Oman corporate tax, legal, accounting considerations

Since 2003, Healy Consultants assists multi-national clients and foreign businesses to timely, accurately and completely discharge their annual Oman company legal, accounting and tax obligations.

Summary of Oman corporate taxation

• All foreign owned business entities suffer corporation tax of 15% on the annual net profits of the Omani entity. Within 4 months of the year end, our multi-national Clients’ must submit an annual corporation tax return with audited financial statements. Omani companies are also liable to corporation tax on their overseas income. A credit is given for taxes suffered overseas; and
• Small Omani companies enjoy a corporation tax of 3% when all of the following conditions are met i) a share capital equal to or less than OMR 50,000 and ii) 15 or fewer employees in average per year and iii) annual revenue equal to or less than OMR 100,000 and iv) company is not engaged in regulated list of activities such as Oil and gas and Financial Institution activities etc.; and
• Oman Free Zone companies are exempted from corporate income tax for at least ten years. They are also permitted to trade within the country without a local agent, but will be required to pay 5% import duties; and
• Net losses of any year may be carried forward to set off against future profits for a period of 5 years; and
• A 10% Omani withholding tax must be deducted from overseas payments for services generated in Oman including i) royalties and ii) management fees and iii) research and development and iv) the use of or right to use computer software and v) dividends and vi) interests payments. Within a month of the overseas transfer, the withholding tax is paid to the Omani Tax Authority; and
• All goods and services bought, sold or imported into Oman are subject to VAT of 5%. Businesses with an annual revenue more than USD 100,000 are required to register for Omani VAT. On a quarterly basis, taxpayers are required to file a VAT return and make payment of the VAT liability. Goods which are sold for export or services which are provided to overseas customers are normally subject to 0% VAT; and
• The standard rate of customs duty is 5%. In Oman, customs duty is levied on the Cost Freight Insurance (CIF) value of most non-GCC sourced goods, unless there is any preferential treatment under the Free Trade Agreement (FTA) signed between Oman and that foreign country. We encourage businesses engaged in import and export activities to explore the advantages of joining the Authorized Economic Operator (AEO) partnership program. Doing so ensures compliance with Omani customs regulations, while benefiting from a strong governance of your international supply chain operations across your business; and
• Employees who are Omani nationals enjoy a social security regime. Currently, the monthly social security payment is 18.5% of the employee’s gross remuneration with i) 7% payable by the employee and ii) the remaining 11.5% is payable by the employer. The withholding obligation is on the employer. There are no social security payments for expatriates;

Oman company legal and compliance considerations

• Financial statements must be prepared in accordance with International Financial Reporting Standards (“IFRS”) and in the local currency. 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. VAT records such as VAT invoices, accounting records, customs documents etc. are required to be maintained for 10 years; and
• Every 5 years, the Oman company registration document needs to be renewed with the Oman Chamber of Commerce & Industry (OCCI). Annually, the OCCI membership certificate needs to be renewed. Other administrative items that need to be renewed annually include i) tenancy agreements and ii) municipality license and iii) post office box renewal; and
• Our multi-national Clients’ must complete an annual renewal of Oman Chamber of Commerce and Industry memberships and licenses; and
• Every Oman LLC with foreign employees must appoint a local Public Relations Officer (PRO). The PRO will i) liaise with the Ministry of Manpower ii) apply for visas iii) process visa renewals and cancelations and iv) communicate with government entities in Arabic; and
• Under the Oman Labour Law, expatriates employees are entitled to a gratuity payment (or an ‘end of service’ benefit); and
• Oman has signed double tax treaties with 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. The foreign tax paid can be deducted from the Omani tax payable on the same income; and
• Omani taxation laws do not contain detailed transfer pricing regulations. Still, the tax authority is keen on evaluating the reasonableness of pricing of goods and services exchanged between the related parties on a case-to-case basis. Therefore, it is wise to maintain suitable documentation to support a position on pricing for transactions between related parties; and
• 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 Omani 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; and
• Omani implements the Common Reporting Standard (CRS) regime, whereby Omani banks report accounts opened and held by foreign persons; and
• FATCA requires most financial institutions to disclose and report certain information on US account holders to the US Internal Revenue Service;
• Oman is a signatory to multiple trade agreements including the i) European Free Trade Association and ii) GCC – Singapore and iii) United States – Oman and iv) Gulf Co-operation Council (GCC) Customs Union and v) Greater Arab Free Trade Area and vi) the World Trade Organisation.