The Oman Tax Department plans to complete tax assessments for tax years up to and including the 2012 tax year. Oman’s full tax assessment system gives the Tax Department five years (from the end of the tax year in which the tax return was submitted) to make their enquiries. Given this extended enquiry window, companies usually have several open tax years, and the Tax Department often raises enquiries regarding multiple tax years at the same time and typically allowing taxpayers only 30 days to respond.
KPMG in Oman has seen a significant number of enquiry letters, covering as many as four open tax years, up to the 2012 taxation year. The letters generally give the taxpayer only 30 days to respond and, based on discussions with the Tax Department, the aim is to finalize assessments by the end of July 2014.
Assessments will be based on the information provided by the taxpayer. Where information has not been provided or is insufficient, assessments will likely be based on adjustments that the Tax Department considers appropriate, and it is unlikely that they will favor the company.
These developments make it even more important for taxpayers to prepare and maintain a tax audit file for each open tax year, so that they are well positioned to respond to assessment queries within these tight deadlines.
The Tax Department has also increased the threshold for assigning taxpayer files to the Large Taxpayer Unit. This is intended to give it more time to focus on large taxpayers’ issues.
By now, taxpayers should have filed their provisional return of income (due 31 March 2014 for 31 December year-ends) and paid any associated tax liability. The final return of income is due on or before 30 June 2014 (or 6 months following the end of the accounting period), along with any payment due.
Previously, the Tax Department did not enforce late-filing penalties, but it has indicated that it may start enforcing them soon.
Regulations have been issued regarding the incentives that are available to businesses operating in the new special economic zone at Duqm.1 The regulations also set out the requirements that businesses must satisfy to qualify for the incentives.
The most important incentives are as follows:
- 30-year exemption – An exemption from all taxes for a period of 30 years, from the date of commencement of activity (renewable for a further 30 years), is available to proprietorships, companies, and branches or establishments of a foreign company. The exemption does not apply to banks, financial institutions, insurance and reinsurance companies, or road transport projects (except registered road transport companies operating permanently within the zone).
- 100 percent foreign ownership – Non-residents are allowed to hold 100 percent of the Omani project company. Minimum local capital requirements are relaxed, and the repatriation of capital or profits is unrestricted.
- Project eligibility – To qualify for these incentives, projects must:
- be registered in the zone and licensed to practice one of the specified business activities
- fulfill its commitment to undertake those activities
- meet the Omanization percentages specified by the Duqm authority regarding number of Omani versus non-Omani employees.
1Royal Decree 79/2013.