On 26 February 2017, Royal Decree 9/2017 (the decree) relating to corporate income tax was gazetted. The decree includes a number of significant changes to the Income Tax Law 2010 that will apply to companies and other entities that are subject to corporate income tax.
The key changes passed by the decree are set out below.
- The standard corporate tax rate has been increased from 12% to 15%
- The statutory exempt threshold (standard deduction) of OMR30,000 (approximately US$78,000) has been removed
- Interest and dividend payments made to nonresidents are subject to withholding tax (WHT) at 10%
- Payments made for services to nonresidents are subject to WHT at 10%
- The WHT exemption for payments made by ministries and government institutions has been abolished. These institutions will be required to deduct WHT on specified payments
- Tax exemption is restricted to the manufacturing sector only for a nonrenewable period of five years, subject to compliance with certain conditions
- Self-assessments as the basis for filing tax returns have been introduced. This change is intended to increase the accuracy and correctness of tax filings
- Provisions have been included for the taxation of Islamic financial transactions in line with conventional banking income streams
Certain changes, such as the WHT provisions, are expected to be implemented with immediate effect from the date the decree was published in the Government Gazette.
All other changes, including those relating to tax rates, are effective from the fiscal year commencing on or after 1 January 2017 (for tax returns filed for tax year 2017).
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