Friday, March 23, 2012

Supreme Court Update: Omani Companies with Foreign Shareholdings Welcome Landmark Tax Judgment

We are pleased to share news of a judgment recently handed down by Oman’s Supreme Court in favour of two clients of Curtis, which we believe is of interest to the broader Omani business community.

The Supreme Court decided that Omani companies who have shareholdings in companies outside Oman should not have to pay tax on dividends received between the tax years 2002-2004 inclusive, which were the years under consideration. This decision overturned the earlier decisions of the Omani Primary and Appeal Courts in 2010 that these overseas dividends were taxable, pursuant to a 2004 Supreme Court judgment.

It is expected that the new written Supreme Court judgment will make it clear that the ruling also applies to the tax years 2000, 2001 and 2005-2009 inclusive.

The favourable Supreme Court judgments therefore imply that taxpayers who have received overseas dividends during the applicable years should not be taxed on this income if they have already disputed the charges or if their assessments are yet to be completed. (If they have already paid tax in respect of these years, they are deemed to have accepted their tax liability.)

Following the judgment, dividends paid in the applicable years to any Omani company on shareholdings in foreign companies will no longer be viewed as taxable income.

Needless to say, this is a very positive development for a broad range of Omani companies.


Tuesday, March 20, 2012

Sultanate Issues New Executive Regulations to Income Tax Law

As part of the Sultanate’s drive to further modernize its platform for businesses, the government has made significant revisions to the national tax code over the past few years. The new Income Tax Law, promulgated in June 2009 by Royal Decree No. 28/09, replaced the Income Tax Law on Companies (Royal Decree No. 47/81) and the Profit Tax Law for Establishments (Royal Decree No. 77/89) which previously had been in force.

Importantly, the new Income Tax Law also called for the issuance of supporting executive regulations. These regulations finally have been released as Ministerial Decision No. 30/2012 (the “Executive Regulations”), which was published in the Official Gazette last month.

This article provides a high-level overview of several key provisions that we believe might be of interest to companies. Naturally, for further details or specific tax advice please consult specialist professional accountants.

Relief for small businesses

One important provision, likely included as part of the Sultanate’s initiative to grow small and medium enterprises (SMEs), is that small businesses are exempted from many of the registration and filing requirements under the Executive Regulations. Companies that meet the following criteria are eligible for such exemptions:
• A registered capital of RO 20,000 or less;
• Total gross realized income of RO 100,000 or less; and
• An average of eight or fewer employees during the tax year.

Authorities’ right to inspect documents at taxpayer’s premises

The Executive Regulations have given the Omani tax authorities an important new enforcement power in the form of rights to carry out inspections of taxpayer documents and records at the taxpayer’s premises. However, the tax authorities must provide at least 10 days’ prior notice to the taxpayer before conducting any such inspection. Moreover, documents that relate to periods falling more than ten years prior to the date of the inspection are exempt from inspection.

Changes to expense deduction rules

The Executive Regulations set forth rules for the deduction of various categories of expenses. These categories include:
• Contributions to pension and savings funds;
• Donations;
• Rent for real estate;
• Interest expenses; and
• Remuneration to boards of directors and owners.

Expense deductions, in particular, are a sensitive area of tax planning and preparation is crucial for companies to handle these deductions correctly. Again, we recommend consulting specialist accountants on these finer points.


Tuesday, March 6, 2012

Curtis Opens Office in Kuwait

New York, March 5, 2012 – Curtis, Mallet-Prevost, Colt & Mosle LLP has announced the opening of an office in Kuwait in association with Mashora Advocates and Legal Consultants. Kuwait becomes the international law firm’s 16th office globally and third in the Middle East.

The Curtis Kuwait office will be headed by David Pfeiffer, who joins Curtis as a partner with 16 years of experience in Kuwait.

The office will be located at Mashora Tower, Qibla Area, Kuwait City. The firm’s phone number there will be +965 2240 4470 and the email will be

Mashora Advocates and Legal Consultants is considered to be Kuwait’s premier law firm with 25 lawyers. Mashora has built an outstanding reputation in the area of corporate and commercial law, litigation, real estate, joint ventures, banking and finance. Mashora is managed by Abdulrahman Al Humaidan, a Kuwaiti national with more than 25 years of experience in the Kuwait market.

“We are very excited to be expanding into Kuwait,” said George Kahale III, chairman of Curtis. “This move is another important part of our strategic growth in the Middle East, where we have already established a strong presence in Oman and Dubai over the past few years. The combined strength of Curtis’ international experience, the addition of David Pfeiffer to head the Curtis Kuwait office and Mashora’s well-known capabilities in the Gulf region will provide clients with the highest level of legal service in Kuwait.”

“We are very happy to be associating with Curtis,” said Mr. Al Humaidan, who served from 2006 to 2009 as Chairman of the Kuwait Municipal Council and President of the Kuwait Lawyers Association from 1998 to 2006. “Our alliance will create one of the most significant international law offices in Kuwait, which will greatly benefit our clients and enable us to grow in a wide range of practice areas.”

“I am thrilled to be joining Curtis because of its strong international focus and reputation along with its commitment to the Middle East,” said Mr. Pfeiffer, who brings 18 years of experience in the Middle East. “Curtis provides a substantial international platform that will allow us to establish a solid base in Kuwait by working closely with its team of highly regarded lawyers around the world to deliver the highest quality service to our clients in all practice areas.”

David Pfeiffer offers a combination of local and international expertise that is unmatched in Kuwait. He has been recognized, including by Chambers Global, as one of the leading commercial lawyers in Kuwait, where he has been based since 1996. He most recently was the managing partner of the SNR Denton Kuwait office after serving as the managing partner of Bryan Cave Kuwait. He has practiced law in New York, Chicago, Riyadh and Jeddah, in addition to Kuwait.

Mr. Pfeiffer earned his J.D. at the University of Wisconsin Law School and an LLM at Georgetown University Law Center. He received his M.A. at the University of St. Andrews, Scotland.

Curtis, Mallet-Prevost, Colt & Mosle LLP is a leading international law firm providing a broad range of services to clients around the world. Curtis now has 16 offices in the United States, Europe, Central Asia, the Middle East and Latin America. The firm’s international orientation has been a hallmark of its practice for nearly two centuries. For more information about Curtis, please visit or follow Curtis on Twitter ( and


Commercial Guarantor Liability

The basic element of a guarantee as recognised under Omani law is the existence of “offer” and “acceptance” between the guarantor and the creditor. A guarantee is characterised as a commercial guarantee if the underlying debt is commercial in relation to the debtor.

Under the Oman Commercial Code, the guarantors are jointly and severally liable among themselves and with the principal debtor and the creditor may choose to proceed directly against the guarantor or simultaneously against both the guarantor and the principal debtor regardless of whether or not the principal debtor is solvent.

It must be noted, however, that if the creditor brings an action against the guarantor, it is incumbent upon the latter to join in the debtor as a party. Failure to implead the debtor in the suit could leave the guarantor with no right of recourse against the debtor if the debtor has already discharged the debt or if the debtor is able to establish that the claim is a nullity or is time-barred. Similarly, the guarantor is obliged to put the debtor on notice before paying off the debt.

Upon discharging the debt, the guarantor is subrogated to the rights of the creditor and the guarantor will be entitled to ‘step into the shoes’ of the creditor and exercise the creditor’s rights against the debtor. At the time of payment of the debt, the creditor is obliged to deliver all the necessary documents to the guarantor to enable him to enforce the right of recourse against the debtor. If the debt is secured by a mortgage then the creditor must relinquish the mortgage rights in favour of the guarantor. The creditor has a duty to safeguard the securities held to cover a guaranteed debt and the guarantor would be released from the guarantee to the extent any damage or loss has been caused to the collateral due to the creditor’s fault.

The Commercial Companies Law requires explicit authorisation by the Articles of Association or by a shareholders resolution of a company for guaranteeing the debts of third parties that are not granted in the ordinary course of the company’s business. It is always prudent to obtain the shareholders approval before granting corporate guarantees.