Tax exemptions for tourism sector restricted to hotels, tourist villages.

Byline: Times News Service

MUSCAT Eoe1/4" Issues of relevance for tourism, utilities and infrastructure companies centre around tax exemptions, depreciation and also withholding tax rules, a senior tax consultant said.

Eoe1/4EoThe provisions relating to tax exemptions are of importance to tourism and public utility companies. Under the old law, companies operating in these sectors were eligible for exemption from tax for five years (with a further five years granted if certain criteria were met). However, this exemption has been significantly tightened under the new tax law,Eoe1/4A[yen] Ashok Hariharan, Tax Partner, KPMG Oman office, told Times of Oman.

He was speaking at the sidelines of a series of Breakfast Seminar on the new Income Tax Law organised by KPMG, a leading international firm providing tax, audit and advisory services yesterday.

Eoe1/4EoThe new law now provides for an exemption only for Eoe1/4Y[pounds sterling]hotels and tourist villagesEoe1/4ao and while there is no further guidance on the definition of Eoe1/4Y[pounds sterling]hotels and tourist villagesEoe1/4ao. It does not include Eoe1/4Y[pounds sterling]integrated tourism complexesEoe1/4ao which have been a major area of focus in the recent years,Eoe1/4A[yen] Ashok explained.

Revati John, tax manager with KPMG Oman, presented the issues of relevance to the selected target audience. She highlighted the newly introduced specific provision for taxing capital gains. Eoe1/4EoWhile the tax authorities typically taxed profits from the sale of certain assets as part of normal taxable income, the new law specifies that profits or gains from any asset (including goodwill or trademarks) would be taxed at the standard income tax rate of 12 per cent,Eoe1/4A[yen] she said.

Eoe1/4EoThe law also includes a clarification on the taxation of overseas dividends, bringing them into the tax net and clearing the previous ambiguity in this area. Another area of clarification was that profits from sale of securities listed on the MSM would be exempt from tax. The exemption would apply to both SAOG and SAOC companies,Eoe1/4A[yen] she added.

The seminar also discussed withholding tax rules, which although largely remain unchanged, have now provided a definition of the term Eoe1/4Y[pounds sterling]royaltyEoe1/4ao and have also introduced a new category for the Eoe1/4Y[pounds sterling]use, or right to use computer softwareEoe1/4ao which previously was implicitly covered under the term Eoe1/4Y[pounds sterling]royaltyEoe1/4ao.

Depreciation

Eoe1/4EoThe new law also brings about fundamental changes to the calculation of depreciation for tax purposes. Under the old law, a straight-line method was used for all assets. Now, categories of asset falling under a broad remit of Eoe1/4Y[pounds sterling]machinery and equipmentEoe1/4ao will be depreciated on a written down value basis,Eoe1/4A[yen] Ashok said.

Eoe1/4EoAlso the concept of asset pooling has been introduced for these assets, which will considerably reduce the workload of companies in calculating tax depreciation. It should be noted that assets falling outside the machinery and equipment classification, will continue to be depreciated on straight line (and non-pooled) basis,Eoe1/4A[yen] he added.

Since the publication of the new tax law in Arabic, on June 1, 2009, KPMG has had the opportunity to analyse the text in detail and has made available to its clients a professional translation of the new tax law in English, drawing on the many years of experience of KPMG tax professionals in Oman.

KPMG employs more than 123,000 people worldwide and generated revenues of almost $22.7 billion during the financial year 2008.

Muscat Press and Publishing House SAOC 2009

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