Does Building Condition Matter In Oman Tax Depreciation?

An important Oman Supreme Court judgment highlights that Oman tax depreciation is not always determined only by the original design or construction materials of a building. The actual condition of the asset, its age, and the extent of wear and tear may also be relevant when determining the correct depreciation treatment under Oman tax law.

The dispute started after the Oman Tax Authority applied a 4% depreciation rate in Oman on the basis that the building was classified as a first-class building. The taxpayer argued that the building had been in use since the 1980s, had significantly deteriorated over time, and no longer maintained the same level of durability or operational condition originally associated with that classification. The taxpayer therefore argued that a 15% depreciation rate should apply instead of 4%.

The Oman Supreme Court confirmed that the assessment should not be based on a rigid or purely formal approach. The Court considered the practical reality of the building, including its age, condition, and actual level of deterioration and use over time. Based on this reasoning, the Court overturned part of the tax assessment and confirmed the taxpayer’s right to apply a higher depreciation rate for the commercial property tax purposes in Oman.

This judgment is particularly relevant for real estate companies in Oman, industrial businesses, infrastructure projects, and companies operating older commercial or operational assets in Oman, especially when reviewing depreciation treatment and fixed asset classifications for tax purposes.