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  • Service: Tax
  • Type: Business and industry issue
  • Date: 10/18/2013

Oman – Setting up foreign subsidiaries and tax audit trends 

Update – Setting up of a company in Oman with foreign participation

Setting up a 100-percent foreign-owned subsidiary in Oman is possible under the current Omani laws and practices. Registration of any company with foreign shareholding in excess of 70 percent requires the approval of the Council of Ministers upon recommendation of the Minister of Commerce and Industry.


Generally, approval is granted only if the Council of Ministers is satisfied that the company’s activities would contribute to the development of the national economy. While no criteria for this is specified, projects that create local employment opportunities or bring in new technology are viewed favorably.


Companies with foreign shareholdings up to 70 percent can be set up under an automatic procedure. However, under the Oman-US Free Trade Agreement, companies incorporated in the United States that are fully owned by US nationals/corporations may incorporate a 100percent-owned subsidiary in Oman.


Note that the foreign company that intends to incorporate a subsidiary in Oman should have been operating in the foreign country for at least 3 years before the subsidiary’s incorporation in Oman.


Registering with the tax department


Taxpayers must register with the Omani tax authorities by filing a Form for Declaration of Business Particulars within 3 months from the date of incorporation or commencement of activities. Changes to permanent information must be communicated within two months from the date of the change.


Maintaining books of accounts in foreign currency


Under the Oman Tax Laws, company accounts must be maintained in Omani rial (OMR). Where a company requires its accounts to be maintained in a foreign currency, the company must obtain prior approval from the Secretary General for Taxation. In our experience, such approval usually is granted for branches of foreign companies. However, the Tax department generally is reluctant to grant approval to Omani-incorporated companies.


Tax return assessments gain momentum


As we enter the last quarter of 2013, the Tax Department has started aggressively pursuing assessments of tax returns that will be time-barred in 2013 (i.e., tax returns filed in the 2008 taxation year).


As a result, we recommend that the taxpayers keep a close watch on communications from the Tax Department. Failure to respond to any of its questions and requests for clarification could cause the Tax Department to complete the assessments with arbitrary adjustments. It is also important to engage in discussions with the appropriate tax authorities to attempt to resolve areas of concern and avoid disputes.

 

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