Omani companies can raise finance through debt or company equity. Income taxes are not levied by the government on:

Dividends from a sole proprietorship
Receipt of dividends by a company from the shares of another company registered in Oman
Withholding tax (WHT) applies (depending on the relevant DTA). Awarded to foreign inventors who receive dividends from Omani joint stock companies or Omani investment funds. However, distributions of profits by an LLC to foreign shareholders are not considered dividends and are therefore not subject to withholding tax.

If a company borrows money from a bank for business purposes and pays interest, the interest amount is subject to deduction. Loans from employees and business partners are permitted only to a limited extent. Oman has a low capital policy, with a company’s debt-to-equity ratio for related party financing not exceeding 2:1. If the ratio exceeds 2:1, the additional debt will not be tax deductible. Withholding tax applies to interest paid to foreign shareholders and income from Islamic sukuk and bonds other than those issued by Omani banks or the government (subject to the DTA).

Corporate Tax
The main tax in Oman is corporate tax. There are no tax exemption restrictions in Oman. The 15% corporate income tax on profits applies to:

Oman-based companies and enterprises and their branches
Foreign companies operating in Oman.
The tax is 3% if the following conditions are met:

Omani business entity with registered capital not exceeding 50,000 OMR.
Number of employees is 15 or less.
Total annual turnover not exceeding 100,000 OMR.
As declared by the Council of Ministers, there are no companies operating in insurance, banking, finance, natural resource extraction, maritime transport, air transport, public utility interests or any other field. The industrial sector is granted tax exemption, but sales of oil and natural gas are subject to a 55% tax. It is important to note that in such cases, the Omani government will pay the tax liability in accordance with the terms of the exploration and production sharing agreement.

Foreign tax credits: In some cases, Omanis may have paid foreign taxes on their income in addition to Omani taxes. In this case, the taxpayer can claim a tax credit. This is allowed regardless of her DTA status in the foreign country where the tax was paid. However, the deduction is limited only to the amount of tax paid in Oman.

Income Tax Returns: Oman requires businesses to file provisional tax returns within three months of the end of the financial year, along with payment of estimated taxes. Oman does not have a consolidated tax system. Annual tax returns must be filed within six months after the end of the financial year, together with the company’s audited financial statements and any outstanding taxes. If the company fails to notify Easy manual tax return. Companies must keep records of transactions for 10 years.

Cross-border payments
Transfer pricing: Although there are no specific tax rules applicable to transfer pricing, Article 125 of the Income Tax Act deals with tax avoidance between related parties and requires tax authorities to comply with existing anti-avoidance provisions. Authorizes enforcement. Article 18, Section 5 of the Income Tax Law Enforcement Regulations (Revised Ministerial Decision No. 30 of 2012) stipulates that the cost of the services provided must be reasonable compared to the value of the services provided. Masu.

Withholding Tax (WHT): WHT applies to management fees, royalties, research and development expenses, use of computer software, dividends, service fees and interest. Foreign nationals who do not have permanent residence in Oman are subject to a 10% withholding tax, which is typically withheld by the payment company prior to payment. Although profit distributions from LLCs to foreign shareholders are tax-free, dividends paid by Omani joint stock companies are subject to withholding tax. The residence status of foreigners in the Gulf Cooperation Council has no bearing on taxation.

Disclosure Requirements: Oman requires all associated companies to use arm’s length pricing methods and fully disclose all details in their tax returns. If circumvention occurs, the TA may enforce the relevant anti-circumvention provisions. Still, the TA will also specify the date by which it must be paid, If the TA requires that the company must pay fresh duty.

Multilateral Instrument The Omani instrument of ratification was submitted to the Multilateral Convention to Implement Tax Treaty Affiliated Measures to Prevent Base Erosion and Profit Shifting( MLI) on 7 July 2020 to the Organization for EconomicCo-operation and Development. It included the 35 covenants that Oman wished to be under the dimension of the MLI.

Payroll taxes
Social Security Fund payments One of the major factors of the payroll levies is the deduction made for the Social Security Fund. An Omani employee would pay 7% of their monthly salary towards this fund while their employers pay 11.5%. Foreign employees are exempt from this wage deduction.

Indirect Taxes
Value Added Tax (VAT): Oman’s VAT regime shall be implemented in accordance with Royal Decree 121/2020 (VAT Law) and Decision 53/2021 of the Tax Authority promulgating the Implementing Regulations of the VAT Law on April 2021. It took effect in May. . Oman charges 5% value added tax. The registration criteria for companies is an annual supply of at least 38,500 OMR.

Sales Tax: Royal Decree No. 23 of 2019 is the sales tax law that came into effect on March 13, 2019. Excise tax is levied on certain products such as energy drinks, carbonated drinks, alcoholic beverages, tobacco, tobacco derivatives, pork and pork derivatives.

Customs: UCL regulates imports and exports with the Royal Oman Police through the General Directorate of Customs under the unified customs system. Goods manufactured by the GCC are freely distributed. Most other foreign imports are subject to his one-time common duty of 5%.

Stamp or transfer tax: Individuals are not subject to income tax, but transfers of property are taxed 5% of the real estate price.
You can also Register for VAT Registration on our website:
https://thevatconsultant.com/