Weekly Spotlight: Regulatory Amendments Issued by Oman’s Central Bank to Enhance the Sultanate’s Financial Industry

This week the spotlight is on regulatory developments in Oman, where the Sultanate’s Central Bank has issued a number of regulatory amendments to enhance the Sultanate’s financial industry. The amendments came into force on 1 April 2018.

The Bank has reduced the capital adequacy ratio requirements for banks from 12 to 11%. This will increase banks’ lending capacity. It is expected to make an additional 2.6 billion Riyals of credit available with 7.8 billion Rials instead of 5.2 billion Rials being released. The Bank has also decided to remove the regulatory restrictions imposed on the risk weights to claims on sovereign and central banks. It comes as the Bank looks to implement the Basel Committee guidelines.

The Bank has decided to increase the prudential limit for all currencies from 15 to 20% for three-to-six months, 25% per cent for six-to-nine months and 25% for nine-to-12 months. The aim is to give banks more flexibility to utilise available credit lines available from foreign and local correspondents at a reasonable rate. Finally the Bank has increased the prudential limit ratio of credit exposure to non-residents and placement of banks funds abroad to banks’ local net worth from 50 to 75%. It is hoped this change will provide banks with greater flexibility to manage their liquidity surpluses, diversify their revenues and increase their external borrowing capacity to finance local projects.

Weekly Spotlight: Oman has joined the Organisation of Economic Development’s Base Erosion and Profit Shifting framework

This week the spotlight is on tax developments in Oman, where the country has joined the Organisation of Economic Development’s Base Erosion and Profit Shifting framework. It aims to curtail multinational group tax avoidance and improve the resolution of tax disputes between countries. By joining it, Oman has agreed to adopt minimum standards developed in 2015 by the Organisation and G20 nations. The country will now have to adopt provisions to prevent tax treaty ‘shopping’, implement country-by-country reporting on multinationals and exchange country-by-country reports. It will also have to limit the benefits of any intellectual property or other preferential tax regimes established in Oman and will need to fully implement the mutual agreement procedures in its tax treaties with other countries to aid resolution of tax disputes. The Sultanate becomes the 103rd country to join the framework.

Elsewhere, the country’s Health Ministry has announced it is considering introducing a junk food tax following concerns over obesity and other related health issues in the country. It comes as Oman amongst the other GCC countries work towards implementing an excise tax on energy and fizzy drinks as well as tobacco. Ministry officials said the tax could see junk food prices increased from 100 or 200bz to 500bz.