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Chapter-1 Introduction to Tax Accounting


Chapter-1 Introduction to Tax Accounting Purpose of Tax Accounting: The primary purpose of tax accounting is to determine taxable income, preparation of federal ... – PowerPoint PPT presentation

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Title: Chapter-1 Introduction to Tax Accounting

Chapter-1Introduction to Tax Accounting
  • Purpose of Tax Accounting
  • The primary purpose of tax accounting is to
    determine taxable income, preparation of federal
    state income tax returns, planning of
    operations along lines that will hold
  • As income tax (IT) rates have gone up the
    determination of Taxable income has become more
    complex, both internal accountants independent
    public accountants have devoted more time to
    problems of taxation. Although many companies
    rely on CPA firms for tax planning the
    preparation of IT returns, larger companies also
    maintain their own tax departments.

Meaning of tax
  • Tax is a compulsory payment to the government by
    a tax payer
  • Tax shall means any tax which must be paid by
    virtue (by force or authority) of this Law
    shall include any fine, interest or any other
    burden stipulated (terms of agreement or
    contract) by virtue of this Law with the
    exception of any penalty (punishment).
  • All countries in the world charge taxes of some
    sort and there is no country in the world which
    does not charge any tax

Types of taxes
  • There are two types of taxes, they are-
  • i) Direct Tax ( Income Tax, Gift tax, Wealth
    tax )
  • Ii) Indirect Tax ( sales, excise, custom taxes,
    Excise tax etc.)
  • Direct tax
  • Taxation, the effect of which is intended to be
    borne by the person or organization that pays it.
    Examples are Income tax, corporation tax etc.
  • In other words direct tax reduces the income
  • Indirect Tax
  • Taxation that is intended to be borne by persons
    or organizations other than those who pay the
    tax. The principal indirect tax is value added
    tax VAT, which is paid by traders as goods
    services enter into the chain of production, but
    which is ultimately borne by the consumer of the
    goods services.
  • One of the advantages of indirect taxes is that
    they can be collected from few sources while
    their economic effects can be wide spread.

Oman Income tax Law
  • There is no personal income tax in Sultanate of
    Oman. However, the government of Oman charges
    income tax on joint stock companies
  • This law shall be called the Law of Income Tax on
    Companies NO.47/1981 and its Amendments. (change
    for the better a law, bill or motion).
  • This law shall have effect in all parts of the
    Sultanate of Oman.
  • Without prejudice (a judgment or opinion formed
    without due examination of facts) to the
    provisions of Paragraph (3) of the Fourth
    Schedule to this law, this law shall have effect
    as from 1st January 1981, shall apply to income
    chargeable to tax for the tax year ending on 31st
    December 1980 the following tax years.

Fourth schedule in Oman Income tax law
  • The fourth schedule of Oman Income tax law says
    Income chargeable to tax the procedures of
    Assessment in relation to which have not been
    completed at the date on which this Law comes
    into effect shall be subject to the provisions of
    this Law.
  • Important definitions
  • What does The Sultan mean in Law?
  • The Sultan shall mean His Majesty the Sultan of
    Oman and his Successors.
  • What does Accounting Period shall mean?
  • The Accounting Period means the period for which
    the company accounts are prepared.

Q6. What is Permanent Establishment?
  • Permanent Establishment shall mean the fixed
    place of business. It include the following
  • a) A place of Sale b) A place of Management c)
    Branches d) Offices e) Factories f) Workshops
    g) Mines or any place of natural resources h) A
    building site, place of construction, Assembly
  • Q7. What is Not included in Permanent
  • The expression Permanent Establishment shall Not
    include the following
  • a) The mere use of facility for the purpose of
    storage, display or delivery of goods or products
    of the company.
  • b) The preservation of goods or product in a
    store for the purpose of storage, display or

c) The preservation in a store of goods or
products of the company for the purpose of
their manufacture alone by means of another
  • d) Storage of goods or products of the company in
    a fixed place for a business which does not by
    its nature intend to make profit, it is only used
    for collecting information or scientific studies.
  • Q8. What does Petroleum mean?
  • Petroleum shall mean any crude oil, natural gas
    asphalt (By product) or petroleum derivatives or
  • Q9. Who is The Director or Officer Responsible?
  • The Director or Officer Responsible with relation
    to any Company shall mean, a member of the Board
    of Director, an officer, manager or any other

who has received a notification from the
Secretary General to represent the company.
  • Q9. What do you mean by Income Chargeable to
  • The Income Chargeable to Tax shall mean the gross
    sum of revenue Less allowable deduction.
  • Q10. What is the meaning of The Tax Year?
  • The Tax Year shall mean the period of Twelve
    months commencing from the 1st day of January
    ending on the 31st December following.
  • ARTICLE (3) Management
  • Q11. Who is responsible for the Implementation of
    Income Tax Law?
  • The Secretary General shall be responsible for
    the implementing this Law. He shall be
    responsible also for

control supervision on director general,
directors other employees of Secretariat
General for the purpose of implementing this Law.
  • Q12. Does Secretary General authorize other
    person to assume any of his functions?
  • The Secretary General may authorize director
    general, directors or other employees of his
    Secretariat to assume any of his functions
    specified in the Law, or to carry out specific
    assignment entrusted originally to the Secretary
    General for the purpose of implementing this Law.

  • Q13. What is the formation of Tax Committee?
  • The Committee shall be formed of a President
    Three(3) Members, Technical Expert Secretary,
    appointed by a decision from the Minister.
  • Q14. What are the powers of the committee?
  • The Committee shall be empowered to view the
    appeals against the Secretary Generals decisions
    in implementing the provision of Article 46
    (Appeals submitted to the Tax Committee) of this
    law, in addition to other functions as stipulated
    in this law.
  • Q15. How the committee works?
  • Committee operation system shall be issued by a
    decision from the Minister committee sessions
    shall be confidential.

ARTICLE 4(bias)
  • Q16. What are the Principle Jurisdiction of the
    Secretary General?
  • The Principle Jurisdiction of the Secretary
    General shall be to
  • Take necessary action for tax assessment or
    exemption as specified by the law.
  • Take necessary procedures to collect taxes,
    duties other amounts due to the administrative
    units of the government.
  • The departments listed in the organizational
    structure of the Ministry of Finance shall be
    under the Secretary General. The Departments are
    as follows
  • 1.Dept. of Investigation Assessment
    2.Directorate General of Collection
    3.Directorate General of Tax Survey

Article (5)
  • Q17. Who is responsible for the Confidentiality
    of documents used as evidence in the Law?
  • Every employee who, while performing his job,
    have an affair in implementing this law or
    settling its dispute is bound to observe the
    confidentiality of the trade in respect of
    documents, instruments data related to any
    company, also all the confidential instructions
    came to his knowledge while performing his
  • Q18. What shall not deemed to be breaches of
  • The following shall not be deemed to be breaches
    of confidentiality-
  • a) The giving of confidential statements demanded
    in the criminal court or in the courts connected
    with this law.
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