Income Tax in Oman
Personal Income Tax
There is no personal income tax in Oman.
Corporate Income Tax
Corporate income tax. Companies, which include Omani companies, partnerships, joint ventures and sole proprietorships, and permanent establishments of foreign companies are subject to Omani income tax. A permanent establishment is defined in the law. In addition, a permanent establishment is created for a foreign person providing consultancy or other services in Oman through employees or designated agents visiting Oman for at least 90 days in any 12-month period.
Omani companies and Omani sole proprietorships are subject to tax on overseas income (income accrued from a source outside Oman). However, a foreign tax credit limited to Oman’s tax rate of 12% is available against the tax payable in Oman.
Rates of corporate income tax. Companies registered in Oman, regardless of the extent of foreign participation, and permanent establishments of foreign companies are subject to tax at a rate of 0% on their first OMR 30,000 of taxable income, and at a rate of 12% on their taxable income in excess of OMR 30,000.
Oil exploration and production companies are taxed at a rate of 55% and are usually covered by special rules contained in concession agreements. Exploration and production sharing agreements (EPSAs) signed between the government of Oman and concession partners provide detailed procedures for computing taxable income and settlement of tax due. Under an EPSA, the government of Oman settles tax due on behalf of the concession partner out of the government’s share of production.
Foreign shipping and aviation companies are exempt from tax in Oman if the Omani shipping and aviation companies enjoy similar reciprocal treatment in the respective foreign countries. Omani companies and sole proprietorships engaged in shipping are exempt from tax.
Income derived by investment funds established in Oman and by funds established outside Oman dealing in Omani securities listed in the Muscat Securities Market (MSM) is exempt from tax. These exemptions are for indefinite periods.
Tax holidays are available to companies engaged in manufacturing, mining, exports, operating of hotels and tourist villages, farm and animal products processing, fishing and fish processing, higher education, private schools and nurseries, private hospitals, teaching and training institutions in education and medical care fields. The exemption for these categories of companies is available for five years but may be renewed for a maximum period of an additional five years, subject to the fulfillment of certain conditions.
No income can be exempt from tax unless provided by a law or Royal Decree.
Capital gains. No special rules apply to capital gains. Capital gains are taxed as part of regular business income at the rates set out in Rates of corporate income tax.
The tax law provides that profits and gains derived from disposals of all assets, including disposals of goodwill, trade names or trademarks with respect to all or part of a business, are included as deemed income.
Gains derived from the sale of investments and securities listed on the MSM are exempt from tax.
Withholding tax. Withholding tax at a rate of 10% of gross payments is imposed on certain gross payments made to foreign companies, including the following:
· Royalties (see below)
· Consideration for research and development
· Management fees
· Consideration for the use of or right to use computer software
Entities in Oman, including permanent establishments, are responsible for deducting and remitting tax to the government. The tax is final. Foreign persons do not have any further filing or other obligations with respect to such income.
If a foreign company has a permanent establishment in Oman, but the permanent establishment in Oman is unconnected to the receipt of income that is subject to withholding tax, withholding tax applies to such payments.
Royalties include payments for the use of or right to use software, intellectual property rights, patents, trademarks, drawings, equipment rentals, consideration for information concerning industrial, commercial or scientific experience, and concessions involving minerals.
General. A taxpayer is required to register with the Secretariat General for Taxation by filing a declaration of details related to the entity (Income Tax Forms Nos. 2 to 5) within a period of three months after the date of incorporation or commencement of activities, whichever is earlier. Any changes to the registration information must be communicated within two months by submitting a form entitled “Declaration of modification to the details related to the taxpayer” (Income Tax Form No. 6). The accounting period begins on the date of commencement of business for joint ventures and permanent establishments. For companies, the start date is the date of registration or incorporation. The first accounting period may be less than 12 months but cannot exceed 18 months. The accounting period may be changed with the approval of the Secretary General for Taxation.
Books of accounts are required to be maintained for a period of 10 years. Permission is required for maintaining books of accounts in a foreign currency. In such a case, income must be converted at exchange rates prevailing on the last day of the accounting year, as published by the Central Bank of Oman. The accrual method of accounting must be used.
The term “Principal Officer” is defined for various entities. If a permanent establishment carries on an activity in Oman through a dependent agent, the agent is treated as Principal Officer. If a sole proprietor or owner of a permanent establishment is outside Oman, the individual or permanent establishment must designate a Principal Officer to comply with the obligations under the law. Such Principal Officer may not be absent from Oman for more than 90 days in a tax year.
Partners of joint ventures are jointly and severally liable for taxes of the joint venture.
Returns. Provisional returns of income must be filed within three months after the year-end. A final return of income, together with audited financial statements, must be filed within six months after the end of the accounting year.
Assessments. Assessments must be issued within five years from the end of the year in which tax returns are filed. If no assessment is issued within a period of five years, such assessments are deemed to have been issued (that is, tax returns are accepted as filed).
Corrections of assessments as a result of obvious errors are allowed. Such corrections must be made within five years after the year of issuance of the original assessment. If a tax return is not submitted for a tax year, the time limit for making an assessment is 10 years from the end of the tax year for which the tax return is due.
Assessed tax, reduced by tax already paid, must be paid within 30 days from the date of issuance of the assessment. A delay results in a fine of 1% per month on taxes due for the period of delay. If a refund is assessed, the refund must be claimed within five years from the end of the year in which such refund is due. Assessments are made with respect to withholding tax.
Statutory periods of limitation. For the period of limitation related to assessments, see Assessments.
The government’s right to collect taxes expires after seven years from the date taxes became due and payable, unless the tax authority initiates action to recover taxes.
Appellate processes. An objection against an assessment order must be filed with the Secretary General for Taxation. Other appellate procedures are an appeal with the Tax Committee, a tax suit filed in the primary court, an appeal to the appellate court, and finally a case before the Supreme Court. An objection against an assessment must be filed within 45 days from the date of serving of the assessment order. An appeal must be submitted within 45 days from the date of the decision on the objection or the date of expiration of the specified period for deciding on the objection if no decision is issued.
The time limit for consideration of the objection is five months, with an extension of an additional five months. If no decision is issued, an implied rejection of the objection is deemed to occur. A taxpayer can seek extension of time for the payment of disputed tax. However, the undisputed tax must be paid within 30 days after the date of assessment.
Dividends. Dividends received by Omani companies, permanent establishments of foreign companies or Omani sole proprietorships from Omani companies are exempt from tax.
Foreign tax relief. A foreign tax credit limited to Oman’s tax rate of 12% is available against the tax payable in Oman on overseas income of Omani companies and sole proprietors.
Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.