In a previous article, we discussed the procedural requirements that companies need to comply with to be eligible for an income tax exemption under the previous law issued by RD 47/1981 (as amended).
This article deals with procedural requirements that companies need to comply with to qualify for income tax exemption under the new Income Tax Law issued by RD 28/2009 (as amended) effective from 1 January 2010.
Ministerial Decision 30/2012 (“New Tax Law”) sets out the rules and procedures that apply with regard to a company seeking an exemption from corporate income tax.
Firstly, in order to qualify for income tax exemption status, a company must comply with the conditions laid down in Article 81 of the New Tax Law. These conditions are essentially the same as the conditions set out in the previous law, except for the following additional conditions that have been added to the new regime:
- In addition to submitting a copy of the annual accounts and annual financial statements of the company immediately upon their approval, the company shall also submit to the General Secretariat of Taxation a copy of the approval received from the competent authorities for establishing or carrying on the activity (or licences issued to conduct the activity), or the certificate of registration in the Register as per the last renewal.
- The establishment or Omani company shall carry on its activity in accordance with the laws, systems and regulations organizing its conduct.
- The establishment or company shall be licenced to carry on its activity as registered in the Register during the specified period of exemption according to the laws, systems and regulations organizing the conduct of that activity.
Article 82 of the New Tax Law clarifies that the income tax exemption shall be limited to the income realized by the company from carrying on its principal activity. The commercial or industrial register, the licence or the Company’s constitutive contract will describe what constitutes the Company’s principal activity. It should also be noted that the principal activity should contribute to not less than 90% of the Company’s annual gross income.
If the company qualifies for income tax exemption status under the New Tax Law, the company must comply with the procedure stated in Article 85 when making a request for exemption. The procedure specified in Article 85 is similar to the procedure specified in the previous law. The following are the procedural requirements contained in the New Tax Law that are in addition to those set out in the previous law, which must be complied with by companies seeking income tax exemption:
- the application submitted by a legal representative of the company to the competent Ministry responsible for the sector to which the company belongs shall be submitted according to Income Tax Form No. 10, attached to Ministerial Decision 30/2012; and
- the application seeking exemption along with its enclosures shall be submitted by the company within a maximum time period of eight months from the date in which the exemption is proposed to commence. Previously, the time frame for submitting the exemption application was three months from the proposed date of commencement of exemption.
It is very important that a company seeking income tax exemption status under Article 118 of the New Tax Law complies with all the requirements stated under Article 85.
After submission of the exemption request, the procedure to be followed by the competent Ministry as per Article 85 is the same as the procedure specified under the previous law.
Article 85 further states that the competent Ministry shall submit to the minister responsible for financial affairs its opinion along with the documents provided by the establishment or the company within three months from the date of submission of the complete papers.
Thereafter, once the General Secretariat of Taxation at the Ministry of Finance considers the application to ascertain whether the conditions and rules required under law have been complied with, the exemption decision may be issued by the minister responsible for financial affairs.