One-person firms brought under scope of Oman Income Tax Law

New provision: The definition of enterprise in the Income Tax Law has now been amended to include the Omani company that takes the form of a one-person company. The Sultanate’s Income Tax Law, amended recently by Royal Decree 118/2020, brings for the first time the so-called ‘One-Person Company’ within the ambit of the statute, adding them to a broad range of commercial enterprises that are liable to submit their tax returns. According to a leading tax, audit and advisory services firm, the ‘One-Person Company’ — also known as sole proprietorships — was legalised for the first time as part of the new Commercial Company Law issued earlier this year vide Royal Decree 18/2020. It introduces, among other things, a new corporate vehicle, the sole shareholder company, which is a limited liability company with only one — either natural or juristic — shareholder. Under the old version of the Commercial Company Law, limited liability companies had to have a minimum of two shareholders. “In line with the new Commercial Company Law, which introduced the legal form of companies named the ‘One-Person Company’, the definition of enterprise in the Income Tax Law has now been amended to include the Omani company that takes the form of a one-person company’’, said PwC Middle East in a recent advisory to clients. “The amendments further introduced a new provision on the Principal Officer of the one-person company to be the owner, or the responsible manager’’, it noted. The inclusion of sole-shareholder companies within the scope of the Income Tax Law is part of a slate of far-reaching amendments made to the statute following the promulgation of Royal Decree 118/2020 on September 14, 2020. The specifics of these amendments were published in the Official Gazette a week later. All of the changes introduced by the Royal Decree are effective from the day following their publication in the Official Gazette (i.e. September 21, 2020), with the exception of Article 140, which is effective for tax years starting on or after January 1, 2020, according to PwC. Notable amendments to the Income Tax Law include, among other measures, the repeal of provisions relating to the filing of Provisional & Final Returns of Income, and replacing them with a new rule mandating the filing a single ‘Return of Income’; defining the concept of Tax Residency; replacing the term ‘contestation’ in the Law with ‘grievance’; and introducing provisions related to Automatic Exchange of Information (AEOI). The most striking of the amendments is the overhaul of the system of filing of tax returns. “For tax years starting on or after January 1, 2020, taxpayers will be required to file only one income tax return, referring to it in the Royal Decree as ‘Return of Income’, which will be due within four months from the end of the accounting year. This provision is replacing the requirement for filing the Provisional and Final Returns of Income, which was due within three and six months from the end of accounting year respectively. This would now imply that the audit of the financial statements needs to be completed within four month from the end of the accounting period’’, said PwC in its advisory. The multinational professional services firm however noted that the amendments did not indicate whether or not an extension of time would be granted to taxpayers in terms of the due date for filing the Return of Income. “However, the Tax Authority, in practice, has been granting such extensions to taxpayers on a case to case basis, a position that is yet to be tested on whether it will continue to be the same under the newly introduced amendments to the Income Tax Law’’, it added. CONRAD PRABHU @conradprabhu