Thinking Beyond Borders
The existence of a representative of a foreign entity in relation to a business or contract in Oman may trigger the taxable presence of the entity in Oman for corporate income tax purposes.
There are currently no personal income tax in Oman.
Oman operates an income tax regime that applies to companies and a wide range of other commercial activities, including general partnerships, limited partnerships, joint venture arrangements and permanent establishments of foreign entities. An individual is subject to income tax to the extent that they carry on commercial, industrial or professional activities as a ‘proprietorship’.
There may be corporate tax implications where a representative/employee of a foreign entity is present in Oman for 90 or more days in any 12-month period. Furthermore, foreign persons including individuals could be subject to withholding tax at rate of 10 percent if payments representing income is realized in Oman to foreign persons not carrying on activities in Oman through a PE. The term “income realized in Oman”, fundamental to trigger withholding tax provisions in the Sultanate, is defined. This is discussed below in detail.
There is no personal tax in Oman. However, corporate tax is applicable to companies and other commercial activities as described above. Furthermore, withholding tax applies on specified payments made to foreign persons.
The Income Tax Law applies a flat 15 percent rate of income tax to all domestic and foreign companies and commercial operations. This rate shall apply to an individual who earns taxable income from carrying on commercial, industrial or professional activities as a ‘proprietorship’. Omani sole proprietorship or an Omani partnership or Limited Liability Company satisfying prescribed conditions are required to pay tax at the lower rate of 3 percent/Nil. For companies engaged in petroleum operations, the rate of tax is 55 percent.
As there is no personal income tax in Oman, personal income tax rates are not applicable. However, as mentioned above, foreign persons including individuals could be subject to withholding tax at a rate of 10 percent if payments representing income is realized in Oman to foreign persons not carrying on activities in Oman through a PE. These payments include the following:
The term “income realized in Oman”, fundamental to trigger withholding tax provisions in the Sultanate, is now defined. As per the new definition, income would be considered as realized in Oman “whenever the source of such funds is from Oman”.
A list of “seven categories of payments” excluded from “fee in consideration of rendering services” for withholding tax purposes includes:
In regard to dividends, it has now been clarified in the amended ERs that withholding tax is applicable only on “dividends distributed by joint stock companies and investment funds in relation to investment instruments” and not by LLCs.
The term “interest”, for the purpose of withholding taxes, has now been defined to mean any amount received “because of loan” and includes income generated from bonds and sukuk (except those issued by government or Oman-based banks). The following payments have been specifically excluded from the definition of “interest” and have, therefore, in principle relaxed their withholding tax obligation in Oman:
Social security contributions are applicable in Oman only for Omani nationals. If Omani nationals are employed, then both the employer and the employee will be required to make social security contributions to the Public Authority for Social Insurance (PASI). A payment of 11.5 percent by the employer (including a payment of 1 percent for insurance against work related injuries and illness) and 7 percent by the employee are due for Omani nationals to the PASI.
Employer and employee contributions are calculated on the aggregate of basic salary and allowances paid in cash and in-kind. The gross salary to be included in the calculation is limited to a monthly gross salary amount of 3,000 Omani rials (OMR). Employers will need to assign a monetary value to the allowances paid in kind.
The employer of an expatriate or an expatriate employee is not required to make any social security contributions in the Oman.
There are no compliance obligations for employees in Oman in the absence of personal tax.
There are no compliance obligations for employers in Oman in respect of personal tax.
Any foreign national intending to visit Oman must obtain a visa. Such visa specifies the period for which an individual is allowed to stay in Oman. A visitor’s entry visa does not permit a foreign national to work in Oman. Visit visas can be obtained at the port of entry by citizens of some countries/territories. Citizens of other countries/territories can obtain visit visas by applying for the same at Oman’s diplomatic missions in their respective country/territory or online through the website of Royal Oman Police. Visit visas are usually single-entry visas and period of visa varies based on the type of trip.
Foreign nationals coming to Oman for the purpose of employment must obtain an employment visa (prior to departure from home country/territory) sponsored by the company that will act as their employer. For certain nationalities, the foreign nationals seeking employment have to undergo medical tests and obtain a medical report from their home country/territory prior to employment visas being issued.
Oman currently has 35 effective double taxation treaties (comprehensive and limited) with other countries/territories to prevent double taxation and allow cooperation between Oman and overseas tax authorities in enforcing their respective tax laws.
Oman’s network of effective double tax treaties currently includes tax treaties with Algeria, Belarus, Brunei, Canada, China (People's Rep.), Croatia, Egypt, France, Hungary, India, Iran, Italy, Japan, Korea (Rep.), Lebanon, Mauritius, Moldova, Morocco, Netherlands, Pakistan, Russia, Seychelles, Singapore, Slovak Republic, South Africa, Sri Lanka, Sudan, Switzerland, Syria, Thailand, Tunisia, Turkey, United Kingdom, Uzbekistan, Vietnam and Yemen.
There is a likelihood that there could be permanent establishment’ (PE) exposure for the overseas company in Oman (due to the presence of secondees in Oman) and this may need a separate examination from a corporate tax perspective.
Amongst others, PE has been defined to include foreign companies providing services in Oman, where the presence of the company’s employees in Oman (or other individuals under the company’s control) exceeds 90 days in any 12-month period.
In accordance with the Common Customs duty regime in place across the states of the Gulf Cooperation Council (GCC), Oman imposes customs duty at a flat rate of 5 percent on the majority of goods entering the GCC. Customs duty is levied at the first point of entry into the GCC. Subsequent movements of the same duty paid goods within the GCC are free of customs duties.
On 13 March 2019, a Royal Decree was issued approving the selective/excise tax Law in Oman which will take effect 90 days after its publication in the Official Gazette (i.e. expected by mid-June 2019). Executive Regulations will be issued within 6 months from the date the Law takes effect. Excise tax is expected to be levied at 50 percent on carbonated drinks and 100 percent on alcohol, energy drinks, tobacco products and pork products.
While Oman does not have VAT regime in place at the moment, it has expressed its intention to implement VAT in line with other GCC countries/territories. The Ministry of Finance had earlier confirmed preparations to target VAT introduction in Oman in September 2019, though the actual date of enforcement is currently under review and has not yet been finalized.
Currently, there are no exchange controls in force in Oman.
Non-deductible costs for assignees are not applicable as there is no personal tax in Oman.
All information contained in this document is summarized by KPMG Tax, the Oman member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Income Tax Law No. 28/2009, which became effective on 1 January 2010 and the Executive Regulations to the Income Tax Law which came into force on 29 January 2012. Changes were made to the Oman’s Tax Law and to the executive regulations by Royal Decree 9/2017 issued on 19 February 2017 and Ministerial Decision No. 14/2019 respectively.
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KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.