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Tax Authority recomputing income

What can the Tax Authority do if it disagrees with our pricing?

The situation

If a related party transaction reduces income or increases costs, it may be disregarded and income recomputed as if with unrelated parties.

The law

  • 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
  • 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

What it means for you

An adjustment of OMR 80,000 adds OMR 12,000 tax at 15 percent, plus a possible fine of 1 to 25 percent of the tax difference. Good documentation is the main defence.

What to do

  1. Document pricing.
  2. Respond to queries quickly.
  3. Object within 45 days if you disagree.
  4. Fix pricing going forward.

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

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