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Economics
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Friday, 19 June 2009 14:53 |
A new Omani Income Tax law will take effect From January 1, 2010. The law is designed to attract foreign companies to enter the market. The new law was enacted by royal decree on 24 May 2009, and published in the Official Gazette on June 1 this year.
"The new corporate income tax law is now more favorable to foreign corporations by fixing the corporate income tax rate to a low 12 per cent, for all businesses including branches and permanent establishments of foreign companies," said Nauman Ahmed, partner in charge for Tax Advisory Services in Deloitte Middle East, adding that it also introduces an annual 90 day threshold in aggregate for any given taxable year before a foreign company conducting business in Oman is deemed to create a taxable presence (Permanent Establishment). "Foreign companies providing consultancy and other professional services will benefit from this development," added Ahmed.
In addition, the new Tax Law introduces measures to broaden the tax base whereby Global Income will now be subjected to corporate tax while also introducing foreign tax relief on certain taxes paid overseas in the form of a foreign tax credit.
Tax exemptions and other incentives will continue to apply to specific industries engaged in development of tourism, qualifying manufacturing businesses and projects of strategic economic importance with substantial export and employment potential. "These industries are perceived to provide economic growth and help fulfill the Omanization program of the Sultanate," said Alfred Strolla, office managing partner for Deloitte in Oman. However, public utility projects will no longer be eligible for tax exemptions while Education and Medical Care providers will have their indefinite tax exemption status replaced by a maximum of 10 years.
The new income tax law also includes provisions that deal with the tax treatment of the income and expenses of the pre-incorporation or pre-operation period. Expenditure incurred for business purposes before the business commences shall be deemed to be incurred on the day on which the business commenced.
Executive Regulations are expected to be issued shortly in order to give more clarity and further guidelines in implementing the new income tax law.
John Belsey, the leader of Deloitte's International Tax Services and the Mergers and Acquisitions (M&A) tax practice in the Middle East, commented "This is a very interesting development to the Omani tax system and it will be interesting to see whether this leads to pressure for announcements to changes to other tax systems in the Middle East later in 2009."
In February this year, as part of Deloitte's commitment to being at the fore of supporting its clients with tax services in the region, the Firm launched an International Tax Center of Excellence in Dubai. The Center offers clients headquartered in the Middle East as well as investors in the region a full suite of services that includes structuring groups with inbound and outbound investments within the Middle East, transfer pricing services, VAT services and transactional tax services.
About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organization of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in over 140 countries. With access to the deep intellectual capital of approximately 165,000 people worldwide, Deloitte delivers services in four professional areas--audit, tax, consulting, and financial advisory services--and serves more than 80 percent of the world's largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Services are not provided by the Deloitte Touche Tohmatsu Verein, and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas.
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