Withholding taxes not an additional cost for firms
Leading professional services firm KPMG hosted another workshop at the Crowne Plaza, Muscat, to address in detail the practical implementation and compliance of the significant tax law amendments enacted by the Royal Decree No 9/2017 issued and published in the Official Gazette last month.
Ashok Hariharan, Partner and Head of Tax for KPMG Lower Gulf, anchored the workshop and interalia explained scenarios where withholding tax deduction in Oman on payment of fees for services and interest payments to non-residents could possibly become a bone of contention during future price negotiations by Omani businesses with their foreign lenders / service providers and how they can try to avoid the same from becoming an additional cost in their hands.
Hariharan cautioned that many foreign taxpayers will expect the taxes imposed on their incomes to be borne by local businesses and to avoid this, he suggested that in all situations, the payer of service fees / interest should diligently enquire about the possibility of the foreign payee’s ability to claim tax credit for the taxes withheld in Oman, to ensure that it does not end up becoming an additional cost in the hands of Omani businesses.
Hariharan also highlighted that such tax credit against home country tax liability can be availed not only under the bilateral tax treaties that Oman has entered into with other countries (where the recipient may be a tax resident), but also as a unilateral tax credit under the home country tax laws, where such enabling provisions exist for this purpose. Another aspect that KPMG dwelled in detail included cost sharing / reimbursement arrangements, where it was highlighted that the underlying contract terms assume key importance to determine a basis for a possible argument that pure cost reimbursements should not be subject to withholding tax in Oman.
Ashok also presented his insights into other key amendments, and addressed many live questions from the audience. Besides Ashok, Nimai Vijay, Tax Director and Sandeep Kumar, Tax manager, took the audience through detailed analysis of the tax amendments including procedures related to e-filing, withholding tax, and assessment of tax returns, and highlighted key uncertainties emerging therefrom and how best to address them till clarity emerges on the same from the tax authorities.