MUSCAT: An increase in corporate income tax from 12 per cent to 15 per cent will adversely affect the net profits as well as the ability of listed companies to distribute higher dividends, according to a leading brokerage firm.
“We estimate a decline of OMR30 million in the net profit, or 4 per cent year-on-year, for the MSM-listed companies as a result of the increase in tax rate alone. We are yet to calculate the impact on profitability arising from the removal of standard exemption,” said United Securities in a research note.
“The increase in tax rate would have a negative impact on dividend distribution as well from next year. The withholding tax on dividend to non-residents might affect the distribution policy of power utilities as the majority shareholders of these companies are foreign non-resident entities.”
Out of the OMR452 million collected as corporate income tax in 2015, 28.5 per cent was contributed by the MSM listed companies. Also, tax paid by the MSM companies for the first three quarters of 2016 increased by 33 per cent, compared to the same period a year ago. “We attribute this increase to the growth in profit of companies as well as increased efficiency in tax collection by authorities,” noted United Securities.
