grievance Committee shall be constituted by virtue of a decision of the Head of the TA following endorsement by the Council of Ministers. The composition of the Committee continues to be the same (i.e. a Chairman, Deputy Chairman and 3 Members).
- Presence of 2 committee members in addition to the Chairman and / or Deputy Chairman is compulsory to convene the Committee
- Existing procedural provisions in the ITL in relation to the Committee hearing have been removed. RD 118/2020 provides that a decision shall be issued by the Head of the TA to specify the work procedures of the Committee, convening its sessions, deliberation and adjudication procedures and manner of notification of decisions by the Committee. A decision on these matters is awaited from the Head of the TA.
5) Some other amendments to ITL:
- The TA has now been authorized to issue assessment giving effect to any reciprocal agreement concluded under International agreements dealing with taxation matters. Such reciprocal agreement should cover Mutual Agreement Procedures (“MAP”) under tax treaties. MAP is one of the minimum standards under Base Erosion and Profit Shifting (BEPS) Inclusive Framework, which Oman has committed to implement.
- General Anti Avoidance Rules have been extended to include transactions or arrangements whose main purpose is to avoid compliance with obligations under the ITL.
- The obligation of the TA to maintain confidentiality has been extended to include any person gaining access to documents, papers, details or information. This should help in building the trust of the taxpayer when submitting confidential information to the TA during the course of the tax proceedings.
- The taxpayer under the amended tax law is required to provide the information about name, address and name of Principal Officer to the Ministry of Commerce, Industry and Investment Promotion (“MOCIIP”). In obtaining a commercial registration with MOCIIP, such details are now being sought and consequentially, a tax identification number is being issued by MOCIIP itself. Any amendment in the business details is also required to be intimated to MOCIIP. Additionally, provisions have been inserted for cases where a person may not be required to obtain commercial registration from MOCIIP but still be regarded as a taxpayer. Such a person will be required to register with the TA by providing the requisite information
- The amended tax law now includes ‘Sole Proprietorship Company’ as an Omani Company eligible to be considered as a small taxpayer subject to fulfilment of prescribed conditions.
It is also expected that local legislation as regards Country by Country Reporting (“CbCR”) [being another minimum standard under BEPS Inclusive Framework which Oman has committed to implement] would be introduced soon, in addition to the above amendments.