Posted by: amj_admin on September 2, 2023 - 9:17 pm

Double taxation Avoidance Agreements (“DTAAs”) as a tool for attracting foreign investors to Oman as a result of the investors being able to reduce the additional tax burdens. DTAAs also provide concessional withholding tax rates in certain cases. The provisions of DTAAs having been ratified by Omani Sultan Decrees override the local Income Tax Law. 

Oman has signed comprehensive double taxation avoidance agreements with more than 30 countries inclusive of India, UK, Turkey, France, Canada, Singapore and Pakistan. Some of the treaties are yet to be ratified or have not yet come into force.

Recently, Oman signed 2 DTAAs: with Egypt in May 2023 and Russia in June 2023 respectively. The DTAA with Egypt has been ratified by Oman but is yet to be ratified by Egypt. These tax treaties will mark a significant step between the signatory countries in boosting foreign investment, cross border trade and strengthening of commercial ties between the nations.

Author details

Angad Ahuja Associate  Commercial & Projects Al Busaidy, Mansoor Jamal & Co Tel: +968 24829200 Email: angad.ahuja@amjoman.com

Posted by: amj_admin on September 2, 2023 - 9:16 pm

Whilst existing businesses which are well established in an economy choose to model their transactions in the most tax efficient manner, the potential tax exposure in an economy is an important consideration for any business planning to enter into a new market.  In this regard, an important factor to be considered by foreign entities entering the Omani market, is the implications of any withholding tax or other tax deducted as source, under the Oman Tax Law.

Withholding tax, as the name suggests, is a tax on payments made by an Omani taxpayer to a foreign entity, where the foreign entity has no “permanent establishment” or taxable presence in Oman, and the income received by it overseas falls into the ambit of any one of the categories, discussed below.

Withholding tax at the rate of 10% in Oman is applicable on the following categories of income accrued:

1. royalties (consideration for the use or right to use intellectual or proprietary rights for literary, artistic or scientific work; patents, trademarks, design, drawings; leasing of industrial commercial or scientific equipment; consideration for granting rights of exploitation of mining; consideration for information concerning industrial, commercial or scientific experience);
2. payments for research and development;
3. payments for the use of or right to use computer software; 
4. management fees; and
5. fees for the performance of services.

Though payments in the nature of dividends and interest also attract withholding tax, as per the Income Tax law, withholding tax on payments of dividends and interest is presently suspended for an indefinite period pursuant to a Royal Directive issued on 11 January 2023 by His Majesty Sultan Haitham bin Tarik. 

In 2019, the Executive Regulations of the Income Tax law were amended and, the following payments categorized under “performance of services” were exempted from the application of withholding tax:

1. participation in organizations, conferences, seminars or exhibitions;
2. training;
3. transportation and shipment of merchandise and its insurance;
4. air tickets and boarding cost abroad;
5. meetings of Boards of Directors;
6. reinsurance payments; and
7. any services provided linked to a business or property located outside Oman.

Further, the Tax Authority, has also clarified that regardless of where the service has been performed, withholding tax is applicable on the payments made to a foreign person in respect of services. The foreign person will be entitled to a Tax Deduction Certificate issued by the Tax Authority, based on which credit for tax can be claimed subject to the laws of the foreign jurisdiction.

While withholding tax is the tax of the foreign person, it is the responsibility of the Omani party to deduct and pay the withholding tax to the Tax Authority in Oman. Therefore, it is important to ensure that all contracts have a tax clause that clearly define who bears the withholding tax, in order to correctly be able to determine the amount of tax to be paid.  

Author details

Angad Ahuja Associate  Commercial & Projects Al Busaidy, Mansoor Jamal & Co Tel: +968 24829200 Email: angad.ahuja@amjoman.com

Posted by: amj_admin on February 4, 2018 - 9:14 am

AMJ, in partnership with the Oman American Business Centre (OABC), organised a seminar on corporate law and finance for SMEs in Oman.

Presented by AMJ senior associate Asad Qayyum, and entitled ‘Survive to Five: Navigating Financial and Legal Aspects for Companies in Oman’, the seminar was designed to help start-ups and companies in the early stages of development. It highlighted a number of common pitfalls faced by entrepreneurs regardless of the sector in which they operate.

Qayyum noted that “Setting up and running a business can be very exciting and rewarding. However, no how brilliant the business idea is, without a solid legal and financial foundation, entrepreneurs run the risk of becoming one of the ‘4 out of five’ startups that statistically fail in the first five years.”

He provided participants with insights on the legal and financial frameworks essential for success, incentives and concessions available in Oman for SMEs, advice on tax and finance, employment, intellectual property protection and the all-important role of networking organisations such as the OABC.

Posted by: amj_admin on March 17, 2017 - 9:55 am

Amendments to Oman’s corporate tax law have wide-ranging implications for companies doing business in Oman as well as foreign investors including those without a permanent establishment in the country. The reforms have been in the pipeline since they were presented to the Cabinet in January 2016. They are part of a package of fiscal measures announced in February 2017 aimed at diversifying revenue resources to offset Oman’s higher than forecast budgetary deficit for 2016 due to depressed oil prices.

The new rules introduced by Royal Decree 9/2017 and published in the Official Gazette on 26 February 2017, represent a radical overhaul of the previous tax regime under Royal Decree 28/2009. Changes include:

– removing the tax-free threshold of OMR 30,000 previously available to establishments, companies or foreign persons deemed to have a permanent establishment carrying on business in Oman;

– raising the corporate tax rate from 12 percent to 15 percent effective for all financial years beginning on or after 1 January 2017. A lower 3 percent micro tax rate is applicable to small tax payers who meet specific criteria;

– expanding the withholding tax net by imposing a 10 percent tax on dividends on shares and interests from 28 February 2017;

– extending the definition of ‘income’ to include fees for services paid to foreign persons who are based outside Oman. Whereas the amendments to the withholding tax provisions came into force on 28 February 2017, the amended definition of ‘income’ comes into effect only on 1 January 2018. It remains to be clarified whether withholding tax deductions on service fees payable to foreign persons take effect now or on 1 January 2018;

– applying withholding tax provisions to ministries and government bodies and other state administrative units; tax payers are required to deduct the withholding tax at source and remit to the government within 14 days of the month-end in which the fees are paid or credited to the account of the tax payer.

– introducing a requirement for all tax payers to obtain a tax card from the Department of Taxation of the Ministry of Finance. The tax card number must appear on all of the tax payer’s contracts, invoices and correspondence. Ministries, state administrative units and companies in which the Government has a 40 percent shareholding must obtain a copy of the tax card before undertaking any transaction with the tax payer; and

– removing tax exemptions previously available for a period of 10 years on income arising from operating hotels and tourism projects, agriculture, mining, export of local goods, fishing, health care and education. Only the manufacturing sector is now exempted from tax for a reduced period of up to 5 years.

In addition to the above, the tax regime has now moved on to a self-assessment regime with rules for increased fines and prison terms for officers of taxable entities for failure to comply with the provisions of the law.

For more information contact Mansoor Malik or Asad Qayyum

Posted by: amj_admin on May 29, 2013 - 11:16 am

AMJ’s Anthony Watson was a guest speaker at a tax seminar organised by the Muscat American Business Council on April 17.

A joint presentation by Anthony, a senior associate in AMJ’s commercial law practice, and Philip Bond of KPMG, highlighted key corporate tax law issues such as withholding tax, exemptions, foreign capital investment rules and the Oman-US Free Trade Agreement for an audience of experts and businessmen.

A hot topic on the sidelines of the seminar was the need to amend the Oman tax laws to reflect new Islamic banking requirements. Oman’s Islamic banks, Bank Nizwa and Izz Bank as well as the Islamic banking windows introduced by many other banks, are pressing for Sharia-compliant protocols to govern the tax returns they are required to file by the end of 2013. Also of interest to the business community is the introduction of value-add tax ‘VAT’ in the GCC tentatively slated for 2015-6.