OmanTax Obligations Detailed

In Oman, employers face several key tax obligations, primarily focused on social security contributions and VAT.

Social Security Contributions

• For Omani Nationals: Employers contribute 12.5% of the employee's monthly gross salary to the Social Protection Fund (SPF). Employees contribute 8% of their monthly gross salary. An additional 1% contribution from both employer and employee is required for the Job Security Fund, totaling employee contribution of 9% and employer contribution of 13.5% (as of today's date, Feb 5, 2025).
• For Expatriate Employees: Expatriate employees are generally exempt from Oman's social security system. However, special rules may apply to employees from other GCC countries. Employers must deduct and remit contributions based on the employee's home country regulations, with the employer's share not exceeding Oman's contribution rate.

Value Added Tax (VAT)

• Standard Rate: Oman levies a 5% VAT on most goods and services.
• Zero-Rated Supplies: Certain essential goods and services, including exports, basic foodstuffs, medicine, and medical equipment are zero-rated.
• Exemptions: Specific exemptions exist under Oman's VAT law.
• Filing and Payment: Businesses must file quarterly VAT returns, within one month of the end of each quarter.
• Statute of Limitations: The Oman Tax Authority (OTA) has five years from the due date of a tax period to make an assessment, extending to ten years for late registration cases.

Corporate Income Tax (CIT)

• Tax Rate: Oman's corporate income tax rate is 15%.
• Filing and Payment: Companies must file a provisional tax return within three months of their financial year-end. The final tax return, along with audited financial statements, is due within four months. Payment is due with the filing of the tax return.

Other Taxes

• Withholding Tax: Oman does not impose withholding tax on employment income. Non-residents may be subject to a 10% withholding tax on specific types of income.
• No Personal Income Tax: There is no personal income tax in Oman for residents or non-residents.
• Pillar Two (Global Minimum Tax): Effective from January 1, 2025, multinational enterprises (MNEs) meeting specific criteria are subject to a Top-up Tax (Income Inclusion Rule - IIR) in line with OECD guidelines.

Additional Employer Obligations

• Employers are responsible for maintaining accurate payroll records for at least ten years.
• Failure to comply with tax obligations can result in penalties.

In Oman, employee tax deductions primarily involve social security contributions for Omani nationals. Expatriates are exempt from these contributions.

Social Security Contributions

• Employee Contribution: 7% of gross salary for Omani nationals.
• Employer Contribution: 12.5% of the employee's monthly gross salary to the Social Protection Fund (SPF). This is set to increase to 13.5% in July 2024.
• Job Security Fund: 1% of the employee's gross salary (paid by the employer.)

Income Tax

There is no personal income tax in Oman for either Omani nationals or expatriate employees.

Other Deductions

Other permissible deductions include loan repayments agreed upon with the employee and penalties for disciplinary actions, if applicable, according to the employment contract. Wage statements must be provided by the employer detailing salary, deductions, and net pay.

Value Added Tax (VAT) was introduced in Oman on April 16, 2021, at a standard rate of 5%.

VAT Rates

• Standard Rate: 5% applies to most goods and services.
• Zero Rate: 0% applies to specific goods and services, including exports, certain financial services, and essential food items. Input VAT credit can be reclaimed.
• Exempt Supplies: Not subject to VAT, and input VAT cannot be recovered. Examples include certain financial services, local passenger transport, education, healthcare, residential rent, and undeveloped land.

VAT Registration

• Mandatory Registration: Businesses with annual supplies exceeding OMR 38,500 must register.
• Voluntary Registration: Businesses with annual supplies or expenditures exceeding OMR 19,250 can register voluntarily.
• Non-Resident Businesses: Non-resident businesses making taxable supplies in Oman must register, regardless of turnover. There is no threshold.

VAT Filing and Payment

• Frequency: VAT returns and payments are due quarterly.
• Deadline: 30 days from the end of the relevant quarter. The deadline is extended to the next business day if it falls on a weekend or public holiday.
• Method: Filing and payments are made electronically through the Oman Tax Authority's online portal.

VAT Invoices

VAT invoices must include:

• Supplier's name, address, and VAT identification number (VATIN)
• "Tax Invoice" clearly stated
• Invoice date and taxable supply date
• Unique sequential invoice number
• Customer's name and address
• Supply details (e.g., quantity of goods)
• Gross and net value of supply in OMR
• VAT calculation

Other Considerations

As of today, February 5, 2025, additional taxes and regulations are in effect for businesses operating in Oman. This includes the newly effective Supplementary Tax Law for multinational enterprises (MNEs) with fiscal years starting on or after January 1, 2025. MNEs should carefully evaluate the impact of this law on their operations and ensure compliance. Further, discussions around mandatory e-invoicing continue, with expectations for implementation sometime in 2025.

Oman offers several tax incentives designed to attract investment and stimulate economic growth. These incentives target various sectors and activities, ranging from manufacturing and capital markets to small and medium enterprises (SMEs) and free zones.

Incentives for Listed Companies

• Capital Market Incentive Program: Companies transitioning from Limited Liability Companies (LLCs) to Closed Joint-Stock Companies (SAOCs) and subsequently listing on the Muscat Stock Exchange (MSX) can benefit from several incentives:
  • Reimbursement of 33.3% of corporate income tax for two years.
  • Installment payment of income tax with a six-month exemption from additional taxes on installments.
  • 10% pricing preference in government tenders for two years.
  • Expedited financing processing at the Oman Development Bank for two years.

Incentives for Manufacturing Activities

• Five-Year Tax Exemption: A five-year, non-renewable tax exemption is available for companies engaged in manufacturing activities.

Incentives within Free Zones

• Free Zone Benefits: Oman's free zones provide a range of incentives, including:
  • Corporate tax exemption for up to 30 years.
  • Exemption from customs duties on goods.
  • No minimum capital requirements.
  • Reduced Omanization quotas.

Incentives for SMEs and Entrepreneurs

• SME Support: SMEs and entrepreneurs can access various incentives, including:
  • Usufruct land rights.
  • Access to specialized business incubators.
  • Marketing support services.
  • 10% price preference in government tenders for locally sourced products.

Specific Sector Incentives

• Pharmaceutical and Medical Equipment: Tax exemptions and customs duty exemptions on raw materials and equipment are available for pharmaceutical factories and medical equipment manufacturers.

General Tax Incentives

• Foreign Capital Investment Law: This law offers incentives like tax exemptions, customs duty exemptions, and other benefits for specific investment projects.
• Double Taxation Agreements: Oman has double taxation agreements with several countries to avoid double taxation on income earned by businesses operating in Oman and those countries.

Eligibility criteria, application procedures, and specific details of these incentives can vary. It is recommended to consult with relevant authorities or legal professionals for the most up-to-date and accurate information. Additional incentives may exist or be introduced as part of ongoing economic development initiatives. This information is current as of February 5, 2025, and is subject to change.