KPMG in Oman summarizes new guidance from the Oman tax authorities on the country’s withholding tax (WHT) and provides updates on electronic filing requirements, taxation of Islamic finance transactions.
The Oman tax authorities issued a new set of answers to frequently asked questions (FAQ) addressing WHT on dividends on shares, interest and consideration for provision of services. Highlights of this guidance are as follows.
As another step toward the Omani government’s commitment to simplify tax compliance procedures, a requirement to electronically file tax returns has been introduced in Oman’s income tax law1. The Oman tax authority’s electronic portal is now operational and taxpayers have started registering to use it.
Although this requirement has been in effect 27 February 2017, teething problems and operational issues faced by taxpayers in registering and using the portal caused the tax authorities to ease requirements for filings of provisional income tax returns for 2016 (due 31 March 2017) as well as final returns for that year (due 30 June 2017). To ensure that procedural issues do not cause late filings, these returns could be filed either electronically or manually in paper format.
Once fully operational, the portal is expected to be user friendly, providing key services such as:
These features will go a long way toward ensuring taxpayers have easy and direct access to the tax department for their compliance and correspondence requirements.
Oman recently issued licenses for the establishment of fully-fledged Islamic banks and Takaful (Islamic insurance). These institutions carry out Islamic finance transactions (IFT) in accordance with Islamic sharia law, which differ from conventional financial transactions (CFT). Omani regulatory authorities allow IFTs to follow the Financial Accounting Standards (FAS) issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), which differ from International Financial Reporting Standards (IFRS).
These differences have caused Oman to introduce specific tax provisions for IFTs for the first time in the history of its tax laws. The IFT provisions aim to level the playing field by ensuring that the tax liability on profits earned from an IFT is equal to the tax liability on interest earned under a similar CFT. KPMG in Oman assisted the Ministry of Finance in drafting the IFT tax provisions.
It remains to be seen how the tax authorities will treat the tax returns of Islamic financial institutions that were prepared and submitted before IFT tax provisions were introduced.
1 Royal Decree 2017/9.