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Penalties linked to TP adjustments

Are there penalties if our related party pricing is wrong?

The situation

Under declared income can attract a fine of 1 to 25 percent of the difference in tax.

The law

  • Income Tax Law (penalties): Late return fine OMR 100 to 2,000; late payment 1 percent per month; under declaration fine 1 to 25 percent of the difference
  • Income Tax Law (related party transactions): Related party dealings must be at arm's length and disclosed in the return; Tax Authority can recompute income

What it means for you

If an adjustment adds OMR 15,000 tax, the fine range is OMR 150 to 3,750 plus 1 percent a month late payment. Documented, good faith pricing reduces risk.

What to do

  1. Keep documentation.
  2. Price at arm's length.
  3. Correct errors early.
  4. Take advice on large items.

We can do this for youRelated party pricing, return disclosure and thin capitalisation review: OMR 750

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