Sohar Suppliers Limited, a SAOC firm founded in Sohar in 2015, primarily supplies imported products to hotels and leisure industries across the Sultanate of Oman. You are tasked with assisting the accountant of Sohar Suppliers Limited company, in determining the taxable profit and the tax liability for the year 2022. The accountant is unfamiliar with the rules under the Law of Income Tax on Omani Companies, so a detailed and accurate analysis is required. The income statement for the company is provided below: (Statement of Profit or loss) Income Statement for the period 2022 Revenue Less: Cost of Sales Opening inventory RO' 000 RO' 000 65,000 Add: Purchases Less: Closing inventory 3,000 55,000 (18,000) (40,000) Gross Profit 15,000 Less: Indirect Expenses Patent purchased 2,000 Prefabricated Building 500 Salary 1,700 Advertisement expenses 500 Bad debts 700 Travelling expenses 300 Insurance 400 Donation 800 Office expenses 100 (7,000) Net Profit 8,000 Additional Information: 1) Travelling expenses include RO 50,000 for personal travelling. 2) The accountant Overvalued opening inventories and undervalued closing inventories by RO 125,000 and RO 175,000 respectively. 3) The company has a permanent building which cost RO 2 million and an equipment cost RO 500,000. The depreciation on such assets is not charged in income statement. 4) Bad debts of previous years RO 150,000 recovered in this year which was earlier allowed as deductible expenses and not included in net profit of 2022 as can be seen in above income statement. 5) Donation of RO 800,000 made to approved charitable project and charged from the gross profit. 6) The Company purchased a patent worth RO 2 million in the year 2022. The life of the Patent is 10 years. The accountant expensed the cost of patent. 7) The company incurred an amount of RO 500,000 total advertising expenses on inaugurating their five new retail business outlets this year. This amount is deducted in calculating the profit. However, the Secretariat General of the income tax department declared RO 50,000 inappropriate because of non- availability of documentary evidence. 8) The company earned capital gain of RO 75,000 on disposal of securities listed in MSM. Such a gain is not included in the profit. 9) The company reported a loss of RO 150,000 in 2015, the year it commenced operations. After that it experienced significant losses of RO 1 million in 2020 and RO 1.5 million in 2021 due to the COVID-19 pandemic. Required: 1. Calculate the Taxable Profit for the year 2022 a) Adjust the net profit provided in the income statement to account for allowable and disallowable expenses as per the Tax Law of Oman. b) Clearly show all adjustments with explanations for inclusion or exclusion. 2. Determine the Tax Liability for the year 2022 a) Apply the appropriate corporate income tax rate for Omani companies.

Sohar Suppliers Limited, a SAOC firm founded in Sohar in 2015, primarily supplies imported products to hotels and leisure industries across the Sultanate of Oman. You are tasked with assisting the accountant of Sohar Suppliers Limited company, in determining the taxable profit and the tax liability for the year 2022. The accountant is unfamiliar with the rules under the Law of Income Tax on Omani Companies, so a detailed and accurate analysis is required. The income statement for the company is provided below: (Statement of Profit or loss) Income Statement for the period 2022 Revenue Less: Cost of Sales Opening inventory RO' 000 RO' 000 65,000 Add: Purchases Less: Closing inventory 3,000 55,000 (18,000) (40,000) Gross Profit 15,000 Less: Indirect Expenses Patent purchased 2,000 Prefabricated Building 500 Salary 1,700 Advertisement expenses 500 Bad debts 700 Travelling expenses 300 Insurance 400 Donation 800 Office expenses 100 (7,000) Net Profit 8,000 Additional Information: 1) Travelling expenses include RO 50,000 for personal travelling. 2) The accountant Overvalued opening inventories and undervalued closing inventories by RO 125,000 and RO 175,000 respectively. 3) The company has a permanent building which cost RO 2 million and an equipment cost RO 500,000. The depreciation on such assets is not charged in income statement. 4) Bad debts of previous years RO 150,000 recovered in this year which was earlier allowed as deductible expenses and not included in net profit of 2022 as can be seen in above income statement. 5) Donation of RO 800,000 made to approved charitable project and charged from the gross profit. 6) The Company purchased a patent worth RO 2 million in the year 2022. The life of the Patent is 10 years. The accountant expensed the cost of patent. 7) The company incurred an amount of RO 500,000 total advertising expenses on inaugurating their five new retail business outlets this year. This amount is deducted in calculating the profit. However, the Secretariat General of the income tax department declared RO 50,000 inappropriate because of non- availability of documentary evidence. 8) The company earned capital gain of RO 75,000 on disposal of securities listed in MSM. Such a gain is not included in the profit. 9) The company reported a loss of RO 150,000 in 2015, the year it commenced operations. After that it experienced significant losses of RO 1 million in 2020 and RO 1.5 million in 2021 due to the COVID-19 pandemic. Required: 1. Calculate the Taxable Profit for the year 2022 a) Adjust the net profit provided in the income statement to account for allowable and disallowable expenses as per the Tax Law of Oman. b) Clearly show all adjustments with explanations for inclusion or exclusion. 2. Determine the Tax Liability for the year 2022 a) Apply the appropriate corporate income tax rate for Omani companies.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter11: Property Dispositions

Section: Chapter Questions

Problem 86TA

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