In keeping with the introduction of new austerity measures, announced at the start of 2017 and a continuing effort to make cut backs in an effort to balance the budget, Oman has announced it will raise income tax rates for companies and remove previously existing exemptions for small firms, the Ministry of Finance in Muscat has announced.
The Ministry said the income tax rate for Omani and foreign companies increased from 12 per cent to 15 per cent under a royal decree issued on February 19. A previous exemption for firms earning less than OMR30,000 ($78,000) per annum has been replaced with a 3 per cent rate of taxation, to be applied from the start of the 2017 tax year.
Oman, which prides itself on its enviable “good housekeeping” skills, has been closely monitoring the country’s taxation system for some time. The new amendment aims at helping balance the budget by limiting the number of tax avoidance incidents practised by certain tax payers who were found to be dividing the value of their transactions between a number of business entities, in order to benefit from the exemption and avoid tax payment.
From now on companies in the mining and hotel sectors, private schools, universities and nurseries will also no longer be exempt from the tax.
The decree includes amendments to the income tax law designed to simplify tax payment, which will be introduced later. Provisions to the law including the ability to forward losses incurred in any tax year to the next year and deduct them from taxable income will also be maintained.
“However, it should be noted that the 15 per cent corporate income tax is still below the average international rate which is 25 per cent, which maintain the investors’ revenues and the sultanate’s competitiveness,” the Oman News Agency observed.
Oman announced it would introduce fresh austerity measure at the beginning of the year to boost earnings from non-oil related revenues, including changes to income tax and the implementation of a new tax charge on goods including alcohol and tobacco. There will also be changes to fees for hiring foreign workers.
Oman posted an OMR5.3bn ($13.76bn) deficit last year, higher than the OMR3.3bn expected as oil prices averaged $39 a barrel rather than the $45 assumed. The government is forecasting a deficit of OMR3bn ($7.79bn).