Oman: Taxpayers set to face more scrutiny

Muscat: Taxpayers across the globe, including Oman, are facing increased scrutiny of their tax returns and positions taken as the pressure on governments increases to raise revenues from taxes, says an expert at KPMG.

Ashok Hariharan, partner and head of tax for KPMG in the Middle East and South Asia region, made the comments at a tax seminar organised by KPMG in Oman for chief executive officers and chief financial officers.

The seminar was organised to give companies an overview of the global, regional and local developments in the field of tax.

Neil Allmark, KPMG’s tax director, gave an overview of Oman’s 2015 budget which projected an increased deficit caused by falling oil and gas revenues, an outcome of the significant reduction in oil prices compared to previous years.

The budget anticipated a 29 per cent increase in taxes and fees with revenues from income tax on companies expected to rise from OMR400 million in 2014 to OMR500 million in 2015.

As Oman had not increased the corporate income tax rates, it was likely that the increase in tax revenues would come from a more thorough examination of tax returns and reducing the backlog in tax assessments.

Allmark pointed out that significant changes can be seen across the world in the tax environment, with United Kingdom (UK) for instance, issuing the Diverted Profits Tax to address attempts by multinational companies to divert profits from the UK to other countries. Similar unilateral actions were also being taken by other countries.

The seminar also provided the latest update on the Base Erosion and Profit Sharing (BEPS) project initiated by the Organisation for Economic Cooperation and Development (OECD) which was also relevant to non-OECD member states in the gulf region.

The seminar discussed measures being taken by OECD to tackle treaty abuse and artificial avoidance of Permanent Establishment (PE) status.

The steps being taken by Organisation for Economic Cooperation and Development to address some of the deficiencies in the current transfer pricing regulations including the much debated country-by-country reporting were discussed.

Allmark also highlighted the key provisions of the tax treaties Oman has concluded recently with Japan, Spain and Switzerland.

Hariharan highlighted the regional developments particularly in countries like Saudi Arabia which is part of the G-20 nations and was committed to the BEPS Action Plan agreed by OECD and G-20 nations.

The expert also referred to the press statements recently regarding GCC countries taking steps to adopt the GCC VAT framework agreement which would be followed by each member state issuing local VAT laws and executive regulations in line with the principles contained in the framework. It was noted that no specific time frame was agreed for implementing VAT.

Hariharan also pointed out the various options available to the government to diversify their tax revenues.

He cautioned taxpayers to be ready for a continuing scrutiny of related party transactions. He advised on the need to have contemporaneous evidence to demonstrate that the goods or services forming part of transfer pricing transactions were in fact provided and at the same terms and conditions which would be expected to be provided to other unrelated third parties.

The need to look at additional documentation that would address specific questions that may be raised by the tax authorities in relation to transfer pricing transactions was also discussed.

The seminar also focussed on the uncertainty arising from certain positions currently being taken by the tax authorities in Oman resulting from their not accepting the accounting treatment prescribed by International Financial Reporting Standards. The need to proactively engage in discussions with the tax authorities with a view to reaching an agreement with them was emphasised.

The seminar attracted many CEOs and CFOs from leading international and local companies and received positive feedback.