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.