Oman relaxes corporate tax laws
Oman has changed its corporate tax laws to woo foreign investors, in an attempt to diversify its economy beyond oil income, an official publication said yesterday.
„The new tax law has been made easy for foreign investors to allow them to retain a bigger share of their profit to encourage a bigger international participation to our economy,” the official gazette said.
The new corporate tax rate is 12 percent and applicable to all companies registered in Oman, owned by local or international firms. It will take effect from January 2010. It replaces current corporate taxes ranging from five to 30 per cent and will apply to companies earning a minimum profit of RO30,000 (ca €55,000) a year.
4 June 2009
Analysis and forecast (↓ decreasing risk)
The relaxation of corporate tax rules and rates in Oman will undoubtedly help the country move towards achieving the aim of economic diversification, as outlined in the Vision 2020.
By introducing this measure, Oman hopes to attract more foreign investments to the country, particularly in non-oil sectors. After the new tax laws go into effect, Oman will have some of the most attractive corporate tax regimes in the GCC.
However, to achieve all the aims of Vision 2020, further measures are needed. In particular, the proposed make-up of the GDP in 2020 can only be realized if further sources of government income are generated. The introduction of income tax will be necessary for this to happen. However, the introduction of income tax in Oman will make it less attractive to foreigners, who would prefer other income tax-free countries in the GCC.
Oman enjoys a more coherent religious make-up with much lower threats from extremist Sunni attacks (such as by Al Qaeda). This will potentially make Oman a more attractive long-term investment location than other GCC states.
So whilst this move is seen as a positive development that will help the country diversify its economy, further measures will be needed to ensure that a diversified economy compensates lower income from oil revenue.
Income from oil and gas exports make up 80 percent of total state revenue. Oman’s budget deficit will double in 2009 to an estimated RO810 million from RO400m a year earlier.
The top figure shows the current make-up of the GDP of Oman while the lower one shows its make-up in 2020, as envisioned in Vision 2020.