Oman – 2017 budget highlights

Oman – 2017 budget highlights

KPMG in Oman analyzes the measures proposed in Oman's 2017 budget and the changes to Oman’s income tax law.

1000

Related content

In its 2017 budget issued on 1 January 2017, the Omani government projected total spending of 11.7 billion Omani rial (OMR) (about 30.3 billion US dollars (USD)). Revenues were estimated at OMR8.7 billion (USD22.5 billion), leaving an anticipated deficit of around OMR3 billion (USD7.8 billion), which is 12 percent of GDP and 43 percent lower than the actual deficit of OMR5.3 billion (USD13.7 billion) for 2016 (based on initial final accounts). GDP is budgeted to grow by 2 percent.

This year’s budget is based on an oil price of USD45 per barrel, which is lower than the USD55 per barrel assumed in the ninth 5-year plan (FYP9) and suggests prudent financial management. 

Highlights of the budget are as follows: 

  • 70 percent of government revenues come from oil and gas.
  • Non-oil and gas revenue is consistent with the 2016 budget estimate of OMR2.59 billion (USD 6.7 billion).
    • Revenue from taxes and fees is projected to increase by 7 percent.o Budgeted corporate tax revenue for 2017 declined significantly to OMR400 million (USD1 billion) (from OMR520 million (USD1.3 billion) budgeted in 2016).
    • Non-tax revenues are budgeted at OMR1.13 billion (USD2.9 billion) in 2017, compared to OMR1.07 billion (USD2.8 billion) in 2016.
  • Expenditure is budgeted to reduce by 8 percent from actual projected spending in 2016 without curtailing development expenditure.
  • Allocations to education, health and social welfare remain unchanged at 23 percent.
  • The deficit is predominantly financed out of borrowings. Public debt has already doubled to OMR7.4 billion (USD19.2 billion), or 29 percent of GDP, at the end of 2016 compared to 2015.
  • Interest on loans is budgeted at OMR265 million (USD686 million), an increase of 194 percent on the budgeted amount for 2016, reflecting higher interest rates and increased borrowings. 
  • Inflation was 1.8 percent in 2016, beating the FYP9 target of less than 3 percent.

The government remains focused on ensuring that its economic diversification (“Tanfeedh”) and privatization programs succeed. A public-private partnership law will soon be enacted. 

For more details about Oman’s 2017 budget, read the report (PDF 155 KB) from KPMG in Oman.

Changes to Oman’s income tax law

The following changes to Oman’s income tax law6 have been made:

  • The tax rate has been increased from 12 percent to 15 percent for financial years beginning 1 January 2017.
  • A three percent tax has been introduced for micro businesses.
  • The tax-free threshold of OMR30,000 has been removed.
  • Dividends on shares and any interest paid or credited to any foreign person from 27 February 2017 are now subject to withholding tax at 10 percent.
  • Fees for services included in the definition of income from 1 January 2018. Such fees are also now included in the scope of withholding tax. 
  • Ministries and other government bodies are now expected to withhold and pay tax.
  • Tax exemptions for mining, export of locally manufactured goods, hotels and tourist villages, agriculture, animal produce, fishing, education and medical care have been removed.
  • Exemptions for manufacturing companies have been limited to five years.
  • All tax payers must get a tax card and use it on all contracts, invoices and correspondence. 
  • The new tax regime will depend on self-assessment.
  • Penalties and punishments – including the imprisonment of the principal officer have been strengthened. 

The amendments are expected to enhance tax revenue collection, but may be expected to increase the cost of doing business in Oman. For instance, taxes on dividends and interest will reduce the return on investments, and could increase the cost of borrowing. 

For more details about the changes to Oman’s income tax law, read the report from KPMG in Oman.

6 Royal Decree 9/2017 issued on 19 February 2017 and published in the Official Gazette on 26 February 2017.

MESA Tax Centre

Welcome to the MESA Tax Centre, bringing you the latest news in tax from the Middle East and South Asia (MESA) region.

 
Read more

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.