As a part of its crackdown on tax evaders, Oman’s Ministry of Finance said skipping tax can lead to a jail term of up to three years and a maximum fine of OMR50,000.
Of the 300,000 companies registered by the Oman Chamber of Commerce and Industry, only about 10% file tax returns with the government.
The move under tax law amendments published by Oman’s Ministry of Finance is designed to ensure voluntary compliance and self-assessment.
The changes target tax evaders who do not submit account book details to the government or conceal these or destroy documents requested by tax authorities or show documents with incorrect tax liability.
Those who try to evade tax by whichever means now face a minimum jail term of six months and a fine of OMR5,000.
Previously, the maximum penalty was only OMR2,500, and there was no minimum imprisonment period.
A fine of OMR3,000 will be slapped for non-compliance with tax law regulations, and a penalty of up to OMR2,000 will be imposed on firms that fail to file tax returns within due dates.
The changed law also stipulates that a tax payer will have to obtain a tax card, which will be valid for a specified period and would need to be renewed after that.
An application for a tax card has to be submitted when the tax payer initiates the procedure for registering his commercial activity with the relevant authorities.
All documents relating to a tax payer’s transactions with a government entity should be accompanied by a copy of the tax card.
Failure to comply with the tax card-related provisions will result in the imposition of a fine up to OMR5,000.
Any foreign person not carrying on any activity in Oman through a permanent establishment will be taxed for dividends on shares of joint stock firms, interest, and fees from provision of services.
The Oman government also scrapped exemptions provided to industries.
These included exemptions that were earlier available to mining, export of locally manufactured goods, operation of hotels and tourist villages, agriculture, animal produce, fishing, education and medical care
Despite administrative and technical challenges, the six Gulf Cooperation Council (GCC) countries are planning to introduce a 5% value-added tax (VAT) at the beginning of 2018.
As a means to enhance non-oil revenues, GCC nations, whose finances are battered by declining oil prices, have already made plans to adopt VAT by early next year.
However, economists and officials have previously opined that simultaneous introduction in all countries may not be feasible as creating the administrative infrastructure to collect the tax remains a challenge.
It is also difficult to train companies to comply with the news tax in a region where taxation is minimal.
Now GCC governments are planning for early, simultaneous adoption, said Younis al-Khouri, under-secretary at the UAE finance ministry.
Accounting firm Ernst & Young recently said VAT would considerably enhance revenues per year for the UAE and other Gulf Cooperation Council (GCC) countries.
VAT at 5% will generate an extra income of more than $25 billion (Dhs 91.8 billion) every year for the six GCC countries, which will be substantial enough to boost infrastructure spending in the region.
While the introduction of a new tax on goods and services may seem daunting to consumers and businesses, the overall impact is not that huge, EY said.
A significant chunk of companies may not be able to start collecting VAT by the go-live date. Considering the work that needs to be done to update their systems and processes, many firms may take some time to transition into the new tax environment.