Oman: Rules for income tax exemption related to new businesses involved in economic diversification (COVID-19)
Defining economic diversification sectors
New businesses involved in economic diversification (COVID-19)
An economic stimulus plan announced in March 2021 to support the economy in light of the coronavirus (COVID-19) pandemic 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.” Read TaxNewsFlash
The Oman tax authorities issued the following rules and conditions on 8 September 2022, clearly defining the economic diversification sectors.
- Exempt companies will be those that carry out business between 1 January 2021 and 30 December 2022 in one of these 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 specified activities (listed above). Companies are not permitted to carry out any other activity apart from the above to claim the tax exemption.
- No company is to have more than one tax exemption, even though it may be 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 Oman tax authorities. If satisfactory, the exemption would be issued by the chairman of the Oman tax authorities.
- Companies are required to annually file the income tax return with the Oman tax authorities 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 Oman tax authorities will estimate taxable income for the relevant tax year.
KPMG observation
The announcement of these rules by Oman tax authorities provides necessary clarity on the process to be followed by companies keen to benefit from the tax exemption.
The Oman tax authorities may need to later clarify certain other matters in connection with claiming the tax exemption. For example: the final due date for companies to request the Oman tax authorities for an exemption, treatment of tax losses incurred during period of exemption, and subsequent acceptance of request by the Oman tax authorities for companies that have already commenced business in these economic diversification sectors within the period prescribed.
Read a September 2022 report prepared by the KPMG member firm in Oman
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