APPLICATION OF TAXES IN OMAN
The Secretariat General for Taxation (SGT) is responsible for implementing and regulating the relevant taxation laws in the Sultanate of Oman. Tax investigation/Audits and assessments are made by the Directorate General within the SGT. Both the SGT and the Directorate General departments are considered branches of the Ministry of Finance of the Sultanate of Oman.
Excise tax was implemented in Oman with effect from 15th June 2019 in accordance with the unified GCC Excise Tax Agreement, making Oman the fifth GCC country to implement the excise taxation rules. As done in the other GCC countries a 100% excise tax will be applied on tobacco products, energy drinks and meat, while a 50% tax will be applied on carbonated drinks.
On 12th October 2020, His Majesty, the Sultan of Oman, Sultan Haitham bin Tariq bin Taimur, issued Royal Decree No.121/2020 in relation to the implementation of VAT in Oman. Following the introduction of VAT in the Kingdom of Saudi Arabia, the United Arab Emirates and Bahrain, Oman will be the 4th GCC country to implement VAT in the region.
The VAT Law will set out the general principles for the application of VAT in Oman in line with the Unified GCC Agreement for Value Added Tax (VAT). The VAT Law was published in the Official Gazette on the 18th October 2020 with an effective date for the introduction of VAT in April 2021.
The VAT rate that has been applied is 5% and the law has segregated the types of VAT rates to be applied across difference industries and services.
Income is currently not subject to personal income taxes in Oman and there is no requirement to file income tax returns.
With the above said, Oman plans to take a step to start taxing the income of wealthy individuals beginning in 2022.
The move is part of a broader program to tackle a budget deficit that is ballooned due to low oil prices and the COVID-19 pandemic.
The main taxation cost to businesses in Oman is corporate income tax (Corporation Tax), applicable at a rate of 15% on all taxable profits (a special provisional rate of 55% applies to income derived from the sale of petroleum products).
A 3% tax rate applies to Omani proprietorships (establishments) and to LLCs which meet the following requirements:
- Registered capital does not exceed OMR 50,000 at the beginning of the tax year
- Gross income does not exceed OMR 100,000
- Average number of employees during the tax year does not exceed 15
Tax Exemptions in Oman
Tax exemptions have been generally annulled by the introduction of Royal Decree 09/2017. The only category now eligible for exemption is industrial (manufacturing) activities. Exemptions will no longer be available for mining; export of locally manufactured goods; operation of hotels and tourist villages; agriculture; fishing; or education.
Double Taxation Treaties
Tax-treaties are agreements that take place between two nations to avoid double-taxation from both the countries during the import-export procedure. Till now, Oman has signed more than 30 tax treaties with multi-nations that have become a plus point for entrepreneurs and businesspersons to expand it to the countries at a faster pace.
Capital Gains Tax
The Sultanate of Oman does not levy any taxes on income from capital gains. There are also no payroll taxes in Oman other than social security contributions.
Social Security Contributions
A 17.5% social security contribution is applicable to employees who are Omani nationals, but not to expatriate employees. The employee pays a contribution of 7% of salary, and the employer pays the balance of 10.5%. The employer is also required to contribute for insurance for work-related injuries in the amount of 1% of the salary of the employee. This brings the total monthly social security and insurance contributions to be made by the employer to 11.5%.
Restaurants, hotels, and cafes are obligated to pay a 4% fee to the ministry from 1 January 2020.
Withholding tax in Oman stands at a rate of 10% that is to be paid to the government by the taxpayer of the income which involves dividends, interest, royalties, and professional fees, which is to be submitted to the Secretarial General, within the duration of 14 days.
A tax card system is introduced whereby all taxpayers (Omani companies, establishments, and permanent establishments) will be issued with tax cards and new taxpayers must apply for a tax card at the time of commercial registration.
The tax card number must appear on all contracts, invoices, and tax authority correspondence. Government entities must obtain a copy of the tax card before dealing with a taxpayer. Failure to comply with tax card provisions may result in a fine of up to OMR 5,000.
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Disclaimer: This article should not be treated nor relied upon as formal legal advice. Nor should it, in any circumstances, be treated as or regarded as being a binding tax opinion provided by Level Accounts Auditing LLC. It is intended to be used for informational purposes only. Any information provided has been prepared in line with what we understand to be current practice and such information is subject to change in accordance with the laws, rules, and regulations of Oman. Please contact us for specific taxation advice in relation to the subject matter of this article or if you wish to discuss your other taxation requirements.
January 21, 2021