No income tax for small businesses run by Omani citizens

Micro-businesses owned and operated by Omani entrepreneurs will not be eligible to pay any corporate income tax under the revised Omani Income Tax Law issued by Royal Decree No 9/2017, it was revealed at a high-level seminar late last week.

Although the tax rates have been increased, the government has shown much concern for Omani micro and small businesses, according to one of the tax experts who presented at the event. Omani establishments and companies with a capital of not more than RO 50,000 and with a turnover of not more than RO 100,000, employing not more than 15 employees, will be charged only 3 per cent tax. Furthermore, if these entities are fully owned and managed by Omanis or Omani establishments and employ at least two Omanis, they are zero-rated and thus will not pay any tax at all, the expert stated.

According to Davis Kallukaran, Managing Partner of Crowe Horwath Oman, said the tax increase was part of a slew of measures by the government to shore up revenues. Of the estimated 360,000 business entities registered in the Sultanate, around half of them are thought to be dormant. Of the remaining number, only around half are registered for income tax. Again, out of the registered entities, only less than 30 per cent file tax returns regularly.

“The government thought it appropriate to bring to the fold most of the businesses to contribute to the nation-building process, by widening the tax net,” said Kallukaran. “This has been facilitated by removing the basic exemption of RO 30,000, restricting the exemptions to only manufacturing / industrial units, increasing the tax rates from 12 to 15 per cent and expanding the scope of income for collection of withholding tax. The penal provisions have also been strengthened by being harsh on those who are not complying with the tax laws.”