Oman Tax Regime

Oman levies a broad-based corporate income tax at a uniform 15% rate on the worldwide income of Omani entities and the Oman-source income of branches and other permanent establishments — the most conventional corporate tax system in the Gulf. A concessional 3% rate applies to qualifying small enterprises, and petroleum income is taxed at 55% under production-sharing fiscal terms. Oman introduced VAT at 5% in 2021, applies a 10% withholding tax to certain cross-border payments, and adopted a Pillar Two income inclusion rule from 2025. Most notably for the region, Oman has enacted the Gulf's first personal income tax — a 5% levy on high earners taking effect from 1 January 2028 — as part of its medium-term fiscal programme. Administration sits with the Oman Tax Authority, and compliance is fully electronic.

1.1 Sources

Primary legislation includes the Income Tax Law (Royal Decree 28/2009, as substantially amended by Royal Decree 9/2017) and its Executive Regulations, the Value Added Tax Law (Royal Decree 121/2020), the Excise Tax Law (Royal Decree 23/2019), the Top-up Tax Law (Royal Decree 70/2024), the Personal Income Tax Law (Royal Decree 56/2025) and decisions of the Oman Tax Authority.

1.2 Recent developments

Royal Decree 70/2024, issued on 31 December 2024, introduced a top-up tax in the form of an income inclusion rule (IIR) effective for financial years beginning on or after 1 January 2025, applying to multinational groups with consolidated revenues of at least EUR 750 million in two of the four preceding years; executive regulations detailing computation, safe harbours and compliance were still awaited as of June 2026, and Oman has not (yet) announced a domestic minimum top-up tax. Royal Decree 56/2025, issued in June 2025, enacted a personal income tax of 5% on the income of individuals exceeding OMR 42,000 per year, effective from 1 January 2028 — a first in the GCC. The suspension of withholding tax on dividends and interest, in place since 2019, has continued. Social protection reform under Royal Decree 52/2023 is being phased in, restructuring employer and employee contributions.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Rates and residence

The standard income tax rate is 15%, uniform across entity types: it applies to Omani companies (SAOG, SAOC, LLC), proprietorships, and branches or other permanent establishments of foreign entities, whether or not registered. Entities formed in Oman are taxable on worldwide income (with foreign tax credit relief); branches and PEs of foreign persons are taxable on Oman-source income. A 3% rate applies to Omani proprietorships and LLCs that qualify as small and medium enterprises: registered capital not exceeding OMR 60,000 at the start of the tax year, gross income not exceeding OMR 150,000, an average of no more than 25 employees, and activities outside excluded sectors (air/sea transport, natural resource extraction, banking, insurance and financial services, public utility concessions and other ministerially designated activities). Income from the sale of petroleum is taxed at 55% under exploration and production sharing agreements — although in practice the government discharges the operator's tax from its own production share, so the levy is typically not borne economically by the contractor. There are no regional or local income taxes.

2.2 Dividends and participation

Dividends received by an Omani taxpayer from another Omani company are exempt from income tax, providing single-layer taxation of domestic corporate chains without a minimum holding or holding-period condition. Dividends from foreign companies are taxable at 15% with credit for foreign tax. Capital gains are generally taxed as ordinary income at 15%, but gains on the disposal of securities listed on the Muscat Stock Exchange are exempt. There is no elaborate participation-exemption regime for foreign shareholdings of the European type; holding-company planning therefore focuses on the domestic dividend exemption, the listed-securities exemption and treaty relief.

2.3 Income determination and deductions

Taxable income is determined from financial statements prepared under IFRS, adjusted for tax. Expenses are deductible if incurred wholly and exclusively for the production of gross income, subject to specific limits: donations are capped (5% of gross income to approved bodies), head office expenses allocated to a branch are restricted to a reasonable prescribed proportion (generally up to 3% of gross income, 10% for banks), sponsorship fees and related-party charges must satisfy arm's-length scrutiny, and provisions are deductible only when specific. Depreciation is available on prescribed straight-line bases (with pooling for plant and machinery), and unabsorbed depreciation follows the loss rules. Fines, income tax itself and expenses attributable to exempt income are non-deductible.

2.4 Interest limitation

Oman applies a thin-capitalisation rule rather than an EBITDA-based limitation: interest on related-party debt is deductible only to the extent the debt-to-equity ratio does not exceed 2:1; interest attributable to the excess is permanently disallowed. Interest paid by a branch to its head office is generally not deductible (self-dealing), and interest must otherwise satisfy the wholly-and-exclusively test. There is no ATAD-style 30% of tax EBITDA rule and no carryforward of disallowed interest.

2.5 Losses

Tax losses may be carried forward for five years for offset against subsequent profits; there is no carryback. Losses incurred during a tax-exemption period (for example under a legacy industrial exemption) may, by concession, be carried forward without time limit. There is no statutory continuity-of-ownership forfeiture rule, but losses do not transfer between entities and are examined on assessment.

2.6 Group taxation

There is no group taxation, consolidation or fiscal-unity regime in Oman; the concept is not applicable. Each company, establishment and PE is assessed separately, and losses cannot be surrendered between group members. Intra-group transactions are respected if priced at arm's length, and the domestic dividend exemption (section 2.2) prevents cascading tax within Omani groups.

2.7 Controlled foreign companies

Oman has no controlled foreign company legislation; the concept is not applicable. Worldwide taxation of Omani-formed entities, with foreign tax credit, is the operative mechanism for foreign profits, and — for large multinationals — the IIR under Royal Decree 70/2024 now attributes top-up tax on low-taxed foreign constituent entities of Oman-parented groups, functioning as a GloBE-based inclusion rule rather than a classical CFC regime.

2.8 Transfer pricing

The Income Tax Law contains arm's-length provisions empowering the Tax Authority to adjust the consideration in transactions between related parties that do not reflect market terms, and related-party charges (management fees, head-office allocations, procurement margins) are routinely examined on assessment. Oman has implemented country-by-country reporting for multinational groups with consolidated revenues of OMR 300 million or more, with notification obligations for Omani constituent entities. There is as yet no statutory master file/local file documentation regime of the OECD three-tier type, but taxpayers are expected to be able to substantiate pricing with functional and benchmarking evidence, and IIR-scope groups will need GloBE-quality data once the executive regulations issue.

2.9 Incentives

Tax incentives have been deliberately narrowed since 2017. The remaining strands are: a five-year income tax exemption available to qualifying industrial (manufacturing) activities, renewable in limited cases; long-term exemptions of up to 30 years for entities licensed in the free zones (Salalah, Sohar, Al Mazunah) and the Special Economic Zone at Duqm, coupled with customs relief, full foreign ownership and reduced Omanisation thresholds; and the 3% SME rate described in section 2.1. Free-zone benefits are conditional on activity, substance and local-hiring requirements, and interact with Pillar Two effective-rate computations for large groups.

2.10 Pillar Two

Royal Decree 70/2024 introduces a top-up tax in the form of an income inclusion rule effective from 1 January 2025 for groups with consolidated revenues of at least EUR 750 million in two of the preceding four fiscal years, whether headquartered in or outside Oman. The IIR is charged on Omani parent entities by reference to the low-taxed profits (effective rate below 15%) of their foreign constituent entities; it expressly does not tax the profits of Omani entities. Executive regulations covering computation methodology, safe harbours, PE treatment and compliance were pending as of June 2026 but are expected to follow the OECD GloBE Model Rules. Oman has not announced a domestic minimum top-up tax, so low-taxed Omani profits (for example in free zones) may instead be captured by other jurisdictions' Pillar Two rules depending on group structure.

2.11 Branch income and reorganisations

Branches of foreign entities are taxed at the flat 15% on Oman-source profits attributable to the permanent establishment; there is no branch profits or remittance tax, so after-tax branch profits can be repatriated without further Omani charge. Head-office expense allocations are capped as noted in section 2.3. There is no comprehensive reorganisation-relief statute; mergers and transformations of Omani companies are handled through commercial law with tax clearance, and transfers of assets or business between entities are taxable events at market value unless specifically relieved. Gains on disposals of shares in Omani companies by non-residents can fall within Omani tax where a PE exists or under specific charging provisions, subject to treaty protection and the listed-securities exemption.

3.1 Current position — no tax until 2028

Oman currently imposes no tax on employment income, business income of individuals is taxed only through the corporate income tax system where carried on via a registered establishment, and there is no tax on individuals' investment income or capital gains as such. Non-resident individuals can nonetheless suffer the 10% withholding tax on Omani-source royalties or service fees, and individuals carrying on business through a PE are taxable like other taxpayers.

3.2 The 2028 personal income tax

Royal Decree 56/2025 enacts a personal income tax with effect from 1 January 2028 — the first in the Gulf Cooperation Council. The tax will apply at 5% to the taxable income of natural persons exceeding OMR 42,000 per year, a threshold designed to confine the charge to roughly the top decile of earners. The base is expected to cover employment, self-employment, rental and certain investment income of residents (with foreign-income rules for Omani nationals) subject to deductions for education, healthcare, housing and charitable items to be detailed in executive regulations. Employers and payers will face registration and withholding-style compliance obligations from commencement, and internationally mobile executives should begin modelling 2028 packages now.

3.3 Social security and end-of-service

Under the Social Protection Law (Royal Decree 52/2023), contributions for Omani employees are being consolidated into the Social Protection Fund: the employer contributes approximately 11% and the employee approximately 7.5% of gross salary (including elements for job security and occupational injury), with phased increases under the reform timetable. GCC nationals are covered under home-country schemes via GCC coordination. Expatriate employees are outside Omani social insurance; they instead accrue end-of-service gratuity under the Labour Law (Royal Decree 53/2023), broadly one month's basic salary per year of service, with a transition toward a savings-scheme model under the social protection reform.

3.4 Other individual taxes and inbound considerations

There is no net wealth tax, no inheritance or gift tax and no general capital gains tax for individuals. Property occupation is untaxed, though municipal fees apply to rents and a 3% registration fee applies to real estate transfers. Inbound employees require employer-sponsored work visas; remuneration is free of income tax and withholding until the 2028 personal income tax commences, but employers must fund social protection contributions for Omani hires, gratuity accruals for expatriates and (in practice) medical insurance. Individuals' Omani-source income can create treaty questions once the 2028 tax begins, and residence documentation is expected to follow physical-presence tests in the executive regulations.

Oman applies a final withholding tax of 10% on the gross amount of specified categories of Oman-source income paid or credited to foreign persons without a permanent establishment in Oman: royalties (broadly defined to include payments for the use of software, equipment leasing and know-how), management fees, fees for research and development, and consideration for services. Administrative practice narrows the services category — services performed wholly outside Oman are, per Tax Authority clarifications, generally outside the net for many categories, and specified items such as reinsurance and certain transport and training payments are excluded. Withholding tax on dividends (chargeable in principle on distributions by Omani joint-stock companies and funds to foreign persons) and on interest has been suspended since 2019 by decision of the authorities, and the suspension remained in force as of June 2026 — though boards should monitor its status, as it is administrative rather than statutory. Oman's treaty network of some 35 conventions can reduce or eliminate withholding, with relief typically administered by refund or by up-front clearance; the payer must remit withheld tax to the Tax Authority within 14 days of the end of the month of payment or credit.

Because the 10% tax is computed on gross consideration, contract gross-up clauses are common and the economic burden frequently shifts to the Omani payer. Treaty relief requires residence certification and, in practice, engagement with the Tax Authority's clearance or refund procedures; payers who fail to withhold bear the tax with penalties. The suspension of dividend and interest withholding materially improves financing and repatriation economics but should be treated as a policy variable in long-dated models.

5.1 Anti-avoidance framework

The Income Tax Law arms the Tax Authority with targeted anti-avoidance tools rather than a comprehensive ATAD-style suite: transactions between related parties may be repriced to arm's length, and the Authority may disregard or recharacterise transactions whose main purpose is the avoidance of tax. There are no hybrid-mismatch rules, no CFC regime, no exit tax and no statutory interest-barrier beyond the 2:1 thin-capitalisation rule — each of these is simply not applicable in current law. Permanent establishment is defined in domestic law (including a services PE based on presence exceeding 90 days in a 12-month period), and the Authority applies it alongside treaty definitions. Oman is a member of the OECD/G20 Inclusive Framework on BEPS, has signed and ratified the multilateral instrument (in force for Oman since 2020), so principal-purpose-test limitations condition treaty benefits across much of the network.

5.2 Transparency, reporting and substance

Oman participates in the Common Reporting Standard for automatic exchange of financial account information and exchanges information under its treaties and the multilateral convention on mutual administrative assistance. Country-by-country reporting applies to large groups as noted in section 2.8, with local notification duties. There is no DAC6-style mandatory disclosure regime and no standalone economic-substance law; substance expectations are enforced through PE doctrine, withholding categorisation and free-zone licensing conditions. Beneficial-ownership registers are maintained under commercial law, and the 2025 top-up tax law will bring GloBE information returns for in-scope groups once regulations issue.

6.1 VAT and excise

VAT applies at a standard rate of 5% under the GCC framework, effective since April 2021. Zero-rating covers exports, international transport, certain foodstuffs, medicines and medical equipment, investment precious metals, and supplies of crude oil and natural gas; exemptions cover financial services, healthcare, education, residential real estate (sale and lease) and local passenger transport. Mandatory registration applies where annual taxable supplies exceed OMR 38,500 (voluntary from OMR 19,250); non-residents making taxable supplies must register without threshold. Returns are quarterly, due (with payment) within 30 days of the period end, and reverse-charge and import-VAT mechanics follow the GCC pattern. Excise tax applies at 100% on tobacco products, energy drinks, alcohol and pork products, and 50% on carbonated and sweetened drinks.

6.2 Customs, municipal and other charges

Customs duty is levied under the GCC common tariff, generally 5% on the CIF value of dutiable imports, with higher rates for tobacco and alcohol and exemptions for free-zone and qualifying industrial imports. There is no general stamp duty regime; real estate transfers attract a 3% registration fee. Municipal taxes apply to specified turnover streams — commonly 3% on property rentals, 5% on hotel revenue and 10% on leisure and entertainment income — and a 4% tourism levy applies to designated tourism establishments. There is no property ownership tax, no payroll tax on employers beyond social protection contributions, and no net wealth taxation. Government royalties and fiscal terms specific to petroleum and mining sit alongside the ordinary system.

7.1 Registration, filing, assessment and audit

Taxpayers register with the Oman Tax Authority and obtain a tax card, quoting the tax identification number on contracts, invoices and correspondence. The tax year is the calendar year, though a different accounting year may be adopted consistently; the first period may run up to 18 months. Since the 2020 reforms a single income tax return is filed electronically within four months of the year-end, accompanied by audited financial statements, with tax paid in full by the same deadline — the earlier provisional/final two-return system has been abolished. Assessments are increasingly risk-based; the Authority may audit and issue assessments or adjustments generally within three years of the year in which the return is filed (five where no return or incorrect disclosure), and deemed assessments apply to non-filers. Withholding tax remittances are due within 14 days of month-end, and VAT returns quarterly within 30 days.

7.2 Objections, appeals and penalties

A taxpayer may object to an assessment within 45 days of notification; the Authority must decide the objection within a prescribed period (extendable), after which the taxpayer may appeal to the Tax Grievance Committee and thence to the competent courts, with payment obligations partially suspended during objection subject to conditions. Penalties include fines for late registration and filing, a charge of 1% per month (additional tax) on unpaid tax from the due date, penalties of up to 25% of the tax difference for understatement, and criminal sanctions for evasion, including responsible-officer liability. Advance rulings of a formal kind are limited, but clearances on withholding categorisation and treaty relief are obtainable in practice; mutual agreement procedures are available under treaties and the MLI.

The compression of filing and full payment into a single four-month deadline makes early closing of audited accounts the critical path in Omani compliance. Groups should also diarise the 14-day withholding remittance rule, which is short by regional standards and a frequent source of penalty exposure.

9.1 Entity choice

The LLC is the workhorse vehicle; since the Foreign Capital Investment Law (Royal Decree 50/2019), 100% foreign ownership is permitted in most sectors without a local partner, subject to a negative list. Joint-stock companies (SAOC/SAOG) serve larger and listed ventures, and the SPC (single-person company) suits wholly owned subsidiaries. Branches of foreign companies are generally available for government-contract execution and certain licensed activities, taxed identically at 15% with no remittance tax. Free-zone and Duqm SEZ entities offer long exemptions and full ownership for qualifying activities. The 3% SME rate rewards genuinely small local structures but its capital, revenue and headcount conditions exclude most foreign-invested operations.

9.2 Structuring and incentives

Practical levers include: locating qualifying manufacturing or logistics operations in free zones or Duqm (weighing exemption value against Pillar Two effective-rate effects for large groups); using the domestic dividend exemption and the current suspension of dividend/interest withholding for efficient repatriation and financing; managing related-party debt within the 2:1 thin-capitalisation ratio; contracting services to be performed outside Oman where commercially real, given the performed-in-Oman focus of service withholding practice; and securing treaty protection for fee flows, with gross-up clauses where the 10% withholding cannot be relieved. From 2028, executive remuneration and shareholder-manager extraction strategies must factor in the 5% personal income tax above OMR 42,000.

9.3 Worked effective-rate illustration

An Omani LLC (wholly foreign-owned) earns EBITDA of OMR 800,000, books depreciation of OMR 150,000 and pays net interest of OMR 50,000 on shareholder debt within the 2:1 debt-to-equity limit. Taxable profit is 800,000 − 150,000 − 50,000 = OMR 600,000. Income tax at 15% is 600,000 × 15% = OMR 90,000, an effective rate of 15.0% on taxable profit. The LLC also pays a royalty of OMR 100,000 to its foreign parent for licensed technology: withholding tax of 100,000 × 10% = OMR 10,000 is deducted at source (the royalty itself being deductible in computing the OMR 600,000 if commercially justified — here assumed already reflected in EBITDA costs). After-tax profit of 600,000 − 90,000 = OMR 510,000 can be distributed with no dividend withholding while the 2019 suspension stands, so the total Omani burden on the operating profit remains 90,000 / 600,000 = 15.0%, plus the OMR 10,000 borne on the royalty stream (an effective 10% on that gross flow).

9.4 Compliance

Expect a tax card and TIN discipline on all documentation, one electronic return with audited IFRS financial statements and full payment within four months of year-end, 14-day withholding remittances, quarterly VAT compliance with e-invoicing developments to monitor, CbCR notifications for large groups, and social protection filings for Omani staff. Free-zone entities must maintain licence conditions and Omanisation percentages to preserve exemptions. Large multinationals should track the pending top-up tax executive regulations and prepare GloBE data; all employers should begin systems work for the 2028 personal income tax withholding and reporting.