Part A

Introduction to Oman Tax System

The taxation laws of Oman are well-thought and practical laws. The laws made by the state of Oman cover all the situations that can occur regarding the taxation system. There are proper laws for all types of operations that can be conducted in the Sultanate. The three basic forms of taxation are withholding taxation, personal taxation, and corporate taxation. Out of these three forms, corporate taxation is the most complicated form. The laws cover all the operations of the corporate sector whether there is the involvement of the foreigners or the business is fully run by the locals. There is a yearly based revision of the tax percentage. The basics of the taxation laws are not changed and the application process of the law is also kept constant.

 

The penalties are an important part of any law. The penalties are an important part of the law and that is why the Taxation law of Oman has strict rules and regulations regarding the application of the penalties. The penalties in form of finance range from OMR 100 to OMR 2000. The upper limit of the fine was increased last year to make sure that people are fined enough to make them understand the importance of following the law. There is also a fine of 1% per month if the taxpayer is unable to pay the tax at the right time. This penalty is to make sure that the government is able to generate tax in time for the projects that have been planned (Murray, 2015).

Rules Regarding Deduction of Specific Expenses

The expense that the taxpayer had to pay for no positive financial outcome is defined as a deductible expense according to the law. This deduction in the tax is offered by the government to provide relief to the taxpayer from paying tax even for the expenses that produced nothing for the taxpayer. The relief is the make sure that the taxpayer stays assured that the government is not greedy for the money and nobody is going to do any injustice to the taxpayer. The amount that the taxpayer spent on the non-profitable expenses is regarded as the deductible income under the law this is because the taxpayer spent the income and got nothing out of that. This can happen in multiple ways and the Law addresses all the possibilities in such cases. It is important to cover all possibilities to make sure that the taxpayer is not overcharged and the government gets a fair amount of tax.

There is a standard for depreciation that is defined by the Sultanate of Oman. This is done to make sure that there is no confusion regarding the depreciation. There is no universal law for the depreciation and to some extent, this is subjected to society and the area of the property. There are so many factors that play a role in this and that is why it is important that there are some standards set by the government for the depreciation of the property (Moisescu, 2018). The building that is semi-permanent under the use of the corporate sector is depreciated at the rate of 15% but on the other hand, the building that is permanently under the use of the corporate sector is depreciated at the rate of 4%. If the building or the asset is being used by the industry the depreciation rate is doubled. This is to support the industrial system in the Sultanate. The buildings for the hospitals or any such public services are depreciated at the rate of 100% (Hameed, 2014).

The costs that were paid by the taxpayer in vain or the losses that were beard by the taxpayer can be considered as a deductible expense in cases but if that expense was recovered from any source like judicial ruling or insurance or due to any contract. In that case, the cost or the loss is not deductible at all. This is because the loss or the cost was recovered so in the eye of law that loss or cost didn’t even happen (Sultanate of Oman Ministry of Finance Secretariat General for Taxation, 2018). There is no compensation for the expenses that were made without outcome and then are recovered completely. The taxpayer got the money so the taxes that are applicable to that tax are also valid and need to be paid by the taxpayer (Secretariat General for Taxation Taxpayer Portal, 2018).

The expenses made in the production of the exempted income are also not deductible in the Oman Taxation Law. Even when the income has been exempted the expenses that are made for that income are not deductible. Capital expenditures can either be deductible or non-deductible depending on the situation. There is a guideline for the taxpayer so that the taxpayer can understand the difference between the capital expenditure that is taxable and the capital expenditure that can be recorded under deductible expense.

The start-up expenses that the owner has to bear just to start the business. These expenses are also noted as deductible expenses. This step is taken by the government to make sure that they provide a healthy and welcoming environment for the new business owners. This is important for the government to promote new businesses as they can support the economy of the Sultanate (Naidu-Ghelani, 2013).

The expenses that are made for the sake of generating the gross income are considered deductible taxes. So the expenses that are made to make more than the gross income are the expenses that are taxable. There is no deduction clause in the tax system for the expenses more than the expenses for generating the gross income (Eudelle & Shrestha, 2017). The tax that is already due on the taxpayer whether it is in Oman or in some foreign country is not deductible by the law. The amount or the tax that is already payable or is already paid is not the expense of the taxpayer that can get some compensation for the taxpayer. Such an amount is already the debt that the taxpayer has to pay to the authorities.

Conclusion

In Oman, strict laws and regulations are clearly defined for deductible expenses. Clear guidelines and strict rules are designed regarding deductible expenses. The major thing is the definition of deductible price, the trickiest and tough task is to define which should be the deductible expenses and which should not. In the entire world, different rules and laws are defined for deductible expenses but as far as the Oman Sultanate is concerned there is leniency to some extent. The laws are lenient and least complicated. In Oman Sultanate the deductions are provided for each expense that is not produced from any taxpayer income.

The Oman government has clearly defined the depreciation rates which are used by the corporate sectors. The government announced the depreciation rate because it is essential and highly important for the government to make the standards clear and remove the confusion. The Oman laws about taxation are very clear and extensive. The laws of Oman regarding taxation cover all the major and minor aspects and conditions which can occur for an individual or company. The articles described all aspects of tax considerations and conditions which are necessary to follow in Oman.

The tax has some conditions to be applied to the taxpayer, the tax will be not applied to that type of loss which the taxpayer can recover from different resources. That’s why the taxpayers consider the laws of the Oman Sultanate feasible and lenient. The Oman Sultanate has liniment strategies by which the taxpayer can get relaxation.

 

Part B

Introduction

Oman Sultanate has a well-defined structure of rules and regulations or laws. In the Oman sultanate, the rules and regulations are clearly defined by the state and the proper procedure for each thing or each activity is defined under the legalities. The importance of fully defined procedures and definitions is considered by the state and in articles, the detailed description of procedures, rules, and regulations is defined regarding all entities. The articles defined all the limitations on the operations of company owners and businesses in terms of taxes. The taxes are essential to pay and who is responsible to pay the taxes, these all things are defined in articles.

The articles of the law have defined the categories under which the taxpayer falls. The articles clearly highlighted the circumstances which can be resulted in the case of an operation by the company or any individual. The company and the individual business holder must follow some rules to pay the tax, for the debt deductions, tax year which is defined in articles with complete detail.  In multiple countries, there are different rules and multiple definitions of taxable, that’s why before establishing a business in Oman it is necessary to clearly understand or make sure the guidelines. The individual working in Oman and the taxable organization must follow the given details and conditions to run the business under laws and regulations.

Body

The procedure of administering the Tax Law

In Article 4, it is thoroughly discussed that a foreign person shall be subjected to pay the tax in that case where he/she is not running the business in Oman by the source of permanent establishment and he/she is collecting the money from royalties, management fees, development, and research, obtaining the rights of a software house or collecting money from any other resource (Strolla & Peri, 2016).

In accordance with article 2 (Almutairi, 2014), it is clearly declared that the tax provisions are applied to the GCC country’s national. If the person was legally permitted to live in or born here on the premises that he /she is subjected to tax provisions. It is based on the Economic Agreement which was signed by the GCC country’s Supreme council in 2001 (Besley & Persson, 2014).

Article 6 declared the fourteen professional activities where the provisions of laws can be implemented. The fourteen professional activities are Dentistry, economic and administrative consultancy, physiotherapy, engineering branches, photography, painting, translation, veterinary medicine, Administrative expertise, and other authorities, etc. (Agarwal, 2017).

Article 28 (Eudelle & Shrestha, 2017) defined the sponsor properly. According to article 28, a sponsor is a person by which the foreign company can enter into any contract to run or carry out any business in Oman. The sponsor is the source of entry for a foreign company in the Oman Sultanate (Ennis, 2015).

According to the article, the changes in any taxpayer information or the notifications regarding the taxpayer changes shall be submitted according to the time limit of the Income-tax Form No 6 which is two months after the changes (Hasan, 2015). During the tax year, some rules and conditions are defined to deduct the bad debts. Article 22, highlighted the three major conditions regarding the bad debt deductions. The conditions discussed in the article are following

• The first condition is that the debt must be recorded in the records of accounting by which the taxpayer can track all the transactions.
• The second condition is that the debt is just because of the production of the gross income, or because of that transaction which is done by the taxpayer in business.
• Articles 23 and 24 are necessary to follow by the taxpayer for the debt collection and failed collected amount which the taxpayer owed in debts.

According to article 29, the detailed deals and conditions are following which are foreign company and sponsor in accordance with the amount paid from the gross income. The sponsor’s fees deals and conditions are defined in article 29 in detail which are three

• The contract of the sponsorship is necessary for which all the terms and conditions must be clearly defined and all the liabilities and responsibilities of both parties must be discussed.
• The fees which are paid to the sponsor must not be for any sale or any trade or any purchase of goods or services, but they should be in the capacity of the sponsor not for any other company operations.
• During the tax year, the permanent establishment must be incurred the fees such as payable or paid fees.

Article 33 discussed some scenarios of donation deductions while defining the taxable income. There are three scenarios that are discussed for deductible donations.

• The donations are paid to the law of private Bodies which are recognized by the sports field or the Private bodies which are working in the sports
• The donation is made to societies or any non-governmental charitable organizations which are recognized by any Non-Governmental Societies Law.
• On the special occasions like Eid, religious events, or any national day the amounts paid by the public organizations, ministries, or any taxpayer

Article 48 declared the salaries which are payable to the owner of any Omani establishment or any company partner in return for the management. article 48 discussed the amount which is returned to the owner in terms of management return shall be treated as bonuses, wages, shares, commissions, and profits whether it is electricity, water, telephone, medical facilities, residential facilities, transportation facilities, or any other facilities regarding living standard provided by the company to the owner or any partner of the company.

Article 34 (Brandenburg, 2013) is clearly described the real estate and rents deductions. In accordance with article 34, the rent is considered in the deductions which are occupied by any taxpayer when it is a registered contract of rent under the Royal Decree N° 6/89 provisions.

Conclusion

Oman has defined some rules and regulations regarding tax provisions etc. The clearly defined law of Oman is that everyone who is carrying business in Oman or earning money in Oman from any business any individual set-up or any organization or in another foreign country will pay the tax. They all are considered taxable entities. The tax laws are defined to provide relaxation to the multiple forms. Sponsorship is common in Oman. The trend of having a sponsor is very old and common in Oman and the laws of tax have separately announced or defined their terms or provisions about the payments in return for the sponsor services. To enjoy the bad debts perks some rules and regulations are necessary and highly optimal to follow because the tax laws are offering relaxation in that case if the conditions are fulfilled.

In Oman, the tax laws are defined for all types of contracts and all types of business whether it is individual or based o partnership or sponsorship. The partnership agreement is also possible in Oman. But the partnership agreement required some considerations of laws by which the tenant may also have some compensations on the rent which will be paid. The rules and terms are defined by which an owner can enjoy the compensations and awards from the company or the partner can also enjoy the same rights. The owner and partner of the company have multiple compensations like the standard of living style or the medical facilities and residential facilities. They are also enjoying bonuses, profits, and commissions in return for management.

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