Municipality losing millions every year

By: Samuel Kutty

MUSCAT: Several landlords in connivance with the so-called ‘middlemen’ are evading property tax worth millions costing the Muscat Municipality huge revenue loss every year. According to the Tenancy Law in Oman, all property rentals are subject to a three per cent tax and both the landlord and the tenant must fill a contract and get it registered at the Muscat Municipality.

“The non-registration or renewal of a lease agreement and/or the failure of payment of the fixed tax within one month from the date on which it has been signed or expired, concluded and entered into shall result in the lease agreement being considered legally null and void before any government authority in the Sultanate, in addition to imposing a fine equal to three times of the fixed tax,” the law insists. If a real estate agent is not involved, then it’s the landlord’s responsibility to submit the rental contract to Muscat Municipality, the law says.

The Observer’s investigation found that there are no agreements in several cases. Even for new buildings which are coming up in Ruwi and its adjoining highly populated areas tenants can get a flat skipping the tax. The modus-operandi of the landlord is to engage a middleman who bargains with a prospective tenant to decide about the rent.

“With agreement or without,” is the first lucrative question thrown by the middleman. “If it is without agreement, the rent will come down by RO 20”, an agent told this reporter when approached for renting a flat.

Landlords, mainly in most populated areas in the capital city of Muscat, are being supported by ‘small-time freelance’ agents who assure them of ‘good money’ for the buildings.

“They very often resort to unorganised and unethical conducts. Also they undercut or overplay the real value of the property because of their lack of knowledge,” said an official at a leading real estate company in Wadi Kabir.

“There is, therefore, an urgent need to regulate the presence of unregistered agents in the real estate market and this is the only way to ensure sustained growth in the sector,” he added. In some cases the entire building is taken over by agents who pay a lump sum amount to the landlord and let them for high rents. Many tenants said that they did not have an agreement. Many of them admitted that they are unaware of the existence of a tenancy contract. “Except for the first time when I took the flat, the landlord never talked about the agreement”, said an Indian expatriate residing in Ruwi.

When contacted, a Muscat Municipality official said that many landlords do not pay property tax at all, or pay just a fraction of it, on the properties they rent. “From time to time, we have been warning landlords and agents. We know that some agents do not do that as the landlords ask them not to. Tax cheating is a punishable offence”, he said.


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