Overview of Accounting, Audit, and Tax Compliance in Oman
Oman, also called the Sultanate of Oman, is a country in Western Asia situated on the Arabian Peninsula's southeast coast. Yemen, Saudi Arabia, and the United Arab Emirates are their neighbours. Oman is a well-liked tourism destination because of its fascinating history, varied culture, and stunning scenery. Oman has gained widespread recognition on the international market as a viable location for international companies. For people intending to conduct business within Oman, it is essential to understand the tax system as well as its accounting and auditing standards. Oman has undertaken steps to diversify and modernize its economy, which is a middle-income country mainly dependent on finite oil resources. The opportunity for foreign investors to acquire 100% of specific industries is one of the government's policies to promote foreign investment. Initiatives to privatize public utilities also seek to strengthen the regional economy.
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Accounting and Audit Standards in Oman
All businesses in Oman must adhere to the International Financial Reporting Standards, which are rules for reporting financial information. The Oman Capital Market Authority, Oman Central Bank, and Oman Tax Authority have all mandated this. Companies must follow specific requirements according to Omani legislation. The Law does not, however, specifically define any particular accounting concepts or procedures.
The balance sheet, statement of income (profit and loss statement), statement of changes in equity, statement of cash flows, and notes to the financial statements are the principal financial statements that businesses in Oman are required to prepare.Companies that issue securities for public subscription are required to submit
- annual, and
- quarterly reports
to the Capital Market Authority that provides details on their operations and financial performance.
All commercial enterprises must keep specific books of account under the rules of the Oman Commercial Law. They comprise -
- A day book, which documents daily company operations, and a monthly report of personal withdrawals for sole proprietorships and partnerships.
- A stock book that records the amount and cost of inventory at the end of the year should also be kept.
Listed companies must release financial information on a quarterly basis and adhere to the Capital Market Authority's disclosure guidelines. Within six months after the conclusion of the fiscal year, limited liability corporations are required to compile audited accounts and submit them to shareholders.
Authorized auditors who comply with the Law Regulating the Accountancy and Auditing Profession must undertake financial statement audits. A list of authorized auditors is made available by the Ministry of Commerce and Industry. Auditors must be independent of the companies. Joint stock companies can choose auditors who have received Capital Market Authority accreditation.
Companies in Oman are required by Law to conduct statutory audits under specific circumstances. These include:-
- Limited liability corporations and joint stock firms with over ten shareholders or capital greater than OMR $50,000.
- If a statutory audit is stated in a business's articles of association or requested by shareholders owning more than 20% of the firm's capital, it may also be necessary.
- Additionally, organizations with capital over OMR 20,000 must include audited financial accounts with yearly tax forms.
- Additionally, audited accounts must be filed by banks and brokerage companies.
Legal System of Oman for Taxation
Islamic Sharia Law and civil code laws are combined to form Oman's legal framework. The system is governed by several regulations regarding taxes and customs duties.
- Oman's income tax is governed by the Income Tax Law, established by Sultani Decree 28/2009 and amended by Sultani Decree 9/2017.
- The Social Securities Law, which handles social security issues in the country, was established by Sultani Decree 72/1991.
- The Commercial Company laws describe the regulatory framework for business operations in Oman, including the formation, management, and governance of firms.
- The Sultani Decree 67/2003 established the uniform Customs Law of the Gulf Cooperation Council Countries (UCL), which sets uniform customs laws applicable to Oman and other GCC members.
Types of Taxes in Oman
- Corporate Tax:The corporate tax is the primary tax that businesses in Oman are required to pay. Oman does not have a limit on the amount of revenue, in contrast to certain countries. For the majority of businesses, the company's tax rate is15% of profits.Two categories of companies are subject to this 15% tax: Companies and commercial organizations based in Oman, including their branches and foreign companies working in Oman.
- Value Added Tax:On April 16, 2021, Oman implemented the Value Added Tax (VAT). In accordance with the Unified Agreement of the Gulf Cooperation Council (GCC), Oman's VAT rate is set at 5%. Zero rating and exceptions are included in the Oman VAT Law. Oman's 5% VAT rate is regarded as one of the lowest in the world by comparison. When a company's yearly supply value surpasses OMR 38,500, it must register for VAT. The tax will be applied to most products and services, although there are several exceptions. According to a royal proclamation, the proposed charge will not apply to essential food goods, healthcare, education, or financial services.
- Petroleum Income Tax: A special tax imposed on earnings from the sale of petroleum is referred to as the petroleum income tax. Those who own or operate businesses that extract, produce, refine, or sell petroleum are liable to a tax rate of 55% on the revenue that they make from these ventures. The tax is computed using the company's income from petroleum-related activity.
- Excise Duty:The excise tax was imposed in Oman on June 15, 2019. Energy drinks, carbonated drinks, alcoholic beverages, tobacco, tobacco derivatives, and pork and pork derivatives are all subject to this levy.
Tax Rate (%)
Tobacco, Energy Drinks, Alcoholic Drinks, and Pork Products
- Customs Tax: A unified customs system is run by the Royal Oman Police and Directorate General of Customs to control imports and exports in accordance with the UCL. There are no limitations on the free trading of goods produced in the GCC. However, a one-time External Common Custom Tariff of 5% is applied as a charge on imported products from other countries.
- Municipal Tax: Municipal taxes are levied at the following items at the following rates:
- Rental properties are subject to a 3% tax.
- Hotel occupancy: A 5% tax rate is imposed.
- Entertainment centres and movie theatres are subject to a 10% tax.
- Tourism Tax: A 4% tax is levied on the restaurants and hotels which are near some tourist places in Oman.
- Withholding Tax: There are many different kinds of payments that are subject to withholding tax (WHT), including management fees, royalties, costs associated with computer software development and research, dividend payments, service fees, and interest. A 10% WHT is due if an international individual or company has no permanent presence in Oman. Typically, this sum is subtracted by the company making the payment before it is sent to the foreign party.
No taxes are levied on payments made by Limited Liability Companies (LLCs) as profit distributions to their overseas owners. However, profits paid by Omani joint-stock businesses are subject to WHT. The foreign person's status as a resident of any GCC (Gulf Cooperation Council) nation is not considered when determining their tax treatment.
Which taxes are not levied in Oman?
Oman does not levy:
- Any local income taxes
- Property taxes
- Stamp duty
- Payroll taxes
- Environmental taxes
- Personal Income Tax
A tax return is a statutory document that individuals and companies must file with the Omani tax authorities to report their financial data and determine how much tax they owe. A tax return is an essential part of the taxation system that allows taxpayers to satisfy their duties and guarantee that they follow all tax laws.
In Oman, individuals and entities must submit a "return of income" within four months after the fiscal year's end. However, according to the Tax Authority's (TA) decision-making, it is possible to ask for a filing extension for the yearly income tax returns. It is essential to remember that even if an extension is approved, tax payments cannot be put off. A monthly tax charge of 1% will be added to any unpaid tax balance from the time it was first due until the time it was paid.
The first financial year can be up to eighteen months. The calendar year is the tax year generally followed in Oman. The financial year ends on December 31, in case approval has been taken to follow a different financial year from Oman tax authorities.
International Tax Treaties
International tax treaties, usually called double taxation treaties, are essential for promoting cross-border commerce and investment to minimize the negative impacts of double taxation. In order to foster economic cooperation and reduce double taxation, Oman has signed various tax treaties as a member of the global community. Oman has signed tax treaties with over 30 countries, proving to be a great asset for business owners and entrepreneurs looking to develop internationally more quickly.
Penalty for Late Payment of Taxes
The tax authorities have the right to issue a fine ranging from 1% to 25% of the difference between the correct income, which is taxable, and the tax amount declared in the returns in case where a taxpayer incorrectly discloses their income. If the taxes are not paid by the given deadline, interest will start to accumulate till the date of payment made at the rate of 1% per month.
Services Offered by Enterslice
Auditing and Accounting Services:
Enterslice provides an array of expert accounting services to ensure our clients get complete assistance. We can offer the following services thanks to our experience:
- Helping produce accurate accounting records that are compliant with applicable standards.
- We are providing thorough financial information to give a comprehensive picture of company performance.
- Tracking business costs and looking for possible financial irregularities.
- Converting to cloud-based platforms from outdated computerized or paper-based accounting methods to improve accessibility.
- Preparing monthly management accounts, cash flow statements, budgets, and projections to help decision-makers make well-informed choices.
- Helping prepare yearly statutory financial statements and ensuring all filing obligations are met.
- Collaborating with auditors throughout the audit process to make it easier to evaluate the financial data of the organization.
- Offering treasury and payment processing knowledge to optimize business processes.
- Examining the accounting, tax, and control components of the payment requests and expense claims.
- Assisting with the setup of accounting systems, which includes developing customized reports, managing master data, and constructing a chart of accounts.
- Implementing control procedures and accounting regulations for the accounting departments of our clients.
- Supplying qualified managers and accountants on a contract or freelance basis.
- Examining accounts for viability and making recommendations for development.
- Providing internal accountants with training to develop their abilities.
Tax Compliance Services:
Enterslice provides an array of tax compliance services:
- We provide a comprehensive range of services to make sure that our customers are well-versed in tax regulations and continue to be compliant. This includes responding to tax-related questions, looking at transactions for potential tax situations, and developing tax-effective structures.
- Additionally, we find chances for tax optimization and offer monthly updates.
- We offer services that address every facet of a company's tax compliance, beginning with tax registration. We manage tax debt computation and tax filings and complete all necessary tax reporting requirements. Our team looks into any inquiries from tax authorities and helps with communication. We aim to ensure that tax rules are followed correctly.
- Throughout the company, we place a strong emphasis on raising quality, adding strategic value, cutting costs, and reducing risk.
- Our team of experts promotes smooth coordination by facilitating communication between the tax, financial, and legal departments.
- We assist companies in navigating regulatory changes, converting data into insightful knowledge, and enhancing compliance and planning procedures.
- We assist clients in staying compliant with evolving tax regulations.
- Our experts create plans to reduce tax obligations while guaranteeing compliance. We provide specialized solutions and crucial advice on how to handle tax disputes.
- We assist companies in determining their eligibility for tax breaks and credits for R&D (research and development) operations. With the help of our services, clients can maximize their R&D tax benefits while still complying with all applicable laws.
- We provide thorough guidance on excise and customs issues. Guidance on duty drawbacks, free zone companies, duty deferral and suspension programs, client risk assessments, and post-clearance audit management are all included in this.
- In addition, we help with applications for authorized economic operators, supply chain management, market access regulations, labeling requirements, and anti-dumping defense.
- We offer advisory services on a variety of VAT-related topics.
- Assisting with VAT compliance and return submissions, as well as offering help during VAT audits or disputes, we conduct VAT health checks to ensure compliance. We also provide advice on VAT refunds.
- We offer expert guidance on complex cross-border transactions while taking into account the tax repercussions of local authorities.
- We proactively handle tax concerns and possible challenges throughout the mergers and acquisitions (M&A) process, assisting customers in maximizing tax results and achieving flawless deal execution.
Our experts help customers navigate the challenging local legal and regulatory landscapes. We provide strategic advice to efficiently manage tax risks and guarantee compliance with changing rules.