Oman: Increased tax rate; taxes imposed on dividends and interest

Oman: Increased tax rate; taxes imposed

Royal Decree 9/2017—issued 19 February 2017, and published in the official gazette on 26 February 2017—amends and makes the following changes to Oman’s income tax law.

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  • The tax rate is increased to 15% (up from 12%) for financial years beginning 1 January 2017.
  • A 3% tax is introduced with respect to “micro-businesses.”
  • The tax-free threshold of OMR 30,000 is repealed. 
  • Dividends on shares and any interest amounts paid or credited to any foreign person, from 27 February 2017, are now subject to withholding tax at a rate of 10%.
  • “Fees for services” will be included in the definition of income, effective 1 January 2018. Such fees are also included within the scope of withholding tax. 
  • Ministries and other government bodies are now expected to withhold and pay tax.
  • Tax exemptions that applied for income from mining activities, exports of locally manufactured goods, hotels and tourist villages, agriculture, animal produce, fishing, education, and medical care are repealed.
  • Tax exemptions for manufacturing companies are limited to five years.
  • All taxpayers must obtain a “tax card” and use it with respect to all contracts, invoices, and correspondence.
  • The new tax regime is based on a self-assessment system.
  • Penalty measures have been strengthened and include possible imprisonment of a principal officer for violations of the tax laws.

KPMG observation

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.

 

Read a February 2017 report [PDF 106 KB] prepared by the KPMG member firm operating in the United Arab Emirates and the Sultanate of Oman.

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