The tax year is the calendar year. Assessments can be made on the basis of a year-end other than 31 December, provided permission is granted in advance by the Omani tax authorities and the company then adheres to the year-end on a consistent basis.
A provisional declaration of tax must be submitted in the prescribed form within three months from the end of the accounting period to which it relates. The final annual return of income should be submitted in the prescribed format within six months from the end of the accounting period to which it relates. Reasonable time extensions can be sought and are normally provided for filing the provisional and annual returns of income, but these do not defer payment of tax, which will be subject to additional tax at 1% per month from the due date to the actual date of payment.
By virtue of recent amendments, for tax years beginning on or after 1 January 2020, a single ‘return of income’ shall replace the provisional and final returns of income, to be filed within four months from financial year close.
In the case of companies having a paid-up capital in excess of OMR 20,000, the annual return of income should be accompanied by audited accounts signed by an auditor registered in Oman. The law requires accounts to be drawn up in accordance with IFRS or any similar standards as approved by the Tax Authority (TA), consistently applied. It specifically provides for accrual accounting unless prior permission of the TA has been obtained. The accounts must be submitted in local currency unless prior approval of the TA has been obtained for submitting them in foreign currency.
In the case of SMEs falling in the category of the 3% tax rate, the tax returns must be filed and accompanied by a simplified income statement within three months of the year-end.
Delay or failure in submitting the provisional or annual returns may attract a penalty of not less than OMR 100 and not more than OMR 2,000.
Failure to file the provisional or annual returns of income may result in an estimated profit assessment by the TA.
Failure to submit audited accounts as required under the Law is deemed to result in an incomplete annual return of income and may attract an estimated profit assessment. The requirement of submitting audited financial statements has been relaxed for SME taxpayers who fall in the category of the 3% tax rate.
The law confers wide powers on the TA for requesting information. Experience has shown that, notwithstanding the presentation of audited accounts, the tax department requests very detailed information and supporting documentation relating to revenue and expenses. Failure to provide such information or the provision of incorrect information can result in an additional assessment by the TA and/or various penalties on the company and/or the officer responsible for providing the information.
Payment of tax
Any tax estimated to be payable in respect of an accounting period should be paid with the provisional assessment and ‘topped up’ for any additional amount computed as payable following submission of the annual return of income. For tax years beginning on or after 1 January 2020, the tax should be paid with the Final Return of Income due within four months of the year-end. Failure to pay taxes by the due date attracts interest at the rate of 1% per month from the date on which such tax was due to the date of payment.
The difference between the amount paid and the amount assessed, subject to filing of an objection, should be paid within one month from the date of the assessment. The additional amount assessed attracts interest at the rate of 1% per month from the date on which such tax was due to the date of payment.
Under the Law, the TA has the authority, with the approval of the Minister and the Tax Committee, to sequester and sell the assets of a taxable entity to recover the taxes due.
If decisive proof is presented to the TA that any person has paid tax for any year exceeding the tax due and payable for such tax year as finally settled, such person has the right to recover the tax. However, if any tax has become payable by such person in respect of another tax year, the excess amount will be adjusted against the future tax liability. Any request for recovery must be presented within five years from the end of the tax year in which the right to refund arises; otherwise, such right shall lapse.
Where the taxpayer fails to declare correct income in the tax return for any tax year, the TA may impose a fine in the range of 1% to 25% of the difference between the amount on the basis of the correct taxable income and the amount of tax as per the return submitted.
Objections and appeals
A company has a right to object to any assessment issued by the TA. The objection document should be prepared in writing (in English and in Arabic) and filed with the office of the TA within 45 days from the date of assessment. The TA is required to give a judgment within five months, extendable up to another three months at the TA’s discretion, from the date of receiving the objection. The tax demanded may be kept in abeyance on request. No additional tax is payable until the TA issues the judgment.
Statute of limitations
The Royal Decree 9/2017 introduced the self-assessment regime, where the assessments are carried out on a sample basis and the statute of limitation is three years from the end of the year in which a tax return is submitted. Where the entity has not submitted the tax returns, the tax authorities have a period of five years to complete the assessments.
Maintenance of records
The Law requires accounting records and supporting documentation to be maintained for ten years after the end of the accounting period to which these records relate.
Topics of focus for tax authorities
Related-party transactions are likely to attract particular scrutiny by the tax authorities. Taxpayers should maintain extensive documentation that proves that transactions are carried on at arm’s length.
COVID-19 measures announced by the tax authorities
On 31 March 2020, and subsequently in July 2020, the tax authorities announced a number of relief measures with the objective of helping taxpayers fulfil their tax obligations without being exposed to potential fines and penalties stipulated by law. These measures include:
- Automatic nine-month extension to the filing and payment due date for income tax, with no penalty imposed for late filing and payment, for all income tax returns due affected by COVID-19.
- Formal application and approval for all taxpayers to settle taxes due by way of instalments, with no penalty imposed.
- An extension for taxpayers to raise objections against original, rectified, or additional tax assessments from the Oman tax authorities, provided they can justify the delay at the time of filing the objection.
- Taxpayers can request for a discretionary extension on the time to submit required information and documents to the tax authorities in relation to an objection. If approved, the duration for making a decision on objection is also automatically extended.
- Donations made by taxpayers for the purpose of combating the COVID-19 pandemic shall be allowed as a deductible expense for income tax purposes for the 2020 fiscal year, provided such donations are made in accordance with the provisions of the Oman Income Tax Law and Executive Regulations.
These measures have been introduced in response to the financial and operational impact on taxpayers in the country following the COVID-19 outbreak. It is our presumption that these would remain in force as long as the precautionary measures against COVID-19 remain in force.
COVID-19 related relief measures previously announced to ease the pandemic impact on taxpayers, have lapsed as of 31 December 2020.