Taxation in Oman: A Business Guide to VAT, Corporate Tax and More

Oman’s tax system is designed to attract investment, stimulate economic growth, and generate government revenue. Its current regime imposes only four types of taxes. Registering and complying with tax regulations benefits not only the country but also businesses by ensuring compliance and fostering a stable economic environment.

Currently, there is no Income tax levied on Oman residents. However, as part of its Medium-Term Fiscal Plan (2020-2024), the committee has proposed Personal Income Tax (PIT) only on high earners to diversify and enhance government revenues. This proposal has  yet to receive the cabinet approval.

If you want to learn more about taxation in Oman, the registration process, and the taxation services available, keep reading.

Types of Taxes in Oman

The structured Oman taxation system has specific regulations, requirements, and restrictions for different types of taxes. Below is an overview of the key taxation in Oman categories:

1. Excise Duty

Excise tax has been in effect since June 15, 2019, applying to importers, stockpilers, and local producers of excisable goods. Additionally, businesses holding excisable goods in their inventory at the time of implementation are required to account for tax. This includes industries such as hotels, restaurants, retail shops, and supermarkets.

While the law does not explicitly list excisable goods, the official tax guide confirms the following goods and their respective Oman tax rates:

• Tobacco and Tobacco Derivatives: 100%
• Carbonated Drinks: 50%
• Energy Drinks: 100%
• Alcohol and Pork Products (special category goods): 100%

2. Corporate Tax in Oman

The standard corporate income tax rate in Oman is 15% for all taxpayers, except for certain Omani sole proprietorship company and small to medium-sized limited liability companies (LLCs).

Eligible Omani establishments and SMEs (certain LLCs) benefit from special conditions for Oman corporate tax rate if they meet the following criteria:

• Registered capital not exceeding 50,000 OMR at the start of the tax year
• Gross income not exceeding 100,000 OMR annually
• Workforce limited to 15 employees or fewer
• Not engaged in air or sea transport, natural resource extraction, banking, insurance, financial services, or any other activities restricted by the Ministry of Finance with approval from the Council of Ministers

3. Value Added Tax

Oman implemented Value Added Tax (VAT) via Royal Decree No. 121/2020, which was issued on October 12, 2020, and published in the Official Gazette on October 18, 2020.

In the tax law Oman, a standard VAT rate of 5% applies to most goods and services supplied within the country, subject to specific exemptions and zero-rated categories.

Exempt supplies are not subject to VAT, and businesses cannot recover input tax on these supplies. Examples include certain financial services, local passenger transportation, education services and residential property rentals.

The government taxes zero-rated supplies at 0% VAT, but businesses can claim input VAT credits for goods or services. 0% VAT categories include exports of goods and services outside Oman, international transportation services and essential food items.

4. Tourist Tax

A 4% tourist tax is for hotels, restaurants, and cafes within particular tourist areas. They typically manage taxation in Oman through franchise agreements and contribute to maintaining tourism infrastructure and services.

Tax Exemptions in Oman

Many tax exemptions were annulled by the introduction of Royal Decree 09/2017. Now, taxation in Oman exemptions are primarily focused on specific sectors and activities, particularly industrial and certain economic zones. Here is a detailed overview of the current tax exemption landscape:

1. Industrial Activities
Effective from January 1, 2017, tax exemptions are available exclusively for industrial (manufacturing) activities. The exemptions for industrial activities are limited to an initial period of five years, with no option for renewal.

2. Special Economic Zones (SEZs)
Companies operating within designated SEZs can benefit from extended tax exemptions ranging from 25 to 30 years, depending on the zone.

3. Dividends and Gains
Dividends you receive from Omani companies and profits from the securities sale listed on the Muscat Securities Market are exempt from income tax Oman.

4. Omani Marine Companies
These entities are exempt from tax regardless of ownership structure, provided they are registered in Oman.

5. Foreign Airlines
The income foreign airlines earn by operating in Oman can get tax exemption to the extent it relates to international transport, contingent upon reciprocal treatment by their home countries.

6. Investment Funds
Income generated by investment funds established in Oman in accordance with the Capital Market Authority Law, as well as those established abroad that invest in securities and shares listed on the Muscat Securities Market (MSM), is completely exempt from income tax.

7. Foreign Companies in Oil and Gas
Foreign companies involved in oil and gas exploration are typically subject to taxation. The government commonly fulfils its tax responsibilities as outlined in the Exploration and Production Sharing Agreement. This framework helps ensure a clear understanding of tax obligations and benefits for all parties involved.

8. National Importance Projects
Foreign companies that are working on projects that are of national importance can negotiate protection from tax clauses with the government, allowing for reimbursement of any Oman taxes paid.

What Kind of Taxation Services are Provided by Experts?

Taxation experts in Oman provide comprehensive tax services to help companies stay compliant and optimise the tax strategy. Some of the services include:

• Tailored Tax Solutions: Develop and implement customised tax strategies that align with your company’s structure and financial goals.
• Tax Filing Assistance: Ensure accurate preparation and timely submission of annual tax returns to the relevant authorities.
• Expert Tax Advisory: Tax specialists provide in-depth guidance on various tax types, including VAT, and corporate tax.
• Refunds and Claims Management: They handle the filing of tax refunds and claims, along with the necessary documentation required by authorities.

Understanding and complying with taxation in Oman is essential for businesses to operate smoothly and avoid legal complications. From corporate tax in Oman to VAT, excise duty, and tourist tax, each tax type has its regulations and requirements.

Upon the completion of company registration in Oman, opting for proper tax planning and timely filing not only ensure compliance but also help businesses optimise their financial strategies. To stay ahead in your business with the right tax solutions, partner with Gryffin Capitalist today!