News

According to news reports, in a statement issued by the Saudi state news agency, Mohammed Al-Jadaan, the Finance Minister of Saudi Arabia, has announced an increase in the rate of VAT from 5% to 15% in Saudi Arabia from 1 July 2020.

The announcement comes after Saudi Arabia posted a budget deficit of USD 9.07 billion in the first quarter of 2020 and is reported to have cancelled/postponed certain operating and capital expenditure and also cut allocations on projects worth USD 26.6 billion.

The austerity measures are intended to help Saudi Arabia stabilize non-oil revenues and cope with public finances currently pressured by low oil prices and Covid-19. This, however, comes as an unexpected move after the recent tax announcements by the General Authority for Zakat and Tax easing tax return filing, tax payment and penalty provisions to help businesses navigate the impact of Covid-19.

The move also seems to be a deviation from the Common VAT Agreement of the States of the Gulf Cooperation Council (GCC Common VAT Framework Agreement) that only empowers member-states to levy VAT at the standard rate of 5% on taxable supplies that are not specifically exempt or zero rated (Article 25).

To access our detailed tax alert on the implications of the increase in the VAT rate in Saudi Arabia please click here.

Development in the UAE

The United Arab Emirates (UAE) introduced VAT on 1 January 2018, the same time as Saudi Arabia, and is faced by similar economic pressures. However, according to recent news reports, in an official statement issued after the announcement by Saudi Arabia, UAE’s Ministry of Finance has confirmed that they have no current intentions to increase the rate of VAT.

Budgetary Challenges in Oman

Oman, like many other countries in the region and outside, is significantly challenged with the sharp slump in international oil prices and the economic instability created by Covid-19 that continue to impact the country’s credit rating. Since the beginning of 2020, the Ministry of Finance has issued many circulars and a set of directives to government units to reduce the volume of spending. In April 2020, the Ministry of Finance announced a cut of OMR 500 million in the State Budget.

Oman has been preparing for the introduction of VAT for quite some time. This includes drafting the VAT law and executive regulations, as well as having systems in place to implement VAT when the government takes a decision on the implementation date. In an interview with Bloomberg at the World Economic Forum 2020 in Davos earlier in January this year, His Excellency Ali bin Masoud Al Sunaid, Minister of Commerce and Industry in Oman, confirmed that Oman would introduce VAT “sometime during the beginning of 2021”.

Given recent unexpected challenges, Oman may consider the possibility of implementing VAT more quickly, in a phased manner. In this case, businesses may not have a long period of time to prepare for implementation. 

Would you please tell us a bit about Azooz, and a bit about yourself as well, as a new member of the OABC?

Azooz is an online delivery app that was created with a vision to enable the Omani producers/manufacturers to sell their products directly to the consumers in Oman. For example, through Azooz,

1. A customer in Madinat Qaboos is able to order a fresh chicken from a farm in Ibra and get it delivered within few hours of ordering.
2. A home-based business lady is selling her spices directly to a customer in AL Mouj
3. And many more examples like this

Whether small or big, Omani manufacturers/producers have a direct reach to customer’s homes through Azooz and are benefitting by more volumes and margins.

As Managing Director of Al-Hathaifa (and AZOOZ), I have been in Oman for last 22 years and started my journey from the oilfield to now a business that is unconventional and challenging in many ways.  The vision of Azooz is shared by my Omani partner and a great set of advisors who always are trying to bring a new dimension in Azooz. We have plans to work very closely and develop home-based businesses, SMEs, and hopefully will create an ecosystem for better reach for their businesses. We also have plans to bring models based on subscriptions, that will bring next level of convenience to consumers in Oman.

What has the day-to-day work been like in the past few months, and how does it compare to the work before COVID19?

We had rolled out Azooz in the month of January among friends and relatives, and from there has been no looking back. We have had great response from our customers and people have reached out to us to help us develop Azooz. With COVID-19 reaching Oman in March, we did not blindly start delivering everything, we stuck to our core cause of supporting Omani products.

Adding new vendors, deliveries, and procurement during COVID-19 challenged us in various ways. One thing that we have been constantly doing is sticking to our core belief of enabling Omani companies and Omani manufacturers/SMEs. We have some large enterprises and some small producers but we can proudly say that we have been doing our part successfully. Our vision is not restricted to the COVID-19 situation, we are focused on enabling Local Producers/Manufacturers in the long run.

How do companies register with Azooz to begin offering their products via the platform?

For the companies who wish to be our partners, simply send us a message on help@azooz.online. Our Vendor Development Team will assist them in completing the listing process. For customers who wish to order, simply download the app available on iOS and android platforms or through our site www.azooz.online.

What is the biggest challenge you are facing during this Pandemic? 

We have been facing various challenges during this excruciating time. The biggest one is receiving goods that we need for our business. Like eco-friendly bags, we are unable to procure them currently due to the lockdown. Similarly, some vendors are unable to deliver products that are already listed on our site. Movement limitation, workforce restriction, lack of labor has impacted all of our vendors and their product availability. Despite these challenges, we are trying our best to deliver what we commit to our customers.

Do you have any advice to those looking to start something new in Oman?

At present, in my opinion, any new business should be started to solve a problem. Money should not be the only motivation when starting any business, one has to ask what impact the business will have on the country’s economy and to the people in general.  There is a tough competition outside and one must be prepared to compete with some very intelligent people who keep you alert and on your toes at all times.

Anything else you’d like to add?

We want support from our customers as Azooz belongs as much to the customers as it belongs to us. We will make mistakes like everyone else, but we promise to learn from them and try not to repeat those errors again. We want our customers to be patient with us and we will ensure that the money they spend goes to Omani producers/manufacturers. In the long term, everyone will reap the benefit of an app that truly supports the Omani economy.

Retrieved from: Trowers & Hamlins

Among these are banning all travel to and from Oman, shutting down schools, malls, shops and cinemas and ordering the private sector to reduce its workforce to the minimum required and put in place IT systems allowing staff to work from home. These are indeed difficult times for everyone, and in particular businesses who have been forced to close or reduce their operations.

Given the restrictions on operations,  some businesses have looked at their work force and are asking us questions on what they can or cannot do under the current circumstances.

In this Article, we will address some of your key employment related questions. The government of Oman has yet to release any specific employment related legislative changes to deal with the effects of the pandemic and so this article will therefore address this subject based on the regulations in place and guidance issued by the Omani government.

Can employers reduce or withhold pay?

Any closure of a business or reduction in staff in light of the Omani Supreme Committee’s orders will be treated as the employer’s decision and so, in accordance with the usual legal position, all wages must be paid in full. Oman’s Ministry of Manpower has also recently issued guidelines to employers confirming that during these unprecedented times, employers are required to pay its staff their wages in full. While we can confirm that this is the stance taken in respect of national employees, we are yet to see the position the Ministry will take towards expatriate employees. To date however, these guidelines apply to both.

Can employers force employees to take annual leave with or without pay?

The Supreme Committee recently ordered private business to reduce its staff to the bare minimum and put in place systems that allow for its staff to work from home. Many business, for example in the construction industry, cannot put in place any work from home systems as the nature of the business means its staff (many of whom are blue collar workers), cannot conduct their work at home. And so, any forced reduction in staff will mean that staff will be at home, with no work and yet still get paid.

Oman’s Labour Law (RD 35/2003 as amended) provides that all employees are entitled to 30 days annual leave with full pay each year. The wording in the Labour Law indicates that while employers can dictate when an employee can take annual leave, in accordance with the requirements of the work, it does not expressly make any allowances for employers to place employees on annual leave without the employee’s consent. We are aware of some businesses that have placed employees on annual leave with full pay, with the support of the Ministry of Manpower, during this period.

It is very likely that a business’s ability to enforce any annual leave will depend on a number of different factors, including the terms of any leave policies in place. This will include any attempt to impose salary reductions during leave. It is important that any change in an annual leave policy is discussed with the Ministry beforehand. Justifications for changing the policy and how this will help support the business and the staff will need to be provided to the Ministry with supporting documents or evidence if available. The current reduced staffing levels at all government offices is likely to increase the time taken for any such approvals.
As it currently stands, pursuant to Oman’s labour laws, employers cannot force employees to take leave without pay.

Can employers make people redundant or terminate?

The Ministry of Manpower recently issued guidelines to all private sector companies to refrain from mass termination of national employees, even where projects have been terminated or in the event of closure or bankruptcy. The Ministry has also stated that business must communicate, three months in advance, with the Ministry if there is impeding bankruptcy or closure due to the spread of Covid-19, in order for the Ministry to take measures to relocate the national employees to alternative employers. Aside from that, the Ministry has not issued any further guidelines and we are yet to see whether any guidelines will be issued in relation to expatriate employees. Accordingly, the status quo remains in place.

Further, Oman does not recognise the concept of redundancy, and so any reduction in staff or redundancy of jobs will be treated as individual terminations. Any termination due to the Supreme Committee’s decision, may not be deemed a justifiable ground for any termination. Termination under Oman’s Labour Law can only be made under specific exclusive grounds., such as grave violations of the terms of the employment contract, unauthorised absence for ten (10) consecutive day or health conditions which prevent the employee from doing his work.

Force Majeure does not apply as a principle to employment contracts and employers are not permitted to unilaterally terminate an employment contract unless for the reasons and grounds provided in the Labour Law. The spread of Covid-19 does not fall under any of the grounds provided in the Labour Law. There are certain exceptions, for instance, where an employee is engaged for a specific project, and that project ends or is cancelled due to Covid-19, termination in this instance would potentially be valid. Although the Ministry has also issued directives to the private sector to refrain from terminating national employees, the same may not be applicable to expatriate employees.

Historically, economic difficulty has not been accepted as a reasonable ground for termination by the Omani authorities. In some rare instances however, the courts have accepted some businesses’ decisions to reduce staff as a management decision to avoid collapse of the business. In these rare instances, the authorities require paper trail evidence on the decision process, including proof of efforts to mitigate the reduction/termination of staff. The courts in general will want to see that any decision to terminate due to economic and financial difficulty was a last resort to prevent the business from collapsing. However, in light of the Ministry of Manpower’s recent decisions, businesses must communicate with the Ministry in the event of economic difficulty, as mass terminations or terminations of any kind due of national employees to economic difficulty is currently not permitted. It remains to be seen whether the same will be applied to expatriate employees.

Conclusions

The current legal position with regards to employment in Oman has not changed from the standard position as the authorities have not yet made any changes to employment law to allow employers more flexibility in their approach to battling the Covid-19 crisis.

It extremely important that records are kept of discussions and decisions which are taken as a result of the Supreme Committee’s decisions.  Being able to demonstrate the steps that were taken, and their justifications, will be essential in any subsequent courts cases which are brought by employees.
It is also important during this time to keep communication open with staff and with the Ministry where possible. And before taking any steps in terms of staffing, it may be best to seek guidance from legal experts as well as the Ministry.

For any questions on the above article please contact Thomas Wigley, Partner at twigley@trowers.com

1. Download the presentation
2.  Replay the webinar

2. Benjamin Smith, Partner Get in touch

Thank you

Retrieved from: KPMG

Tax Relief measures announced by the Oman Tax Authority in response to Coronavirus Pandemic (COVID-19)

Late morning, on 31 March 2020, an announcement was made by the Oman Tax Authority providing relief specifically to taxpayers affected by COVID-19 as a result of the precautionary measures imposed by the government to counter the pandemic in Oman.

These measures inter-alia include, deferral of tax return filing and payment of tax by up to three months from the due date, exemption from all fines and penalties related to such deferred filing and tax payments, and tax deductions for all donations or contributions made towards handling this pandemic in accordance with the prescribed rules under the income tax law and the executive regulations.

These are summarized below:

Tax return(s) filing and related tax payment deadlines extended by three months

• The Tax Authority has allowed deferral of tax return filing and payment of tax due as per the tax return by a period of up to three months for taxpayers who have been adversely affected by the COVID-19 pandemic as a result of the precautionary measures imposed by the government in Oman. This would mean that taxpayers who follow the calendar year as their tax year, for whom provisional tax returns were due on 31 March 2020, or those taxpayers whose tax year ended on 30 September last year and whose final returns were due on 31 March 2020, may now rely on this announcement. They may file the tax returns and pay related taxes on or before 30 June 2020, if not already filed and paid.

• Further, the announcement clarifies that no fines and penalties would be levied on such taxpayers who could not file their returns and pay the taxes within the prescribed due dates as a result of the precautionary measures imposed by the government in Oman to counter the COVID-19 pandemic.

Please note that the announcement seems to be limited to tax returns only and may not cover withholding tax statements which are due on the 14th of every month. It is further not clarified in the announcement if the deadline for filing the final return of income for taxpayers following the calendar year as their tax year has also been extended by three months. One should wait for the necessary clarification(s) to be issued by the Tax Authority in this regard.

Flexible tax payment mechanism introduced along with exemption from additional tax (interest) levy:

• Taxpayers may reach an agreement with the Tax Authority allowing the settlement of outstanding taxes in installments. This arrangement is likely to be ‘condition based,’ as will be agreed between the relevant taxpayer and the Tax Authority.

• Additional tax (interest) leviable of 1% per month on such outstanding taxes for cases governed by this arrangement will be exempt. Such exemption will be granted only upon satisfaction to the Tax Authority that tax settlement could not be made within the due date for reasons or circumstances resulting from the government measures imposed to counter the COVID-19 pandemic in Oman.

• Exemption from additional tax does not appear to be automatic. The onus or burden of proof lies on the taxpayer to justify with reasons or prove circumstances that resulted in delayed payment of taxes.

Deferment in filing of objection against assessment orders:

• As a brief background, the provisions of the tax law currently allow a taxpayer to object to the assessment order issued by the Tax Authority within 45 days from the date of receipt of the assessment order.

• For objection submission(s) [against assessment orders or rectified assessment orders or additional tax assessment orders] that are delayed as a result of the precautionary measures imposed by the government to counter the COVID-19 pandemic in Oman, the Tax Authority has clarified that such submission  beyond the statutory period of 45 days will be permitted. The delay period will be treated as a ‘force majeure’ event, based on which such deferment would be granted.

• The onus once again lies on the tax payer to prove that the delay in submission beyond the statutory period for objection submission is due to the imposition of the government’s precautionary measures.

Additional timeframe granted to submit supporting documents and clarifications for ongoing objection proceedings:

• Taxpayers have been given the opportunity to request an extension to submit their supporting documents and clarifications for the ongoing objections proceedings. This request is subject to the approval of the Tax Authority.

• The additional time granted by the Tax Authority in such cases shall be ignored from the overall timelines for objection disposal by the Tax Authority [which is currently five months from the date of filing of the objection with an extended time of an additional three months if desired by the Tax Authority].

COVID-19 related donation(s) made tax deductible:

• The Tax Authority has clarified that donations or contributions made by taxpayers for the purpose of dealing with the COVID-19 pandemic in Oman will be treated as tax deductible. The onus or burden of proof is, once again, on taxpayers to prove that the purpose was for dealing with the COVID-19 pandemic.

• Such donations are to be governed by the same rules as have been already prescribed in the Executive Regulations to the Oman Tax Law and would be subject to the overall 5% of gross revenue capping.

The said extension is surely a welcome move by the government to provide relief to taxpayers who have not already filed their returns and who are adversely impacted by the current COVID-19 pandemic. We recommend our clients engage in discussion with the Tax Authority through their tax advisors to seek clarity on these announcements, wherever necessary.

If you have any questions regarding the above, please do feel free to contact us.

Ashok Hariharan

Partner and Head of Tax

+96824749231

Teamwork is critical for overcoming obstacles the world faces today. To build resilience and become positioned for success, employees must be equipped with the right tools and resources.

The Oman Telecommunications Regulatory Authority (TRA) has recently announced that it has enabled access to communication tools as part of its efforts to facilitate business continuity and collaboration for public and private organizations. As such, Microsoft Teams app will be available to further empower people to work remotely and stay connected.

Making Teams available for everyone

Teams is a part of Office 365. If your organization is licensed for Office 365, you already have it. But we want to make sure your team has access to it during this time.

If you work for a business that isn’t currently licensed for Teams, Microsoft got you covered with a free Office 365 E1 offer for six months. Please contact your Microsoft partner or sales representative to get started today.

Start using Teams to Change the way you work

1.Set up Microsoft Teams virtual meetings in place of in – person meetings

a. How to to schedule a meeting: : Watch video

b. How to join a meeting: Watch video

c. How to share your screen during a meeting: Watch video

2. Use Microsoft Teams virtual webinars instead of in- person meetings

a. How to use Share option to deliver the training content: Watch video

b. How to use Whiteboard to make the training interactive: Watch video

c. How to record the meeting for reply and for your knowledge base: Watch video

3. Set up Microsoft Teams Live Events instead of town hall events

a. How to plan and schedule a live event: Watch video

b. How to attend a live event: Watch video

c. How to moderate a Q&A: Watch video

For details on this article, please contact AbdelKarim at AbdelKarim.AbuJaber@microsoft.com

The Canadian Health Centre’s Counseling Psychologist Sara Hassan advises everyone to equally prioritize their mental and physical health during this time.

Remember that your overall wellbeing is always a priority, however; during a worldwide crisis such as Covid-19 your wellbeing and safety are crucial. Maintain a positive attitude regarding what is going on in the world and trust the process. This will pass so take advantage of the time you have towards the things you didn’t have time to do during the hustle and bustle of your daily lives prior to the pandemic. If watching and reading the news makes you anxious limit your viewing or maybe even get the latest accurate information from a trusted friend or colleague every other day rather than daily. Furthermore, adopt a positive perspective and engage in healthy behaviors like eating healthy, staying well hydrated and exercising in your home or outdoors keeping in mind and sticking to the strict social distancing rules. Although we are currently social distancing, maintaining the meaningful emotional connections is a crucial part of staying positive and hopeful together.  So utilize all the social media and electronic platforms available to you. Your feelings are valid and you are not alone so make sure you talk to family and friends and engage in those meaningful conversations.

Also, take advantage of the excessive time you have and do the things you’ve always wanted to do like draw, paint, read, dance, sing, journal, and organize your closet, for example. Finally, try to be mindful in everything you do, whether it is while walking, cooking, eating, and praying, for example. Focus on the 5 things you can see, 4 things you can touch, 3 things you can hear, 2 things you can smell and the 1 thing you can taste. This is an extremely effective grounding technique. We are all in this together so lets all show each other love, kindness and compassion.

For more information on any of the material presented here don’t hesitate to contact the Canadian Health Centre at 24139659, or connect with Sara Hassan directly on hassan.sara1@gmail.com 

The Anual Discover America was concluded on Sunday, October 20th, by celebrating and networking at the Deputy Chief of Mission’s Residence with U.S. Ambassador Sievers, an event co-hosted in partnership with the U.S. Embassy. We want to thank our members and guests for joining us and making the evening a delightful one, congratulate all the raffle winners, and extend our thanks to all of our sponsors for supporting Discover America and being a part of its success.