Doing
Business
in Oman
2023
March 2023
A Tax and Legal Guide
Table of content
Welcome to the Oman “Doing Business Guide”
Introduction
Establishing a business in Oman
Taxation
Additional legal considerations
Key tax Indicators in Oman
03
04
04
07
11
12
Doing Business in Oman – Tax and Legal Guide
About PwC Middle East
13
Contacts
14
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Oman, with its long history as a trading location and its oil based natural resources, has
been a destination for foreign investment for many years.
Like other countries in the region, efforts are underway to diversify the economy and
government revenues away from petroleum. These drivers will likely result in continued
changes to company, investment and taxation laws. We have seen new Commercial
Companies Law (“CCL”) and Foreign Capital Investment Law (“FCIL”), which makes
significant amendments and much awaited changes aimed at improving business
environment and diversifying the economy.
Further, a Royal Decree in relation to the implementation of VAT was issued and VAT has
been implemented in Oman since April 2021. Significant amendments to the Labour Laws is
expected in the near future.
Company Law aspects sit alongside other fundamental issues such as employment visas,
accounting requirements and taxation issues including customs when considering the
establishment or changing of businesses in the country.
This guide is intended to provide an introduction to the taxation and legal aspects of doing
business in Oman, particularly from the perspective of the items an inbound investor will
have in mind.
We hope you find the guide useful.
Mohammed Yaghmour - Middle East Tax and Legal Services Leader
Darcy White - Partner | PwC Oman Tax Leader
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Introduction
The Sultanate of Oman was formed in 1970 upon the
accession of His Majesty Sultan Qaboos bin Said Al Said,
who ruled the country until his demise. He has been
succeeded by His Majesty Haitham bin Tariq who is the
current Sultan of Oman.
The current estimated population is approximately 4.8
million, of which almost 46 percent are expatriates employed
in a range of industries. As an oil rich state, Oman has
sought to diversify its economy, particularly in tourism,
logistics, mining, fisheries and industrial manufacturing.
Located in the south-eastern quarter of the Arabian
Peninsula, Oman is the only member of the GCC situated
outside the Gulf. As a historical trading nation, Oman
benefited from its strategic location, and now has the goal of
becoming a global logistics hub.
Arabic is the first language, with English widely spoken and
used in business.
The Sultanate has jumped 10 places in the World Bank
‘Ease of Doing Business 2020’ report, ranking 68th in the
world for 2019, while in 2018 it was 78th. There are several
other fields in which Oman has achieved globally: Building
Permits (47th), Access to Electricity (35th), Property
Registration (52nd), Investor Protection (88th), Pay taxes
(11th) Contracts (69th).
Legal and Regulatory Framework
The legal system in Oman is based on both civil code
principles and on Islamic Shari’a Law. The sources of law for
civil matters include:
• The 1996 Basic Statute of the State (‘the Basic Law’)
• Islamic Shari’a
The Basic Law states that ‘Islam is the religion of the state
and the Islamic Shari’a is the basis of legislation’. Existing
laws and regulations remain in force ‘provided that they do
not conflict with any of the provisions of this Basic Law’. The
only areas that, according to the Basic Law, are governed by
Islamic Shari’a are family law and inheritance.
The Commercial Court has jurisdiction over commercial
disputes. As Oman is a civil law jurisdiction, judges have
freedom to interpret agreements in a way in which, in their
opinion, the original intentions of the parties are reflected.
This could extend to amending a contract if the judge feels
the amendment would more accurately reflect the parties’
original intentions
Establishing a Business in Oman
Introduction
Foreign companies and individual investors may establish
operations in Oman via one of the following main forms:
• Limited Liability Company (LLC)
• Joint stock company
• Branch
• Commercial Agency
• Commercial Representative Office
We will look at each one of these potential options in more
detail now.
Companies
1. Limited Liability Company (LLC)
The new CCL, issued in April 2019, attempts to create a stronger
and more transparent corporate governance regime in Oman. Key
changes include introduction of a single person LLC, removal of
minimum capital requirements for establishment of LLC. This
should also be read in conjunction with amendments to the FCIL,
which permits establishment of wholly foreign owned LLC, subject
to conditions or restrictions thereon that is imposed in the
Executive Regulations to the FCIL.
Eligibility for wholly foreign owned LLC is seen as a significant
development relaxing rules and restrictions on foreign investments
in Oman. The amended FCIL and CCL also seek to streamline
the registration and licensing procedures for foreign investors, as
well as procedures relating to dispute resolution.
2. Joint Stock Company
Joint stock companies that do not offer their shares for public
subscription are known as privately held joint stock companies
(SAOC). The minimum share capital required for an SAOC is
OMR 500,000 ($1.3m).
Alternatively, joint stock companies that offer their shares to the
public are called publicly held joint stock companies (SAOG). The
minimum share capital required for an SAOG is OMR2m ($5.2m).
The 30% local Omani shareholding requirement must also be
observed in establishing a joint stock company.
Ownership of stock in SAOGs is through Muscat Stock Exchange
(MSX) trading and regulated by the Capital Market Authority.
Foreign investment in banks and other types of financial
institutions is governed by the Central Bank of Oman (CBO).
The amendments to CCL also seek to impede better protection of
rights of minority shareholders in joint stock companies. It is
anticipated that further guidelines and corporate governance
compliance rules will be established by the Capital Markets
Authority – the competent authority for joint stock companies –
and the Ministry of Commerce, Industry & Investment Promotion
(“MOCIIP”), in due course.
3. Branch
A foreign company may register a branch in Oman only to execute
a contract with the government or a quasi-government body. The
branch registration is limited to the duration of the underlying
contract. Special dispensation may be given to allow a foreign
company to register a branch without a government or semi-
government contract if the activity is deemed by the Council of
Ministers to be of national economic importance.
Doing Business in Oman – Tax and Legal Guide
4. Commercial Agency
Foreign companies without commercial registration in Oman may
do business through commercial agents. Agency agreements are
formally registered with the MOCIIP under the Commercial Agency
Law.
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5. Commercial Representative Office
A foreign firm may open a commercial representative office
in Oman solely for the purpose of marketing and promotion
of its products or services. A representative office is not
allowed to sell products or services or to engage in other
forms of commercial activity. However, it may sponsor and
hire employees.
Historically, it has taken approximately four to six weeks to
incorporate an entity, since there are a number of steps and
supporting documentation which need to be legalised, to
complete the incorporation process. However, effort has
been made in recent years to make the company registration
process more efficient and convenient, including the
introduction of the MOCIIP’s e-portal www.business.gov.om,
which permits the immediate, online registration of a new
company, allowing for the submission of establishment
documents post-registration.
Free Zones
There are currently three free zones (Sohar, Salalah and Al
Mazunah) in Oman, as well as a special economic zone in
Duqm. Each zone has its own features. Although goods
produced in free zones can be sold freely in the mainland,
this may affect some of the benefits available on account of
operating within the free zones (such as tax exemptions).
The Sultan of Oman has recently issued a Royal Decree No
10/2022 to set up three free zones in Oman: Muscat
International Airport Free Zone, Sohar Airport Free Zone and
Salalah Airport Free Zone.
Duqm Special Economic Zone (DSEZ)
With its 1777-sq-km area bordered by an 80-km Arabian Sea
coastline, the DESZ is strategically placed as a gateway to and
key hub for the Middle East, North and East Africa, and South
Asia.
The zone is made up of several areas, namely: port and dry dock,
fishing port and fisheries industries, industrial and logistics areas,
tourism and educational areas, filters and petrochemicals
complex, new Duqm town and Duqm airport.
Incentives offered to investors in the special economic zone
include competitive land lease rates, a 30 year income tax
exemption and full customs exemptions. 100% foreign ownership
of businesses is also permitted, along with related Omanisation
requirement
Mergers & Acquisitions
A final market entry strategy for foreign companies is to acquire or
invest in an existing local company. Both share and asset
purchases are possible in Oman. Particular factors to bear in mind
include:
• The very limited amount of publicly available information and
so the need for thorough due diligence.
• The impact of the foreign ownership restrictions, if any.
• The absence of a provisional equivalent to the European
transfer of undertaking regulations and the resulting need to
deal with the transfer of employee contracts as part of any
asset deal.
• The absence of any provisions in tax law on mergers and
acquisitions.
Doing Business in Oman – Tax and Legal Guide
Sohar Free Zone
Full exemption from customs duties on goods imported into
the free zone. Businesses may be 100% foreign owned and
tax exemptions are allowed for up to 25 years for companies
established in this free zone. The free zone also allows
relaxed Omanisation rates. Located close to Port of Sohar
and Sohar Industrial Estate, this free zone is aimed at
attracting investment in the metal and steel, food and
logistics sectors.
Salalah Free Zone
Located in the south of the country near to Oman’s second
city, Salalah, this free zone offers competitive labour and
infrastructure costs compared to other regions in order to
attract investors in the chemical and material processing,
manufacturing, assembly and logistics sectors. Income tax
exemptions are available for up to 30 years. Full foreign
ownership is permitted and customs exemptions are
available. There is no minimum capital required to set up a
company located in this free zone and there are relaxed
Omanisation rates applicable to such companies.
Al Muzunah Free Zone
This free zone is located in the Dhofar region, in the South
West of Oman, to attract investors in the trading, light
industry and assistant services sectors. Income tax
exemptions are available for up to 30 years. Full foreign
ownership is permitted and customs exemptions are
available. There is no minimum capital required to set up a
company located in this free zone and there are relaxed
Omanisation rate applicable to such companies. Additionally,
Yemeni nationals are permitted to work in the zone without
visas or work permits.
Due Diligence
Each of the five options, particularly the appointment of agents
and the selection of local partners (if required), requires thorough
due diligence to ensure commercial compatibility and avoid future
legal difficulties. Particular considerations include the third party’s
other existing business interests in order to:
• Avoid conflict of interests and competitive business.
• Flush out existing business interests in high risk jurisdictions.
• Ensure the foreign company can continue to comply with its
obligations in respect of anti-bribery and corruption.
Anti-Bribery and Corruption
The main, formal piece of legislation on anti-bribery is the
Law for the Protection of Public Funds and Avoidance of
Conflicts of Interest (“Anti-Corruption Law”). This has
stringent anti-bribery/corruption regulations, specifically
directed at governmental bodies. It prohibits giving,
accepting and mediating bribes, and lists a number of
categories under this prohibition such as:
• Granting or facilitating a special benefit or preferential
treatment for a natural or juristic person, without a
justified reason.
• Receiving any outside consideration (directly or indirectly)
for the work an employee performs within the scope of his
employment, or as a result of it; and
• Using public funds for the employee’s personal benefit or
allowing misuse of public funds by others.
With regards to public funds, companies with governmental
ownership exceeding 40% are included in the definition of
“public funds” for the purposes of this law; therefore, the
employees of such companies will be considered
governmental officials and employees in application of the
law.
Due to the fact that the law is particular to public funds and,
therefore, governmental bodies, the applicable penalties are
also directed at officials and employees of the relevant
government institutes. As such, the scope of this law can
extend to cover auditors, if the circumstances require.
The Oman Penal Code defines bribery in the context of
government officials as, “any person who accepted a bribe
for himself or for another person, be it in cash or a gift or a
promise or any other benefit, in order to accomplish an act
pertaining to their function, or to abstain from or postponing it
accomplishment.”
Once again, the act of bribery is considered in the public
context, and the penalty of imprisonment (up to ten years)
and a fine equivalent to at least the value of the bribe in
question, is directed at the government official involved.
However, the penalty applies also to the person(s) making
the bribe, any mediators and legal representatives involved
in the act.
Internationally key legislation includes:
• Foreign Corrupt Practices Act of 1977 (FCPA) – one of its
two primary provisions being bribery of foreign officials.
• UK Bribery Act 2010 – again focuses on the issue of
bribery of foreign public officials but goes further in some
instances, for example extending beyond company
employees to include behavior of third parties acting on
behalf of a company.
Process and Time for Establishment
All Omanis and foreign individuals and companies
intending to undertake business in Oman must register
with Ministry of Commerce, Industry and Investor Protection
(MOCIIP) and submit all the resolutions and records and
other documents which are required to be filed with MOCIIP,
within seven (7) days of the day following the date of
adoption of the resolution, the convening of the general
meeting or realisation of the fact for which the filing is
required.
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Doing Business in Oman – Tax and Legal Guide
Any change to the constitutional documents or commercial
registration certificate of an entity registered with the MOCIIP
needs to be approved by the MOCIIP before it takes effect.
The estimated time to complete the registration is
between 2 and 4 weeks after receipt of the documents
appropriately authenticated by the competent authorities
and legalised by the Omani Embassy or Consulate.
Limited liability company (LLC)
This is the most commonly used company form, allowing between
two and 50 persons to have limited liability. This company form is
not suitable for certain activities where a joint stock company is
required, such as banking or insurance. There is no minimum
capital requirement to establish an LLC in Oman.
Joint-stock companies (JSC)
A joint stock company is a commercial company with its capital
divided into negotiable shares of equal value. A joint stock
company must consist of at least three natural persons or legal
entities. A joint stock company can be closed or public. The
minimum capital requirements are:
● Public: OMR 2 million;
● Closed: OMR 500,000;
● Converted from another form: OMR1 million.
Branch offices
These are offices owned by the parent company. They are only
available to foreign companies for the purposes of contracting for
a discrete project with the government or a government company.
There is no minimum capital requirement.
Key considerations
Oman has been making great efforts towards simplifying the
company registration processes. The process of actually
getting a company registered with the The Ministry of
Commerce, Industry & Investment Promotion (MOCIIP) is a
matter than can be completed in a few minutes online. All
additional documentation, licenses and capital requirements
may be submitted post registration, and completion typically
takes two to four weeks.
However, potentially high set-up costs still exist, especially
those associated with rental costs and high capital contribution
requirements (for non-LLCs). Furthermore, there remain
stringent compliance requirements relating to manpower and
labour regulations, which companies may find quite
challenging to comply with, without investing sufficient time
and resources in that area.
Companies functioning in the manufacturing industry may find
it worthwhile to set-up in the various special economic and
free zones described above, as these areas provide the
advantages of both lower set-up costs and compliance
requirements, as well as an easier and clearer registration
processes.
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The establishment of a new autonomous and independent Tax
Authority will hopefully further enhance tax policy and
administration, particularly as the tax landscape continues to
evolve in Oman and the wider GCC.
Withholding Taxes (“WHT”)
A 10% withholding tax is applied at source to amounts paid or
credited to foreign persons that are ‘tax non-residents in Oman’
(as defined by recent amendments to the ITL) for the following
categories of income:
• Royalties.
• Management fees.
• Fees for the performance of services (with defined
exclusions for participation in organisations, conferences,
seminars and exhibitions / training / transportation and
insurance thereon / air tickets and accommodation abroad /
board of directors’ meetings / reinsurance payments /
services in connection with an activity or property outside
Oman).
• Consideration for research and development.
• Consideration for the use of or right to use computer
software.
• Dividends and interests (temporarily suspended till further
notice).
In the context of the above, tax residency has been defined as:
• Natural Person who is present for a continuous or
intermittent period of not less than 183 days in a
year.
• Legal Person established in Oman / with main or
actual headquarter located in Oman.
Again, tax treaties between Oman and its treaty partners may
provide for beneficial WHT rates, subject to certain procedural
compliances in this regard.
Transfer Pricing & Thin Capitalisation
Oman’s ITL does not contain detailed transfer pricing regulations
in order to determine an arm’s length price although some broad
guidelines are expected in the near future. Where related party
transactions result in a lower taxable income or higher taxable loss
than would have arisen on a transaction between unrelated
persons, the tax authority may adjust the terms of the transaction
when computing taxable income and losses.
Thin capitalisation rules apply to corporations in respect of interest
on loans from related parties. Interest paid to a related party may
be deducted for tax purposes only if the debt-to-equity ratio of the
borrower does not exceed 2:1. If the debt-to-equity ratio of the
borrower exceeds 2:1, only a portion of the interest expense is
allowed for tax purposes
Tax Exemptions
Tax exemptions have been generally annulled by the introduction
of Royal Decree 09/2017. The only category now eligible for
exemption is industrial activities for a maximum up to five years.
Taxation
Corporate Income Tax
Oman’s Income Tax Law (“ITL”) seeks to tax the worldwide
income of Omani entities and the Oman-source income of
branches and other permanent establishments. The tax rate
applicable is 15% of taxable income (previously 12% for tax
years ending up to 31 December 2016).
The tax rate for companies engaged in petroleum exploration
is 55% on income derived from the sale of petroleum
products.
The amendments to the ITL introduced a single tax return to
be filed within four months from financial year close (along
with audited financial statements), for tax years beginning on
or after 1 January 2020. This replaces the requirement for
submitting separate provisional and final returns of income.
Permanent Establishment
Under Oman ITL, a permanent establishment (‘PE’) is
defined as a fixed place of business through which a
business is wholly or partly carried out in Oman by a foreign
person. This includes places of sales, places of
management, branches, offices, factories, workshops,
mines, quarries and buildings sites, places of construction or
assembly projects where activities are carried for more than
90 days. However, the use of storage or display facilities,
maintenance of a stock of goods, purchase of goods or
collection of information for the business, and/or other
activities of a preparatory or auxiliary nature will not create a
PE in Oman.
The definition of PE also references carrying out business in
Oman either directly or through a dependent agent. A 90 day
threshold in a 12 month period applies to foreign companies
rendering consultancy or other services in Oman, whether
directly or through employees or others designated to
perform the services. Tax treaties between Oman and its
treaty partners may in some cases alter the PE
determination resulting under domestic law.
Taxable Income
Corporate income tax is charged on all sources of income
(including capital gains) of a company or an establishment or
a PE, earned or realised in Oman. Omani companies are
also liable to tax on their overseas income. Credit is given for
taxes suffered overseas irrespective of whether the country
where the activity is carried out has a double tax treaty with
Oman. The credit is limited to the Oman taxes applicable to
such overseas income.
Introduction of a New Tax Authority
As part of reform initiatives of the Government, a new
autonomous Tax Authority was established, marking a
significant step towards evolving the tax function in the
country in October 2019.
Doing Business in Oman – Tax and Legal Guide
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Value Added Tax (VAT)
VAT has been implemented in Oman with effect from 16
April 2021. The standard rate of VAT in Oman is 5% and
consistent with the GCC Unified Agreement, and there are
provisions for zero rating and exemptions in the Oman VAT
Law. By global standards, 5% is one of the lowest VAT rates
implemented in the world.
Exempt supplies are not subject to VAT, and the input tax in
relation to exempt supplies cannot be recovered. Examples
of exempt supplies include certain financial services, local
passenger transportation services, education services,
renting of residential property etc. Zero-rated supplies are
subject to VAT at 0%, and the supplier can avail input VAT
credit in respect of goods / services used for making zero
rated supplies. Examples of zero-rated supplies include
export of goods and services outside Oman, international
transportation services, basic food items etc.
VAT Registration: registration for VAT is an online process.
• Mandatory registration threshold - If the total value of
annual supplies exceeds or expected to exceed OMR
38,500 (USD 100,000).
• Voluntary registration threshold - If the total value of
annual supplies / expenditure exceeds or expected to
exceed OMR 19,250 (USD 50,000).
Note - There is no threshold applicable to non-resident
businesses and hence they need to be VAT registered in
Oman from the first day of being obliged to pay VAT.
VAT Returns: Taxpayers are required to file a VAT return
and make payment of VAT liability on a quarterly basis,
based on self assessment of their inward and outward
supplies. The due date for filing of VAT return and making
payment of VAT liability is 30 days from the end of the
quarter. If the due date falls on a weekend or a public
holiday, the due date for filing of VAT return and making
payment of VAT will be extended to the next working day.
The late payment of VAT liability is subject to additional tax
at 1% per month or part thereof whereas a delayed filing of
VAT return is subject to administrative penalty ranging from
OMR 500 to OMR 5,000.
Record Keeping: VAT records such as VAT invoices,
accounting records, customs documents etc. are required to
be maintained for 10 years whereas real estate businesses
are required to maintain such records for 15 years.
Statute of Limitations: As per the Oman VAT law, the
Oman Tax Authority can not assess the Tax after completion
of 5 years from the due date of a tax period (due date is 30
days from the end of tax period). The period will be extended
to 10 years in cases where registration is not made within the
prescribed time limits.
Excise Tax
Following the adoption of the GCC-wide Common Excise Tax
Agreement, excise tax was implemented in Oman from 15 June
2019.
Excise tax (also referred to as ‘Selective Tax’) is a tax on specific
goods which are normally seen as harmful to individuals’ health or
to the environment. Excise tax applies to importers, domestic
producers and stockpilers of excise goods.
Currently, excise tax in Oman is applicable on the following
goods:
• Tobacco and tobacco derivatives – 100%
• Carbonated drinks - 50%
• Energy drinks – 100%
• Pork products – 100%
• Sugar sweetened beverages – 50% (with effect from 1 October
2020)
• Alcoholic beverages – 100%
Businesses involved in importing and producing these goods are
required to register for and submit periodic Excise Tax returns and
discharge the Excise Tax liability to the Tax Authority.
Stamp Taxes
Currently, there are no separate stamp duties levied in
Oman.
Tourism Tax
Restaurants/cafes located within a tourist area or managed
through franchise agreements are required to levy tourism tax at
4%.
Municipal Tax
Municipal tax in Oman applies to the following items:
• Property rents: 3%.
• Hotel occupancy: 5%.
• Leisure and cinema houses: 10%.
Note - As part of the Economic Stimulus Plan (ESP) announced in
March 2021, the Government announced an exemption from
collection of Municipal Tax and Tourism Tax up to 31 December
2021. The said exemption has been withdrawn with effect from 1
January 2022 and as a result, a levy of Municipal Tax and Tourism
Tax has become effective from such date.
Property Transfer Fee
Stamp duty is not applicable in Oman. However, a property
transfer fee is applicable on transfer of land and property at 3% of
the value to be paid to the Ministry of Housing.
Customs Duties
In Oman, customs duty is levied at applicable rate of Cost Freight
Insurance (CIF) value on most non-GCC sourced goods, unless
there is any preferential treatment under the Free Trade
Agreement (FTA) signed between Oman and a foreign country.
Standard rate of customs duty is 5%. However, there are certain
goods which are subject to customs duty at different rates.
Doing Business in Oman – Tax and Legal Guide
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Customs Duties (…cont’d)
The GCC Customs Law sets out the general legal framework
for customs regulations and procedures; however, the
practical application of the law is subject to the interpretation
of the local customs authorities in the GCC member states.
This has sometimes led to discrepancies and contradicting
practices among the member states.
Generally, the customs clearances in Oman are facilitated by
the electronic service portal – the Customs Bayan System.
Goods imported into Oman’s special zones may be exempt
from customs duty.
In July 2019, the Royal Oman Police (ROP), represented by
the Directorate General of Customs, launched the Advance
Rulings Initiative, allowing importers to obtain consistent
customs guidance on how to handle their goods during the
import and export process. Traders can apply for advance
ruling and obtain guidance in terms of import or export
procedures, relating to the origin, classification or valuation
of the goods.
Digital tax stamp scheme for Excise products
The Oman Tax Authority has announced a phased
implementation of the digital tax stamp scheme for excise
products.The scheme will be applied at the beginning of the
project on imported cigarettes and then it will be extended to
all excise goods in the Sultanate of Oman, according to
timetables that will be announced by the Oman Tax Authority
(with an aim to apply the scheme to all excise goods from the
beginning of 2023).
The key dates for application of the digital tax stamp scheme
for cigarettes are mentioned below:
• 30 June 2022 - With effect from such date, local
importers can request tax stamps for their manufacturers
to place them on cigarette packs.
• 14 October 2022 - With effect from such date, tt is
unallowable to import any cigarette products that do not
carry the digital tax stamp to Sultanate of Oman.
• 1 February 2023 - It will be unallowable to sell, trade,
import or produce any cigarettes in the Sultanate of
Oman unless it holds the digital tax stamp.
Authorized Economic Operator (AEO) Program
The AEO program provides traders with the opportunity to
partner with the customs authorities and secure benefits
within their supply chain. All businesses operating in Oman
can apply and benefit from the AEO program, subject to the
fulfillment of the required criteria.
Benefits of obtaining AEO certification include simplified
verification of documents during customs clearance, exports
and imports pass through express lines, priority in
inspections and faster cargo clearance process, etc.
We encourage businesses engaged in import and export activities
in Oman to explore the advantages of joining the AEO partnership
program. This is a fantastic opportunity to ensure compliance with
customs regulations, while benefiting from a strong governance of
your international supply chain operations across your business.
Personal Taxes for Nationals and Expatriates
Income is currently not subject to personal income taxes in Oman
(except that business income of individuals is taxes under
corporate tax as detailed above) and there is no requirement to file
income tax returns.
Employees who are Omani nationals are subject to a social
security regime in Oman. Currently, the social security payment is
at a rate of 18.5% of the employee’s gross remuneration as stated
in an employee’s employment contract and applies regardless of
free zone tax holidays: 7% is payable by the employee and the
remaining 11.5% (including a 1% payment for work related
injuries) is payable by the employer. The withholding obligation is
on the employer.
Further, from January 2021, a job security scheme has been
implemented for Omanis, whereby employers and Omani
employees are each required to make a monthly salary
contribution at the rate of OMR 1 per OMR 100 of monthly salary
(or 1% of payment). The deduction will be taken from gross salary
(including any benefits).
The scheme is under Public Authority for Social Insurance
(“PASI”) and expected to be included in PASI bills for January
2021 onwards. There are no social security payments for
expatriates. Expatriates employed by an Omani employer are
entitled under the Oman Labour Law to a gratuity payment (or an
‘end of service’ benefit). End of service benefits are not applicable
to Omani national employees.
Accounting and Payroll
Financial statements must be prepared in accordance with
International Financial Reporting Standards (“IFRS”). An exception
to IFRS can be allowed. The first accounting period of an entity
begins on the date of its registration and may cover any length of
time up to eighteen months, after which a fixed twelve-month
period must be chosen. If an entity wishes to change its
accounting period subsequently, it must first obtain prior approval
from the Tax Authority.
Accounting records maintained by entities must be recorded in
OMR (Omani Rials), although an entity may be permitted to use
another currency if it requests and receives permission to do so
from the Tax Authority. It is standard for accounts to be recorded
in English; no Arabic translation is required. Accounting records
must be preserved for a period of ten years.
Whilst there are no personal income tax obligations in Oman, it is
important to comply with all labour law requirements together with
certain mandatory requirements such as the Wages Protection
System (WPS).
Doing Business in Oman – Tax and Legal Guide
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Accounting and Payroll (…cont’d)
The WPS applies to employees registered with the Oman’s
Ministry of Manpower. A key requirement under the WPS is
to pay employees’ wages in the local currency, by way of
bank transfer into their local bank accounts. Employers
noncompliant with the WPS could face financial penalties
and problems with renewing or processing new visas for their
workforce.
Common Reporting Standards
In order to align with international best practices regarding
the fight of cross-border tax evasion and meet the standards
set by the European Union (EU) and the Organisation for
Economic Co-operation and Development (OECD) in this
matter, the Central Bank of Oman (CBO) issued a circular
(Reference: BDD/CBS/CB/2019/2858) implementing the
Common Reporting Standard (CRS) regime.
This circular sets the rules for the automatic exchange of
information (AEOI) through CRS. The CRS rules force
Financial Institutions to identify and report accounts opened
and held by persons that are tax residents in a CRS
participating jurisdiction (i.e.109 jurisdictions including the
Sultanate of Oman are implementing or have committed to
implement CRS until now).
Ministerial Decision No 78/2020 was also issued, which
mandates that all reporting financial institutions should
perform a due diligence and obtain tax residency of account
holders. Financial Institutions and TA are both required to
maintain confidentiality relating to data shared as part of
CRS reporting requirements.
Multilateral Convention to Implement Tax Treaty Related
Measures to Prevent Base Erosion & Profit Shifting
(BEPS)
Oman became the 91st country to sign the OECD's
Multilateral Convention to Implement Tax Treaty Related
Measures to Prevent BEPS (MLI). The MLI, was developed
under action 15 of OECD's BEPS project and makes various
changes to existing double tax treaties between signatory
countries as recommended by the OECD, thereby lessening
the opportunity for tax avoidance by multinational
organizations.
Oman has not yet ratified the MLI, nor indicated the date on
which it will enter into force.
The ratification of MLI is expected to ensure compliance at a
global level and reduce the opportunity for tax avoidance by
multinational organisations.
Oman has introduced Country-by-Country Reporting (CbCR)
requirements, applicable for reporting years beginning on or
after 1 January 2020. The filing / notification obligations
trigger for Ultimate Parent Entity (UPE) / Surrogate Parent
Entity (SPE) or Constituent Entity which are tax residents in
Oman, in cases where the consolidated revenue of the
multinational group exceeds OMR 300m / EUR 670m / USD
780m.
Doing Business in Oman – Tax and Legal Guide
Key considerations
Currently, the main tax cost to businesses in Oman is in
relation to corporate income tax at the rate of 15% and value
added tax at the rate of 5%.
Personal income is not currently subject to income taxes in
Oman. Accordingly, there is no requirement for individuals to
file income tax returns and the concept of tax residency is not
currently defined for individuals.
With regard to customs, it should be considered whether any
preferential treatment, suspension arrangement or exemption
is available to mitigate cash outflows.
All GCC national employees, whether Omani or otherwise,
and their employers, are obliged to make social security
contributions.
11
Dispute Resolution
There are three different courts in Oman:
• The Court of First Instance
• The Court of Appeal
• The Supreme Court
Oman is a civil law country and, therefore, unlike common law
jurisdictions, case law does not act as binding precedent, and the
courts do not need to decide future cases based on a previous
court’s decision.
Court proceedings are conducted in Arabic, and there are various
rules and conditions describing those permitted to attend the
proceedings, as well as the qualifications of the lawyer relative to
each type of court. Arbitration is a well-established method of
dispute resolution, especially in relation to large-scale industrial,
construction, oil and gas, etc. contracts.
Real Estate
Generally, only Omani natural persons are able to enjoy the
benefits of full ownership of freehold and leasehold property.
Corporate entities’ ownership of property is restricted to holding
real estate for use for the achievement of the company’s
objectives, for example, using the property as an administrative
office, for staff accommodation, warehousing, etc.
The Law on Foreign Ownership of Land in the Integrated Tourist
Complexes was introduced in 2006, and it permits non-Omani
individuals and companies to own land/real estate in areas
designated as “integrated tourism complexes”. Expats living in
the Sultanate and foreigners living abroad can buy properties only
in certain areas of the Sultanate, which are defined as ‘touristic
areas’ and not in areas close to the national borders.
Pursuant to this law, the government grants usufruct rights to real
estate developers over designated lands for their development.
The rights and obligations of a developer are recorded in a
development agreement.
Doing Business in Oman – Tax and Legal Guide
Additional Legal Considerations
Commercial Agencies
Commercial agencies are utilised as vehicles for importing
products and/or services into the Sultanate and not to
establish a business presence. The Commercial Agencies
Law defines a commercial agency as “any agreement
through which a merchant or a commercial company in the
Sultanate is assigned to promote or distribute the products or
services of a foreign person or entity in consideration for
profit or commission”.
Only Omani nationals, both natural and juristic persons, may
be appointed as commercial agents. For natural persons, the
individual must be above eighteen years of age and a
member of the Oman Chamber of Commerce and Industry;
legal entities must be properly established in Oman, and be
at least 51% Omani owned.
The commercial agency agreement must be in writing and
must be duly certified, authenticated and subsequently
registered at the Commercial Agencies Register at MOCIIP.
This is especially important as no claims can be brought in
relation to agency agreements that have not been properly
registered.
The agency agreement must include at least the following
essential elements:
• Names of the agent and principal and their respective
nationalities.
• The products or services making up the subject matter of
the agency; and
• The term of the agency and the jurisdiction under which it
falls.
The agreement must be directly between the provider of the
services, or the manufacturer of the products, and the agent.
During the term of the agency, the principal may not engage
in the sale of the products and services in the territory,
whether directly or through any other intermediary.
Engaging a local agent is a quick and simple process; all that
is required is a signed agency agreement between the
parties, to be registered at MOCIIP. However, it is important
to bear in mind that terminating an agency relationship is
significantly more difficult than forming one, as Omani courts
tend to be highly protective of local agents and may award
terminated agents generous compensatory damages.
Immigration
To live in Oman, a person needs to be sponsored either on
the basis of the ownership of a business in Oman, or an
employment contract with an employer in the country.
The sponsorship requirements include obtaining a residence
visa or work permit.
In addition, holders of a residence visa are permitted to
sponsor dependents.
Key considerations
Oman has strong laws and regulations, which are constantly
amended to provide a flexible and up-to-date legal framework
to do business in. Business disputes are adjudicated by the
commercial courts.
To live and work in Oman a foreign person must be sponsored
either on the basis of the ownership of a business in Oman or
an employment contract with an employer in the country. All
immigrants (non-GCC nationals) must have a residency
card/work permit issued by the Royal Oman Police. An
employer must process and obtain any visas and work permits
required for its employees.
12
Tax Indicators
Resident
Non
-Resident *
Typical fiscal year end
Calendar year. However, another year end can be
used provided permission is granted in advance by
the Omani Tax Authorities
Calendar year. However, another year end
can be used provided permission is granted
in advance by the Omani Tax Authorities
Companies
Income Tax
15%
Not applicable, unless the foreign company
has a permanent establishment in Oman
(refer to comments)
Tax on Capital Gains
Taxed as ordinary income. Gains on the sale of
listed shares are exempt from tax
Not Applicable
General Sales Tax
Not applicable
Not applicable
Value Added Tax
5% VAT on standard rated supplies in Oman.
Note
–
Specified goods and services are exempted
/ zero rated under Oman VAT law. Exempted goods
and services will not be subject to VAT whereas
zero rated goods and services will attract VAT at
0%
Non resident businesses are required to
register under Oman VAT from the first day of
being obligated to pay VAT in accordance
with the provisions of Oman VAT law.
Excise Tax
Applicable to importers, domestic producers and
stockpilers of excise goods.
Rate of excise tax:
•
Tobacco and tobacco derivatives – 100%
•
Carbonated drinks - 50%
•
Energy drinks – 100%
•
Pork products – 100%
•
Sugar sweetened beverages – 50% (from 1
October 2020)
•
Alcoholic beverages – 100%
Not Applicable
Individuals
Individual Marginal Tax Rate
(Max)
Not applicable
Not applicable
Basis of Taxation
Not applicable
Not applicable
Withholding Tax
Dividends
Not applicable
10% (Not Applicable to GCC nationals and
subject to tax treaty) (temporarily suspended
for 5 years upto 5 May 2024).
Interest
Not applicable
10% (Subject to tax treaty) (temporarily
suspended for 5 years upto 5 May 2024).
Royalties
Not applicable
10% (Subject to tax treaty)
Management Service Fees
Not applicable
10% (Subject to tax treaty)
Performance of services
Not Applicable
10% (Subject to tax treaty) (with defined
exclusions)
Customs
Standard rate of Customs duty is 5%. However, there are certain goods which are subject to
Customs duty at different rates.
Exchange Controls
Not applicable
Thin Capitalisation
Debt
-to-equity ratio should not exceed 2:1 for interest to be deductible
Transfer Pricing
Arm’s length principle applies, but there are no prescribed transfer pricing methodologies. OECD
guidelines are normally accepted
Double tax treaties in force
Algeria, Belarus, Brunei, Canada, China, Croatia, France, Hungary, India, Iran, Italy, Japan,
Korea, Lebanon, Mauritius, Moldova, Morocco, Netherlands, Pakistan, Portugal, Seychelles,
Singapore, South Africa, Spain, Sri Lanka, Sudan, Switzerland, Syria, Thailand, Tunisia,
Turkey, United Kingdom, Uzbekistan, Vietnam, Yemen
Key Tax Indicators in Oman
Doing Business in Oman – Tax and Legal Guide
* Not tax resident in Oman and no permanent establishment in Oman.
13
Doing Business in Oman – Tax and Legal Guide
Established in the region more than 40 years, PwC has more than 7,500 people in 12 countries across the region:
Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, the Palestinian territories, Qatar, Saudi Arabia and the
United Arab Emirates.
About PwC Middle East
7,500
people
40+ years
12
Countries
Contacts
Doing Business in Oman – Tax and Legal Guide
Taking this #journeywithyou
Mohammed Yaghmour
Tax Partner | Middle East Tax & Legal Services Leader
Email: [email protected]
Darcy White
Tax Partner | Oman Tax Leader
Email: [email protected]
Kanval Ashar
Tax Senior Manager | VAT & Indirect Tax
Email: [email protected]
Gaurav Kapoor
Tax Director | Oman Tax Reporting & Strategy Leader
Email: [email protected]
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