Submission Deadline Marks and Feedback

Before 6pm on: 15 working days after deadline (All Levels)

15th May, 2020
29th April 2020

Module title & code BLT & AC 14-2

Assignment number and title
Assessment type
Weighting of assessment
Module learning outcomes
2 & WR – I
Individual Report
50%
1. Knowledge and understanding
Be aware with the provisions of various commercial laws and the tax system
applicable in Oman.
2. Skills and abilities
Apply provisions of various laws to analyse a given scenario/case and apply
relevant tax rules of Oman to calculate corporate and capital gain tax.

What am I required to do in this assignment?

Task 1:
Al Umaima Trading LLC is a registered Company in Muscat Securities Market, Sultanate of Oman doing business
in manufacturing industry since 1990. It has the following financial information for the year ended 31 st December
2019.
Sales during the year are Omani Rials 1,250,450 with 50,040 Omani Rials as Return Inwards. The total Cost of
goods for the year were estimated as follows:
Total Purchases are 745,354 Omani Rials; Opening Inventory (01.01.2019) 35,700 Omani Rials and Closing
Inventory as on 31.12.2019 had been estimated as Omani Rial 81,990.
The following expenses have been incurred during the financial year:
Maintenance and repairs 8,970 Omani Rials ; Tax consultants fee 4,470 Omani Rials ; Provision for Obsolete stock
6,781 Omani Rials ; Salaries and Wages 50,980 Omani Rials; Telephone expenses 8,640 Omani Rials; Accountant
fee 10,400 Omani Rials; Depreciation on Heavy equipment @15% 10,460 Omani Rials; Depreciation on
Equipment @ 33.33% 9,460 Omani Rials; Advertisements 12,580 Omani Rials; Bad debts 87,000 Omani Rials;
Donations paid to listed organisations specified by the Ministry of Finance 21,000 Omani Rials; Directors
 remuneration 36,950 Omani Rials; Provision for Obsolete stock 6,781 Omani Rials; Provision for doubtful debts
22,650 Omani Rials.

During the financial year the company had purchased the following assets; Equipment 19,450 Omani Rials ;
Furniture 19,369 Omani Rials; Buildings 250,000 Omani Rials (First Class category);
The following additional information has been extracted from the books of accounts:
Further provision for bad debts have been identified at Omani Rial 5,000; Outstanding Advertisement expenses are
measured at Omani Rial 9,540; The loss brought forward from the past two years are Omani Rial 55,000; Gain on
exchange transactions are at Omani Rial 4,000.
Prepaid rent is Omani Rial 3,500; outstanding salaries and wages are identified at Omani Rial 12,800; Sponsorship
fee paid in total at Omani Rial 35,790; Al Umaima Trading LLC has paid advance Tax of Omani Rial 1,900 to tax
authorities.
Required:
 As a qualified accountant, identify those items that are not allowable and partly allowable expenses for
taxation purpose in accordance with The Law of Profit Tax on Commercial and Industrial Establishments
Royal Decree No.77/89, amended by Royal Decree 9/2017. Briefly explain your reasons using the tax
tables’ applicable.
 Compute the Corporation Tax payable for the year ending 31st December 2019.

Al Umaima Trading LLC

Corporation Tax Computation - 31.12.2019
RO.
Sales 1250450.00
Sales return 50040.00
Net Sales 1200410.00

Opening Stock 35700.00

Total Purchase 745354.00
Closing Stock 81990.00
Cost of good sold 699064.00

Gross Profit 501346.00

Expenses Deductible Not deductible

Maintenance and repair 8970.00 -8970.00
Tax Consultant 4470.00 -4470.00
Provision for obsolete stock 6781.00 0.00
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 Salaries and wage 50980.00 -50980.00
Telephone expense 8640.00 -8640.00
Accountant Fee 10400.00 -10400.00
Depreciation on heavy machinery 10460.00 0.00
Dep on equipment 9460.00 0.00
Advertisement 12580.00 -12580.00
Bad Debts 87000.00 0.00
Donations 21000.00 -21000.00
Director remuneration 36950.00 -36950.00
Provision for Obselete stock 6781.00 0.00
Provision for doubtful debts 22650.00 0.00
Sponsorship -35790.00 -35790.00
Total Allowable expenses -189780.00

Loss b/f 55000.00 -55000.00

Gain on exchange transaction 4000.00 4000.00
Capital Allowance 21873.19 -21873.19

Taxable Income 238692.81

Tax 15% 35803.92

Advance Tax 1900.00

Net Tax Payable 33903.92

All the business expenses that incurred in the normal course of the business are allowable and deductible expenses
except the provision for obsolete stock and bad debts.

Reason for the deductible and not deductible expenses

Expenses Deductibl Not RO Reasons
e deductibl
e
Maintenance and repair 8,970 (8,970) Business expenses are deductible
Tax Consultant 4,470 (4,470) Business expenses are deductible
Provision for obsolete stock 6,781 - Provision and Bad Debts are not
deductible
Salaries and wage 50,980 (50,980) Business expenses are deductible
Telephone expense 8,640 (8,640) Business expenses are deductible
Accountant Fee 10,400 (10,400) Business expenses are deductible
Depreciation on heavy 10,460 - Provision and Bad Debts are not
machinery deductible

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 Dep on equipment 9,460 - Provision and Bad Debts are not
deductible
Advertisement 12,580 (12,580) Business expenses are deductible
Bad Debts 87,000 - Provision and Bad Debts are not
deductible
Donations 21,000 (21,000) Business expenses are deductible
Director remuneration 36,950 (36,950) Business expenses are deductible
Provision for Obsolete stock 6,781 - Provision and Bad Debts are not
deductible
Provision for doubtful debts 22,650 - Provision and Bad Debts are not
deductible
Total Allowable expenses (153,990
)

Task 2:
Muscat Shipping SAOG Company operates business in Sultanate of Oman and has registered with Muscat
Securities Market. According to the Income Tax Act RD No 9/2017 of Chapter IV, Article (112) the
establishment must pay Capital gain tax of 15%.
The firm had disposed-off the following assets during the year ending 31st December 2019.

 Furniture & Fixture were purchased on 01/07/2017 for worth of Omani Rials 35,000 and sold out for
Omani Rials 5,000.

 Ship was purchased on 30/09/2014 for Omani Rials 115,540 and disposed-off for Omani Rials 55,900.

 Pre-fabricated Buildings were purchased on 01/10/2015 for worth of Omani Rials 860,000 and later sold-
off for Omani Rials 900,000.

 Vehicles purchased on 01/01/2019 for Omani Rials 75,000 and sold out for Omani Rials 45,000.

 Cranes & Tractors were purchased on 30/06/2017 for Omani Rials 62,000 and sold out for Omani Rials
20,000.
Required:
a. As a qualified accountant, calculate capital gains tax payable by Muscat Shipping LLC for the year
ended 31st December 2019.

List of Assets Purchase Date of Acq. Disposed Tax Capital Tax Rate
in 2019 Rate
Furniture & Fixture 35,000 01.07.2017 5,000 33.33% 15%
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 Ship 115,540 30.09.2014 55,900 15% 15%
Pre-Fabricated Building 860,000 01.10.2015 900,000 15% 15%
Vehicle 75,000 01.01.2019 45,000 33.33% 15%
Cranes & Tractor 62,000 30.06.2017 20,000 33.33% 15%

Furniture & Fixture and Cranes & Tractor Working of Capital Allowance
01.07.2017 30.06.2017
Furniture & Fixture 35,000 Cranes & Tractor 62,000
Tax Rate 33% Tax Rate 33.33%
Half Year Dep 5,833 Dep 10332.3
Carry Value 29,167 Carry Value 51,668
Year 2018
Furniture & Fixture 29,167 Year 2018
Tax Rate 33% Cranes & Tractor 51,668
Dep 9,721.44 Tax Rate 33.33%
Carry Value 19,446 Dep 17220.84
Carry Value 34,447
Year 2019
Furniture & Fixture 19,446 Year 2019
Tax Rate 33% Cranes & Tractor 34,447
Dep 6,481 Tax Rate 33.33%
Carry Value 12,965 Dep 11481.14
Carry Value 22,966
Disposal Value 5,000
Disposal Value 20,000
Loss on disposal (7,965)
Loss on disposal (2,966)

Ship and Prefabricated Building Working of Capital Allowance

30.09.2014 01.10.2015
Ship 115,540 Pre-Fabricated Building 860,000
Tax Rate 15% Tax Rate 15%
3 month dep 4,333 3 month dep 32250
Carry Value 111,207 Carry Value 827,750

Year 2015 Year 2016

Ship 111,207 Pre-Fabricated Building 827,750
Tax Rate 15% Tax Rate 15%
Dep 16,681 Dep 124162.5
Carry Value 94,526 Carry Value 703,588

Year 2016 Year 2017

Ship 111,207 Pre-Fabricated Building 703,588

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 Tax Rate 15% Tax Rate 15%
Dep 16,681 Dep 105538.1
Carry Value 94,526 Carry Value 598,049

Year 2017 Year 2018

Ship 94,526 Pre-Fabricated Building 598,049
Tax Rate 15% Tax Rate 15%
Dep 14,179 Dep 89707.41
Carry Value 80,347 Carry Value 508,342

Year 2018 Year 2019

Ship 80,347 Pre-Fabricated Building 508,342
Tax Rate 15% Tax Rate 15%
Dep 12,052 Dep 76251.3
Carry Value 68,295 Carry Value 432,091

Year 2019 Disposal 900,000

Ship 68,295
Tax Rate 15% Gain on Disposal 467,909
Dep 10,244
Carry Value 58,051 Capital Gain Tax 70186.4

Disposal Value 55,900

Loss on Disposal (2,151)

01.01.2019
Vehicle 75,000
Tax Rate 33.33%
Dep 24997.5
Carry Value 50,003

Disposal Value 45,000

Loss on
(5,003)
Disposal

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b. Discuss and elaborate on the provisions concerning to the disposal of capital assets according to Sultanate of
Oman’s Income Tax Law.
Answer:
According to the article 10, para 2 disposal of asset of a taxpayer, with and without the consideration below the
market value for the asset, gain on the asset is recognized in the financial statements. Further, article 55, para 6
any consideration or amount paid for the acquisition of asset except the article 37 para4, necessary expenses in
case of disposal of asset should be charged to the accounting period.

Task 3:
“A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of
the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of
the product, less any of the costs of materials used in the product that have already been taxed.”
Required:

As a student of Law & taxation, what do you think, If Sultanate of Oman implements VAT in its territory, what
are the prospects and challenges it will receive out of it? Elucidate

Oman will only introduce the VAT system in any case in 2021. This measure has been prohibited in the 2020
budget. This occurs despite the fact that Oman is one of the six Arab Gulf countries that will present in 2016 to
introduce a region VAT organized. In Oman, we tend to understand that VAT legislation, advice and guidance are
subject to scrutiny. To help organizations offer value added tax in the Sultanate of Oman, Deloitte has created a
guide that provides an overview of the implementation, as well as of the most affected companies, the use of
expenses and previous activities of pre-use, among others. Starting with our involvement in VAT implementation
with the UAE, the Kingdom of Saudi Arabia and completely different countries, organizations must start on time,
to ensure consistency and fear. The understanding of the structure of the value added tax of the countries of the
Gulf Cooperation Council began on November 27, 2016 and is ready to implement fund rates within the
geographic region. Extending the exercises the United Arab Emirates and Saudi Arabia learned, including with
Bahrain because it plans to introduce VAT in January 2019, we have fixed ten main difficulties in the Sultanate of
Oman that you may need to consider when creating a guide to use VAT within the country.

Pre-implementation of Oman VAT law Post-implementation of Oman VAT law

Review of the tax laws All financial transactions need to be spillover
ERP system are required and need to be Registration of VAT, Return and filing
upgrade
Pricing should be competitive Penalties for non filing
Cash flow management Amendments required
Business functions need to be integrated  
Contractual obligations for the cutover  
period

7
 Task 4:

We have allowed the word avoidance to gain too much respectability.  It is just a smarter form of evasion.
– Pravin Gordhan, South African  Minister of Finance, Nov 2009
Required:
Write a brief report on how to confront such Tax evasion and Tax avoidance in any society in general, and
Sultanate of Oman in particular.

Basically, the distinction between repudiation and avoidance is legitimate. The reduction is a legal misuse of the
legal framework to reduce current or future obligations through an implication not proposed by Parliament. It often
includes imagined imaginary exchanges for favorable flexibility.

The minimization cases are: cargo derivatives, change of commercial structures through valves or construction of
an offshore organization throughout the country.

In an ongoing report, the Hamad Center for Human Rights condemned the evaders of the allegations, saying that "a
small minority is distorting or violating the rules by deliberately avoiding or avoiding their evaluations, and that we
are determined to deal with these people" .

Evasion of expenses is not proportional to the qualification or relief agreement. An appraisal agreement is an
advantage that reduces the tariffs imposed on the fees without conflict with Parliament, for example, through
blessings for a noble cause or interests in specific resources that meet all the assistance requirements to collect the
fees. Several examples of moderate moderation include tax exempt ISA or paying for conspiracy.

Avoiding taxes is running away by paying contributions illegally. This is normally the norm when an individual
distorts or covers the state of truth of his promises to the burden of professionals, for example, the declaration of
the obligation to exploit.

Evaluating the evaluation is that organizations can formulate arrangements within the Sultanate of Oman, while
evasion can be a crime across the planet in addition to the interior of Oman. Avoiding the charges could carry a
prison sentence of up to 3 years and a maximum fine of 50,000 OMR under law amendments distributed by the
Ministry of Finance, as the government begins cracking down on evaders.

The report indicated that the most severe punishment for not providing the data and files mentioned by the
competent authority or not attending the hearings could be expanded from 2,500 OMR to 5,000 OMR.

A fine of OMR 3,000 will be imposed for the violation of the guidelines of the law, and a fine of up to 2,000 OMR
will be imposed on companies that do not register the evaluation forms during their expiration dates.

Also, the amended law specifies that a citizen must obtain an evaluation card, which can be legitimate for a
predetermined period and wishes to recover from that point.

8
 APPENDIX 1: Depreciation rates applicable for Tax year 2019/2020.

Permanent Buildings 4%
First Class buildings 5%
Prefabricated buildings 15%
Bridges, platforms, pipelines, permanent way, and railway lines 10%
Heavy equipment, Tractors, digging equipment, and any other similar heavy equipment 33.33%
Motor vehicles 33.33%
Furniture and fixtures 33.33%
Aircraft and ships 15%
Other equipment and tools 15%
Hospital buildings and educational establishments 100%
Scientific research equipment 100%

GUIDELINES
It is an individual report writing.

Task 1
1. You are required to identity the non-allowable and partly allowable expenses according to Income tax of
Oman and briefly explain your reasons by using tax tables in Annexure.
2. Calculate the corporation tax to be paid for the year ending 31 st December 2019. Provide notes wherever
needed.
Task 2
1. You are required to calculate the capital gain tax payable by considering the depreciation rates given for each
asset in the table provided in Annexure as “Depreciation rates applicable”.
2. Write a discussion on capital gain tax provisions which are available in Income Tax of Sultanate of Oman.
Task 3
1. Discuss what is the significance of Value added Tax.
2. Write brief discussion about its identified merits and demerits in general especially in GCC countries.
3. Present a discussion on the application of VAT in Oman: problems and prospects.
Task 4
1. Discuss what is Tax evasion and Tax avoidance
2. Narrate what are its impact on the tax administration on any society
3. Discuss how to tackle such crimes? What are the plans does Sultanate of Oman have to overcome this?

9
Deliverables
Submission:
It is an Individual report.
Submission of the individual report will be done via Turnitin Link on MOVE. At the time of submission, you need
to make sure that the assignment is your own and all the sources have been acknowledged.
Is there a word limit (Number of Words ± 10%)?
2000
What do I need to do to pass? (Threshold Expectations)

In order to pass the assignment:

 You should be able to understand what corporation tax is and how to calculate tax to be paid to state.
 Capital gain tax and its computation
 Basic understanding about VAT and Tax evasion and Tax avoidance.

How do I produce high quality work that merits a higher grade?

 Wide range of information search is needed on Corporation tax and its implication.
 Rules applicable while computing corporation tax to be paid.
 Knowledge on provisions concerning to the disposal of capital assets according to Sultanate of Oman’s
Income Tax Law.
 Capital gain tax computation with the application of depreciation table for tax purposes.
 Valued added Tax and its implications in Oman
 Critical understanding on the concepts of Tax evasion and Tax avoidance and its impact.
How does assignment relate to what we are doing in scheduled sessions?
During the practice sessions, guidance and assistance will be provided relating to the conceptual framework. And
also, the class room teachings will be used to develop the essential knowledge and skills needed to do the
assignment effectively.

10
 How will my assignment be marked?
Your assignment be marked according to the threshold expectations and the criteria on the following page.
You can use them to evaluate your own work and estimate your grade before you submit.

Sub Standard /
N Weighin Poor Satisfactory Good Very Good Excellent Outstanding
Criterion No Attempt
o g (%) (20 Marks) (40 Marks) (50 Marks) (60 Marks) (70 Marks) (100 Marks)
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12
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13
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14
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15
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16