Oman set for changes in tax laws to suit Islamic banking

The plans of the Oman government for the near future include an amendment to the current tax legislation. The goal of the amendment is accommodation of Islamic banking products and services as well as the creation of a level playing field with its conventional counterparts. The Ministry of Finance gave KPMG the project of recommendations on amending the tax legislation. Due to the different procedure regarding entering transactions, it is currently possible that the profit becomes liable to tax in the first year. This way, Islamic banks are likely to be considered disadvantageous in comparison with conventional banks.

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New vistas of growth

An issuance of a full-fledged Islamic Banking Regulatory Framework (IBRF) by the Central Bank of Oman (CBO) is expected in the very near future. Therefore, Oman is ready to dive into Islamic finance. By the end of 2015 a growth in Islamic finance assets of 20% of the total banking and insurance assets in the Sultanate is expected. Investment in research and innovation is encouraged in order to meet the needs of the increasing market appetite.

Banks in Oman to see cost benefit of offering Islamic banking services

According to KPMG Oman, conventional banks in Oman that do not offer any Islamic banking services will face the threat to lose numerous customers which will prefer a bank that offers Shari'ah-compliant financial services. Khalid Yousaf, Director of Islamic Finance Advisory Services, KPMG Oman, claims that opening an Islamic window operation is a safe strategy. As a reason he points out that it requires less capital while, at the same time, sharing a common cost base with additional business.

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