Taxes in Oman

Being situated in the border of the UAE, Saudi Arabia, and Yemen, the Sultanate of Oman has been a favorite destination for international investors to invest in new startups and expand their established businesses as well. Being surrounded by other Middle-East countries, it becomes an open gateway to capture other nations which enables entrepreneurs and business persons to expand their businesses. Now, once a business entity gets established, it becomes mandatory to follow the taxation policies as stated by the Omani government. This article will take you through the taxation services available in Oman. Let’s proceed…

Once a business entity gets established, it becomes mandatory to follow the taxation policies as stated by the Omani government. The Omani government is trying to focus more on revenue from non-oil sources. 

The country’s government has introduced broad tax changes to the income tax law. After intense speculation for many months, the changes aim at improving tax administration, increasing tax revenue, and stimulating small business activities.

This article will take you through all the taxes in Oman.

Oman Income Tax

While planning for your company registration in Oman, you should also know that there are different types of income taxes in the country, except for personal income.

1. Withholding Tax, Oman

Withholding tax in Oman stands at a rate of 10% that is to be paid to the government by the taxpayer of the income, which involves dividends, interest, royalties, and professional fees, which is to be submitted to the Secretarial General, within the duration of 14 days.

2. Customs Duty

This rate gets implemented on the import/export goods to raise the state’s revenue. It is charged on the value of goods depending upon various parameters like weight, dimension, etc. 

The standard custom duty rate in Oman stands at a rate of 5%.  Import and export of certain items like alcohol, tobacco, etc., need to bear a rate of 100%.

3. Corporate Tax

The standard corporate tax in Oman stands at 15%. However, the fee is charged to the business entities based on their revenue generation.

So, if your point of interest is in knowing Oman Tax laws, and the procedures to file them, let us understand how to file corporate taxes in Oman.

Corporate Tax in Oman

Omani Taxation Laws state that all taxpayers are required to submit two returns for the relevant tax year on the specified forms to the General Secretariat.

1. Provisional Return

Provisional returns are to be filed before the last three months period of the taxation year. The establishment details the taxable income for that accounting year and the tax value that is self-assessed by the establishment itself in the provisional return. 

The taxes are levied based on the Activity detail returns, the Final account of the company, and provisional, and annual returns of the taxpaying company.

2. Annual Return

Annual Returns of the company are to be filed before the last six months of the accounting year. A taxpaying establishment mentions its yearly income and the payable tax due according to the self-assessed estimate. 

A licensed auditor will be accompanying the audited documents included in the accounting and bookkeeping services for an Oman business. The two types of annual returns for any establishment are as follows. 

No audited accounts are necessary from an establishment with a maximum capital amount of OMR 20,000. The attached final audited accounts are necessary for establishments with a capital exceeding OMR 20,000. 

In case of failure of payment of the returns mentioned above within their respective time limits, the Secretary-General of Taxation is lawfully permitted to enforce a fine of up to OMR 2000.  If the final return does not reveal the real income, the law allows imposing a penalty.

Changes to the Corporate Tax Rates in Oman

Royal Decree No. 9/2017, on 26th February 2017, published in the Official Gazette, an introduction of a few broad tax changes. The essential items include the following.

  1. The basic income tax rate has increased from 12% to 15%.
  2. For individual small taxpayers, the income tax rate is at 3%.
  3. WHT extended 10% to dividends, payments for services, and interest.
  4. The exemption threshold, which initially was OMR 30,000, which approximates about 78,000 USD, has been removed.
  5. Tax cards for all taxpayers.
  6. Dividend and interest payments made for non-residents are now subject to WHT (Withholding Tax).
  7. The Withholding Tax rate stays at 10%.
  8. The tax exemptions have been limited only to the manufacturing sector for a five-year non-renewable period.
  9. Self-assessment of tax filing for improved accuracy and precision is introduced.
  10. Any provisions availed by the non-residents are subject to a 1% withholding tax.
  11. The minimum penalty in case of failure to file tax returns by the due date has been increased from OMR 1000 to OMR 2000.
  12. In case of failure to submit the information required by the taxation authority or to attend the scheduled hearings has increased from OMR 2500 to OMR 5000.
  13. In case of failure to comply with the Executive Regulations or administrative decisions, a penalty of OMR 3000 may be imposed.
  14. Provisions for the taxation of Islamic financial transactions are included in line with the banking income streams.
  15. Changes like the provision for Withholding Tax will be implemented immediately from the date the decree was published in the Oman Government Gazette.
  16. An electronic tax return filing system is to be introduced following the rules to be set out by the Ministry of Finance.
  17. Tax exemptions for mining, operation of hotels and tourist villages, the export of locally manufactured goods, agriculture, fishing, and education are no longer available.

All about VAT in Oman

Value Added Tax (VAT) is an indirect tax based on the consumption applied to all goods and services sold for consumption or use, products sold for export or services provided to customers abroad are usually not subjected to VAT, whereas imports are taxed.

Value Added Tax, introduced in 2019 applies to all commercial activities involving the production and distribution of goods and the provision of services. Under any VAT regimen, end customers are borne the ultimate tax burden.

You should know about the VAT system before availing of company formation and corporate secretarial services in Oman.

Key Terms of the Unified Agreement for the VAT System in Oman

  1. The VAT will apply to goods and services at a standard rate of 5%.
  2. Businesses with an annual turnover of OMR 38,500 (or equivalent from any other GCC member state currency) should register for VAT.
  3. Businesses generating about half of the threshold turnover may register for VAT voluntarily.
  4. According to the Unified Agreement, the following sectors are applicable for a 0% VAT rate at the discretion of each member state.
  • Medicine and medical equipment
  • Transport of goods and passengers (intra-GCC and international) and associated ancillary services
  • Export of products outside of the GCC
  • Certain transactions in gold and silver
  • Certain food items (bread and milk)
  • Oil and gas, including oil derivatives
  • Supply of means of transportation for commercial purposes
  • Financial services
  • Goods imported.

5. The Unified Agreement states the VAT due on the import of products is to be paid at the first point of entry into the Gulf Corporate Council (GCC).

Excise Tax in Oman

A new 100% excise tax has been introduced in Oman, which will be falling under the new Sin Tax regulations. The said Sin tax in Oman will be in relation to deemed harmful products to human health and will be levied on alcohol, tobacco, pork products, and energy drinks.

The tax is also known as an excise tax as it is added to the point of the manufacturer and not the sale and applies to all those goods that are harmful to both public health as well as the environment. Sin tax has been put in force as the result of a tax agreement by the six-nation of Gulf Cooperation Council.

The objective of Introducing the Sin Tax in Oman

The Oman Ministry of Health carried out a health survey wherein they found that more than two-thirds of its population is suffering from diabetes, whereas nearly about one in ten adults smoke tobacco, while some 40 percent of people are exposed to second-hand smoke at home or work.

Sin taxes in Oman and other countries serve two objectives. One is to make undesirable goods so expensive that an average consumer would not buy them and would be forced to give up the bad habit. Second, to make the industries which are producing such goods pay a higher amount of tax, which indirectly can be used to fund the necessary welfare expenditure. 

Although there might be positive reasons for the implementation of sin tax in Oman as well as other countries, certainly, these taxes have got their downsides as well. These are:

  • The taxes aren’t always high enough to reach the aim.
  • They don't ultimately pay for social costs.
  • They are only subjective. Many other harmful products are not taxed.

The introduction of a sin tax in Oman is for the advantage of society as well as the environment. However, such type of tax is not always helpful for eradicating unhealthy behavior. 

The regulations in respect of the improvement should be strict enough that people, as well as suppliers, comply with the law.

Oman Tax Treaties

Tax treaties are agreements that take place between two nations to avoid double taxation from both countries during the import-export procedure. Till now, Oman has signed more than 30+ tax treaties with multi-nations that have become a plus point for entrepreneurs and business persons to expand it to the countries at a faster pace.

Income Exempted from Tax

  • Dividends received by an establishment.
  • Profits or gains from the disposal of the securities listed in the Muscat Securities Market.

Tax Exemption

  • Income earned by practicing maritime transport activity
  • Income derived by a foreign person from the exercise of maritime or airport transport activity subject to reciprocity
  • Revenue generated through investment funds
  • Industrial projects
  • Exemptions in other fields will be validated only if the Minister of Financial Affairs issues a decision.

Still, confused about business-related activities or taxes in Oman? Contact us for tax consultation and other business advisory solutions.

Frequently Asked Questions (FAQs)

What is the withholding tax rate in Oman?


How much is the corporate income tax rate in Oman?


When should a business register for VAT in Oman?

Businesses with an annual turnover of OMR 38,500 should register for VAT.

What is the standard custom duty rate in Oman?


When does one need to pay 100% customs duty in Oman?

Import and export of certain items like alcohol, tobacco, etc. need to bear a rate of 100%.