February 14, 2020
Whether you are looking for a new career, hoping to supplement your existing income, or have the next greatest business idea, starting your own business is the way to go! Starting a business means that you are self-employed and from a tax perspective, this could be beneficial for you. However, this is also a daunting task as you will be the President, CEO, and staff, all rolled into one. This takes a lot of guts, tolerance for risk, and motivated hard work, but there could also be some tax breaks available. It is essential to follow the rules established by the tax department, ensure you are aware of the deductible expenses available, and have set up a system to keep track of those expenses to ensure you pass any scrutiny by the tax department.
Once you decide to start a business, whether part-time or full-time, there are a number of expenses that are deductible from the income you earn. The tax act provides some guidelines as to what can and cannot be deducted but these guidelines are limited to a few specific items. For those items not specifically identified, the rule is that the expense must have been incurred for the purpose of earning income and that the expense is reasonable.
If your expenses for a calendar year exceed your income, you will have a business loss. This loss can offset any other income that you earned in the year but conversely, if your business made a profit in a calendar year, then that income is added to all other income earned in the year and taxed accordingly. For example, if you have a tutoring business in addition to your regular job as a teacher, here is how both a profit and a loss would be taxed:
As per the GCC VAT agreement, the standard rate will be 5%. This will be the same for goods and services that will be taxable, i.e., 5%. This excludes products listed under the exempted category. In the case of the Zero Rated category, the business is allowed to reclaim all VAT paid during the business year. Upon request, one can expect a taxable person who has only zero-rated supplies would be excluded from mandatory registration. Mentioned below are the businesses listed under zero-rated supply and exempt supply.
It is mandatory to appoint a responsible person for VAT in Oman for executing all the duties assigned to him under the provision of the VAT law. Article-No. 2 clearly defines the various roles & responsibilities of such an individual under different types of entities. Furthermore, Article 76 states that the responsible person must be present during discussions of taxable transactions. They must be able to submit tax returns and fulfill other such duties assigned under this role. Non-compliance may result in fines or imprisonment of up to 1 year. As mentioned previously, the emphasis lies on the presence of a person during discussions of taxable transactions. This is why Article No. 4 also defines that "the responsible person must not remain outside the Sultanate for a period of more than 90 days during the tax year (i.e., calendar year)." Prior permission in such a case thus becomes mandatory.
The VAT law is expected to impact business operations in Oman, thus needing expert specialists to advise on various accounting & taxation procedures. This includes claiming input VAT and ensuring that only the net VAT is payable to the government. To safeguard complete compliance, this law is protected by subjecting an entity to punishable offenses such as imprisonment (1 to 3 years) or fines (OMR 20,000) in case of non-compliance. This urges firms to consistently check their taxable earnings and report to the government if it crosses the VAT threshold.
With the VAT law's onset, Water and Shark, having extensive experience in the Middle East, can act as assets that could easily walk you through VAT implementation & compliance in Oman. The range of VAT-related services includes i) VAT registration service in Oman ii) VAT implementation advisory & compliance services in Oman. With such assistance, businesses can now explore a hassle-free tax returns process that benefits both the government and businesses.
