Muscat: 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, a top tax expert said.
Ashok Hariharan, partner and head of tax for KPMG Lower Gulf, stated at a KPMG hosted workshop on Sunday in Muscat.
The workshop focused in detail on the practical implementation and compliance of the significant tax law amendments enacted by the Royal Decree 9/2017, issued and published in the Official Gazette last month.
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.
He 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.
Hariharan also presented his insights into other key amendments, and addressed many live questions from the audience. Besides Hariharan, Nimai Vijay, tax director and Sandeep Kumar, tax manager, took the audience through a detailed analysis of the tax amendments, including procedures related to e-filing, withholding tax, and assessment of tax returns, and highlighted key uncertainties emerging there from and how best to address them till clarity emerges on the same from the tax authorities.
Over 150 professionals, comprising of CFOs, finance and tax managers and other senior managerial personnel from within and outside Oman, attended the workshop and posed plenty of questions during live scenarios to the KPMG tax team, with a view to understand the course of action they should ideally follow to ensure correct and efficient tax management within their respective businesses.
This seminar was arranged by KPMG’s Tax Management group. KPMG has been providing tax services in Oman for over four decades. Their tax practice is led by Hariharan, who has experience of dealing with taxes in Oman and in the region for over 30 years. KPMG’s tax practice comprises around 30 tax professionals, including two directors and six senior managers and managers.