A more punitive penalty regime has been implemented with the promulgation of Sultani Decree 9/2017 (Issuing Amendments to Some Provisions of the Income Tax Law) (the “New Law”) amending Sultani Decree 28/2009 (together, the “Law”), for the purpose of encouraging compliance with the Law, and to encourage self-assessment. This article will provide an overview of the penalties of which taxpayers should be fully aware.
Assessments by the Secretary General
Electronic lodgement of tax returns will commence following the issue of the amendments to the Law. Pursuant to Articles 13 and 14, returns must be submitted in an electronic format by the due date. The Secretary General is empowered with the right to examine those returns from a random sample, in accordance with Article 15, and in accordance with rules and regulations issued by the responsible Minister and as proposed by the Secretary General. These are yet to be decided, so there will be additional considerations applicable to the electronic lodgement of returns. The Secretary General will also examine assessments of any taxpayer returns if:
- A final return has been submitted without fulfilling the conditions for electronic filing in compliance with Article 13, including failure to enclose accounts;
- An examination of the final return in the application of Article 15 demonstrates that it did not include the real taxable income; or
- Upon request by the taxpayer within three years from the submission of the final return in the tax year for which the assessment is to occur.
Taxpayers will need to ensure they are conversant with the procedures for filing returns in order to comply.
Time Limits on Assessments by the Secretary General
With the lapse of time, the Secretariat General is prevented from examining returns and assessments (see Article 18). For any tax year, following the lapse of three years from the end of the tax year for which the final return is submitted, the Secretary General is prevented from conducting examinations of returns or assessments. This does not apply to cases of fraud and deception, wherein the Secretary General may conduct examinations for up to five years following the end of the tax year in which the return is submitted. Final returns must be submitted within five years following the end of the tax year for which the final return is due. It should be noted that taxpayers are entitled to object to an assessment, correction or amendment or to make an additional assessment, and to dispute a decision of the Secretariat General.
The penalties below will be imposed by the Secretary General in respect of the regime outlined above.
Taxpayers will risk facing penalties for failure to file notifications within the specified time, with such notification to be provided in respect of commercial or industrial registration, or other formal records including name, address and any relevant amendments. Notifications must be submitted within 60 days of either incorporation or the start of the activity, whichever is earlier, and within 30 days of making any amendments to the information. Additionally, taxpayers will be liable for failure to file a provisional or final return during the specified deadlines. The maximum penalty in each instance is OMR 2,000.
Pursuant to Article 21, penalties will be imposed by the Secretary General for failure to declare the correct income in a taxpayer’s return. The maximum penalty imposed is 25% of the difference between amount of tax on the basis of correct taxable income and amount of tax as per the return submitted, providing a significant incentive for taxpayers to be accurate.
Penalties will be imposed under Article 22 for failure by the taxpayer to provide data, information, accounts, accounting records or any other documents required by the Secretary General or failure to attend at the time and place specified by the Secretary General to discuss the taxpayer’s return or assessment of the return, or answer questions about the return, the assessment or the taxpayer; or failing to file a tax card application from the commencement of incorporation onwards or comply with Article 15 in retaining records for 10 years for the end of the relevant accounting period which will attract a maximum penalty of OMR 2500. The fine can be levied on the principal officer or the taxpayer, or both.
Harsh penalties for obstructionist practices
Taxpayers should be fully aware that, subject to harsher penalties in Oman’s Criminal Law, Article 23 imposes harsh penalties should the principal officer intentionally fail to submit a return in accordance with this Law, or if the taxpayer or principal officer prevents the Secretary General from exercising its functions or rights specified by this Law. The penalty for doing so is imprisonment of between one to six months and a maximum fine of OMR 20,000. Previously, imprisonment was only for a period of one month with a maximum fine of OMR 2,000. So it is quite apparent that breaches of this nature are to be taken very seriously in the future.
Repeat instances of failing to issue a return by the principal officer will attract harsher penalties from the Secretary General if the abstention occurs over two consecutive years. In such cases the principal officer will be held accountable and may be imprisoned for three months to one year, and/or the Secretary General may impose a maximum fine of OMR 30,000.
In the event the Principal Officer intentionally refuses to file returns with the actual income of the entity or should an incorrect tax liability be intentionally disclosed or documents and records be disclosed, the tax authority may impose upon the principal officer a period of imprisonment of between six months and three years and a maximum fine of OMR 50,000 (see Articles 23-24).
In order to avoid the harsh penalties imposed by the New Law, principal officers and taxpayers should be diligent in filing their returns in an accurate manner, on the due date, together with all relevant information. Should the tax authorities require examination of returns and assessments, principal officers and taxpayers should act in compliance with the requests of the tax authority and should attend all requested meetings and provide all relevant information.