A brief background
- As part of Oman’s commitment to implement four minimum standards under the Base Erosion and Profit Shifting (“BEPS”) Inclusive Framework, it has now introduced rules for CbC reporting (Action Point 13 of BEPS Action Plan) vide Tax Authority’s Decision No. 79 /2020 (“TA Decision – 79/2020”) published in the Official Gazette today i.e., 27 September 2020.
These provisions have been made effective for Reporting Fiscal Years (based on the accounting period followed by the Ultimate Parent Entity of Multinational Enterprises Group) starting on or after 1 January 2020.
- Oman is the fourth GCC country after Kingdom of Saudi Arabia, Qatar and United Arab of Emirates to introduce CbCR rules. These rules are similar to those introduced in the above GCC countries.
- The rules are applicable to Multinational Enterprises (“MNE”) Groups (as defined in the TA Decision 79/2020) with a consolidated revenue of not less than OMR 300 million (approximately USD 780 million or EUR 670 million) during the year immediately preceding the Reporting Fiscal Year.
Entities responsible for filing CbCR
- Ultimate Parent Entity (“UPE”) of the MNE Group where such a UPE is a tax resident* of Oman;
- Otherwise the Surrogate Parent Entity (“SPE”), i.e. an entity that is a part of an MNE Group or permanent establishment (if preparing separate financial statements) of such entity and a tax resident* of Oman, subject to fulfilment of other conditions.
* Tax residency provisions were recently introduced in the Income Tax Law (ITL) vide Royal Decree No. 118 / 2020. Click here for our tax flash exploring these provisions in detail.
Compliance requirements and timeline
a) A tax resident entity in Oman of the MNE Group must notify the TA whether it is the UPE or SPE.
In case it is not the UPE or SPE, then it must notify to the TA about the identity and tax residence of the entity undertaking CbC reporting in its home jurisdiction. This notification is required to be made on or before the last date of the Reporting Fiscal Year.
For example, in relation to the fiscal year of the UPE ending on 31 December 2020, the tax resident entity in Oman will be required to evaluate whether the consolidated revenue of its MNE Group for the year ended 31 December 2019 is OMR 300 million or more. If it meets this criterion, then the tax resident entity in Oman will be required to submit the notification on or before 31 December 2020 (i.e. effectively within next three months).
Currently, no form or procedure has been prescribed for such a notification.
b) It is mandatory to submit the CbCR if the tax resident entity in Oman qualifies as a UPE or SPE, based on the template issued by Organization for Economic Co-operation and Development (“OECD”). The CbCR is to be filed within 12 months from the end of the Reporting Fiscal Year.
As per the TA Decision – 79/2020, the CbC report should be filed electronically.
Content of CbCR
CbCR includes aggregate financial information such as revenues, profits/losses before income tax, income tax paid, number of employees, tangible assets other than cash or cash equivalents etc. as well as relevant details about each entity of the MNE across the countries in which the MNE operates.
- The TA may use the CbCR for limited purposes such as identifying high level transfer pricing risks, non-compliance risk etc. The TA cannot make transfer pricing adjustments based on CbCR.
- No specific penalty provisions or other procedures such as time period for maintenance of CbCR documentation etc. have been specifically prescribed under the TA Decision 79 / 2020. The provisions recently introduced in the amended ITL in relation to these aspects may apply.
The above rules on CbCR would require applicable MNE Group(s) to evaluate their reporting strategy immediately. Additionally, with the introduction of CbCR, Oman has effectively taken action on all four minimum standards as part of its global commitment to tackle BEPS. This is expected to expedite Oman’s removal from the EU’s blacklist and boost foreign investment in these challenging times.