Changes to Income Tax Law by Sultani Decree 118/2020

The provisions of the Income Tax Law (“ITL”) have been amended by Sultani Decree 118/2020. This change partially comes within the framework of the Sultanate’s accession to a number of international agreements on tax affairs related to information exchange, which were signed on 26 November 2019 at the OECD headquarters in Paris.

Significant changes to the ITL include:

• introduction of a new section titled tax residency
• requirement to file only one tax return but within four months from the end of the relevant tax year or accounting period; and
• enabling provisions to facilitate Automatic Exchange of Information (“AEOI”) between tax jurisdictions.

The general rule is that the financial information of an individual cannot be disclosed to anyone but the concerned person; however, Article 29 of the amended law specifies the cases wherein the appointed person in the Tax Authority can disclose financial information, data or documents:

• The concerned person explicitly consented to the disclosure,
• Implementation of a decision issued by the Income Tax Committee,
• Implementation of a decision or judgment issued by a competent judicial authority, and implementation of a fatwa request, or
• Decision issued by an official body legally authorised to do so.

In accordance with AEOI, the Tax Authority has the right to obtain any financial data, information or documents from any person for the purposes of implementing the provisions of international bilateral or multilateral treaties concerned with tax affairs, including requesting any information related to any person from any licensed bank in the Sultanate. Furthermore, the bank is legally not authorised to notify its client of the search, and refusal to oblige to the Tax Authority’s request may result in administrative penalties.

This provision comes as an exception to Article 70 of the Banking Law and Article 29 of the amended ITL. The Tax Authority is also authorised to conduct search proceedings at the concerned person’s residence to obtain any relevant information.

The tax residency was introduced in the amended ITL to define the persons subject to the provisions of the ITL. The amended law provides that the persons that are legally considered tax residents are:

• Natural persons residing in the Sultanate who are present in the country for more than 183 continuous or intermittent days within a tax year
• Legal persons if they are either an established entity in the Sultanate or if their headquarters or actual place of management is in the Sultanate

Furthermore, all appeals against the Tax Authority objection decisions shall now be filed with the Tax Grievance Committee. The appeal to a decision should be submitted in writing to the Committee, including the complainant’s request and the reasons on which the complaint are based, within 45 days from the date of his notification of the objection decision issuance or from the date of the expiration of the period specified for adjudication.

These measures will support the Sultanate’s participation in international efforts aimed at curbing tax evasion and tax fraud crimes.

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