Welcome to the March edition of our tax newsletter, bringing you news on global and regional tax developments. 

KPMG report: Comments on OECD’s draft rules for tax base determinations under Pillar One Amount A

The Organisation for Economic Cooperation and Development (OECD) in February 2022 issued a release seeking comments on a public consultation document setting out draft rules for tax base determinations under Amount A of Pillar One—part of the ongoing work of the OECD/G20 inclusive framework on base erosion and profit shifting (BEPS) in implementing the two-pillar solution to address the tax challenges arising from the digitalization of the economy.

In response to the OECD request for comments, KPMG tax professionals submitted a memo concerning the draft rules for tax base determinations under Amount A of Pillar One.

See the full text of the report here

OECD: Commentary on Pillar Two model rules for domestic implementation of 15% global minimum tax

The Organisation for Economic Cooperation and Development (OECD) published commentary on the Pillar Two model rules which were released 20 December 2021 and provided a precise template for governments to move forward with Pillar Two of the two-pillar solution to address the tax challenges arising from digitalisation and globalisation of the economy.

According to OECD’s release, the commentary provides MNEs and tax administrations with detailed and comprehensive technical guidance on the operation and intended outcomes under the GloBE rules and clarifies the meaning of certain terms. The commentary also illustrates the application of the GloBE rules to various fact patterns. The commentary is intended to promote a consistent and common interpretation of the GloBE rules that will facilitate coordinated outcomes for both tax administrations and MNE groups.

See the full text of the commentary here

KPMG report: Updated analysis of Pillar Two model rules for 15% global minimum tax following release of commentary

Based on the OECD’s commentary on the Pillar Two model rules released 20 December 2021, KPMG published an updated analysis of Pillar Two model rules for 15% global minimum tax.

See the full text of the report here

MoF holds discussions with the OECD

The Undersecretary of the MoF hosted a delegation from the OECD which was headed by the Director of the Centre for Tax Policy and Administration. Meeting was held to discuss enhancing strategic relations and furthering common interests in order to strengthen cooperation between both parties.

Read the full article here

Oman to Set Up Free Zones at Three International Airports

On 2 March 2022, His Majesty Sultan Haitham bin Tarik issued a Royal Decree (“RD”) No. 10/2022 for the creation of free zones at Muscat International Airport, Sohar Airport and Salalah Airport. The zones will be established in the designated land plots according to the relevant layouts and concession agreements.

As per RD, the operator of and operating companies in the free zones are entitled to an income tax exemption for each project for 15 years, which may be extended by another 5 years. Further, RD provides that income tax exemption is not available for banks, financial institutions, insurance and reinsurance companies, or projects in telecommunications, land transport or construction services.

As in the case of existing free zones and special economic zone, the exemption to projects in the airport free zones will be issued by a decision of the head of the Tax Authority. Applicable rules, regulations and procedures are to be prescribed in due course. The applicability of income tax exemption to existing companies in the designated free zone land plots will need to be reviewed after receipt of further rules and regulations governing these airport free zones. 

Withholding tax on specified expenses incurred towards non-residents by companies in the airport free zones may still apply based on experience of existing zones and it may be appropriate to reconfirm this position after receipt of rules and regulations governing these airport free zones. Indirect tax benefits (if any) for these zones may be notified separately. The Free Zones shall be considered foreign territory for customs purposes and, therefore, international trade transactions within the Free Zones shall be exempted of customs duties.

It is expected that the airport free zones will have a one-stop portal for processing of applications for permits, licenses and related approvals.  

Economic substance return submission in Bahrain due by 31 March

Entities carrying out relevant activities in Bahrain or having “relevant activity code” on their commercial licenses are obliged to submit their ES returns by 31 March 2022.

Read the detailed guide prepared by the KPMG member firm in Bahrain.