EU action bodes well for FDI inflows into Oman

Transparency: The action follows a series of reforms initiated by the Sultanate to improve its tax governance framework and to facilitate the exchange of tax-related information with EU member states.

The Sultanate’s recent removal from a European Union (EU) blacklist of countries characterised as non-cooperative tax jurisdictions has the potential to bolster foreign direct investment (FDI) inflows into Oman, as well as enhance the country’s international appeal as investment destination with a safe and transparent regulatory regime.

Earlier this week, the EU Council dropped Oman from the blacklist after certifying that Muscat had undertaken all of the requisite taxation and information sharing reforms mandated by the Paris-based Organisation for Economic Cooperation and Development (OECD).

The action, KPMG noted, follows a series of reforms initiated by the Sultanate to improve its tax policy framework, in addition to measures to facilitate the exchange of tax-related information with EU member states.

“Oman was considered as compliant with all its commitments after it ratified the OECD Convention on Mutual Administrative Assistance in Tax Matters, enacted legislation to enable automatic exchange of information and took all the necessary steps to activate its exchange-of-information relationships with all the EU member states,” said the Council in a statement announcing the Sultanate’s removal of the blacklist.

The move has been welcomed by tax and legal experts. “(The Sultanate’s) removal from the EU blacklist is a positive development and should boost inbound investment from European countries, which is important to uplift the economy in these unprecedented times,” said well-known multinational professional services firm KPMG in a statement.

The EU began to blackball countries and tax jurisdictions in December 2017 that it deemed were doing enough to meet internationally accepted standards in tax governance and information sharing matters. It listed 17 non-EU countries that had either failed to engage in a “constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement reforms to comply with a set of objective tax good governance criteria, concerning tax transparency, fair taxation and implementation of international standards against tax base erosion and profit shifting”. Oman was included in the list in March 2019.

“The EU list is essentially a tool to tackle tax fraud or evasion, tax avoidance, and money laundering,” explained KPMG in a post. “The basis of inclusion of a non-EU country in the blacklist followed three criteria: Non-Transparency (ie, not facilitating automatic exchange of information); Unfair Tax Competition (ie, jurisdiction having a harmful tax regime) and non-implementation of Base Erosion and Profit Shifting (BEPS) minimum standards.”

Over the past year, the Sultanate has worked earnestly to address shortcomings in its tax governance system and information sharing policies.

Last November, Oman signed the Multilateral Convention for implementing tax treaty-related measures to prevent BEPS, also known as the ‘Multilateral Instrument (MLI). It also inked the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and the Multilateral Competent Authority Agreement‎ on Automatic Exchange of Information Agreement (CRS MCCA).

Several key pacts signed during the last three months helped pave the way for Oman’s eventual removal from the EU blacklist. Notable is the Multilateral Competent Authority Agreement on the exchange of Country by Country Reports (CbCR), which was signed in July. This was followed by the promulgation of an amended Income Tax Law in September 2020 facilitating, among other things, the automatic exchange of information. Guidelines for Common Reporting Standard (CRS) rules and CbCR were also issued by the Tax Authority of the Sultanate.

Twelve jurisdictions continue to remain on the EU’s list of non-cooperative jurisdictions. They comprise: American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, the US Virgin Islands and Vanuatu.

CONRAD PRABHU

@conradprabhu