On 9 March 2021, His Majesty Sultan Haitham bin Tarek announced an economic stimulus plan (“ESP”) to support the Sultanate’s efforts to counter the effects of Covid-19 on the economy. (Click here for the related tax alert)

ESP had inter alia announced an income tax exemption of five years for new businesses that commence operations between 1 January 2021 and 31 December 2022 and are involved in economic diversification. The rules and conditions to avail such a tax exemption were expected to be announced by the Oman tax authorities (“OTA”) as per the ESP. The OTA laid out these rules and conditions on 8th September 2022, clearly defining the economic diversification sectors (considering the same were not explicitly defined in the ESP).

We have provided below a summarized version of these rules and conditions. For details, please click here.

  • Exempt companies will be those that carry out business between 1 January 2021 and 30 December 2022 in one of the six sectors of economic diversification: 
    • Industry
    • Tourism
    • Logistics
    • Fisheries
    • Agriculture wealth
    • Mining

The exemption will be effective from the date of operation or commencement of the production.

  • The exemption will be applicable only for companies established/registered in Oman in accordance with applicable laws and those that have Oman as their main centre for management or operation.
  • Exemptions are applicable only on income generated from the above-mentioned specified activities. Companies are not permitted to carry out any other activity apart from the above to claim such a tax exemption.
  • No company is to have more than one tax exemption where it is subject to multiple tax exemptions laws and regulations.
  • The exemption request is to be made in a form along with necessary documentation and attachments by the Company’s legal representative which would be duly examined by the OTA. If satisfactory, the exemption would be issued by the chairman of the OTA.  
  • Companies are required to annually file the income tax return with the OTA in accordance with the provision of the Income Tax Law in Oman. Absent tax returns filed for any tax year under the exemption will be forfeited and the OTA will estimate taxable income for the relevant tax year. 

Conclusion

The announcement of these rules by OTA is welcome move, providing necessary clarity on the process to be followed by Companies keen to avail such tax exemption.

It would be also helpful if the OTA later clarifies certain other matters in connection with availing such tax exemption, such as the final due date for companies to request the OTA for an exemption, treatment of tax losses incurred during period of exemption, subsequent acceptance of request by the OTA for companies that have already commenced business in these economic diversification sectors within the period prescribed etc. These would be essential for ensuring its effective applicability.