Tax Regime Changes in Oman

The corporate tax system in Oman has implemented substantial changes during early 2017. The changes are expected to affect small and medium enterprises, foreign businesses without a local establishment and Oman taxpayers.

There are several changes to the tax regime in Oman:

• Corporate income tax is increased to 15% from 12%.
• An introduction of a lower 3% tax rate for certain small businesses (only applicable for GCC countries).
• The initial OMR 30,000 (USD 78,000) of taxable profits has been eliminated.
• Withholding tax has been extended to include interest, dividends and payments for services for those without a permanent establishment in Oman.
• Most tax exemptions are eliminated.
• A new tax card system has been introduced by which tax cards will be issued to all taxpayers, and new taxpayers are required to apply for a tax card during commercial registration.
• To form a permanent organisation in the case of a building site, an assembly project or place of construction, a minimum activity period of 90 days is required.
• Tax exemptions will only be available for manufacturing activities. Tax exemptions will no longer be available for mining, export of goods manufactured in the region; operation of tourist villages and hotels, education, fishing or agriculture. New industrial exemptions will be limited to the initial five year period, with no renewal.
• The old assessment system will be switched to a self-assessment based system, and electronic filing of tax returns has been introduced under conditions and rules outlined by the Ministry of Finance.
• Stricter penalizations have been added to enforce acquiescence in cases of particular violations of the tax law.
• Islamic financial transactions will be taxed in the same manner as their conventional equivalent.

Establishments will need to immediately consider the business impact of the tax rate changes and extension of suppressing taxes on their operations in Oman. Double taxation treaties may help amend the effect of withholding tax changes. In spite of the tax law alterations, Oman remains a jurisdiction without any personal income tax legislation.