Oman Individual Tax Guide

Oman

Muscat GMT +4

EY Street address:

Mail address: 5th Floor, Landmark Complex P.O. Box 1750 Bowsher Ruwi, Postal Code 112 Muscat Oman Oman

Executive contact

Alkesh Joshi +968 2250-4675

Email: alkesh.joshi@om.ey.com

Immigration contact

Ali Al Sulaimi +968 2455-9534 Email: ali.alsulaimi@om.ey.com

A. Income tax

Oman does not levy personal income taxes. However, tax is imposed on the income derived by sole proprietors. Only an Omani national or, under certain circumstances, a national of a Gulf Cooperation Council (GCC) member country may operate a business as a sole proprietor in Oman. Individual persons carry ing on professional business in their individual capacities are tax able in Oman.

Partnerships are taxed at corporate rates. To transact business in Oman, partnerships must have at least one Omani partner and must be registered with Omani authorities. Partnerships estab lished by agreements entered into outside Oman that carry on profitable activity in Oman are taxed in Oman on income that is attributable to a permanent establishment in Oman.

No special rules apply to capital gains. Capital gains are taxed as part of the regular income of sole proprietors and partnerships. Profits derived from the sale of investments and securities listed on the Muscat Securities Market are exempt from tax.

Royal Decree 9/2017 (RD 9/2017), which was published in the Official Gazette on 26 February 2017, increased the tax rate to 15% and removed the statutory deduction of OMR30,000. Also, RD 9/2017 provides a 0% or 3% tax rate to small-scale establish ments, including sole proprietorships and Omani partnerships, subject to certain conditions. These amendments to the tax rates introduced by RD 9/2017 are effective from tax years beginning on or after 1 January 2017.

Up to 26 February 2017, a 10% withholding tax (WHT) applied to royalties, consideration for research and development, consid eration for the use of or right to use computer software and management fees paid to foreign persons not having a permanent establishment (PE) in Oman or to foreign persons having a PE if such payments did not form part of the income of the PE in Oman. Effective from 27 February 2017, under RD 9/2017, the

scope of WHT is extended to dividends, interest and fees for performance of services.

Ministerial Decision (MD) 14/2019 published in the Official Gazette on 10 February 2019, amended the Executive Regulations (ER) to the Income Tax Law (ITL) to provide certain exclusions and clarifications with respect to categories of payments that may be covered by or excluded from performance of services, divi dend and interest for purposes of the WHT.

WHT on performance of services. The tax authority’s view is anything that is not a purchase of tangible goods is considered performance of services and is subject to WHT. Although the term “services” is not defined in the ITL or the ER, MD 14/2019 introduces the following list of payments that are excluded from WHT:

• Participation in organizations, conferences, seminars or exhibi tions

• Training

• Transporting, shipping and insurance of goods

• Air tickets and accommodation expenses abroad

• Board meeting fees

• Reinsurance payments

• Any services related to an activity or property outside Oman

WHT on interest. The amendments to the ER define the term “interest” for WHT purposes and clarify the treatment of returns generated by certain Islamic Finance products. The ER also excludes the following payments from WHT:

• Interest paid on amounts deposited in banks in Oman

• Returns on bonds and sukuk issued by the government or banks in Oman

• Benefits from transactions and facilities between banks for providing and managing liquidity or financing, if the term for repayment of the debt does not exceed five years

WHT on dividends. Amendments contained in MD 14/2019 define the term “dividends” for WHT purposes to refer to divi dends distributed by joint stock companies and distributions by investment funds. Consequently, WHT on dividend payments applies only to distributions made by joint stock companies and investment funds to foreign shareholders.

Dividends and interest paid to foreign persons. A Royal Assent suspended WHT applicable on dividend and interest payments to foreign persons for a period of three years, effective from 6 May 2019. Further, in accordance with the Economic Stimulus Plan introduced by the Ministry of Finance on 9 March 2021, the suspension on WHT on dividend and interest payments was extended for a period of five years starting from the 2020 tax year. Accordingly, dividend and interest payments to foreign persons by Omani taxpayers are not subject to WHT during that period.

B. Other taxes

Value-added tax. Royal Decree No. 121/2020, issued on 12 October 2020, introduced a value-added tax law in Oman, which entered into force from 16 April 2021. The rate of VAT is 5%.

Excise tax. Excise tax was introduced in Oman, effective from 15 June 2019, on selected products at the following rates.

Goods Tax rate (%)

Tobacco and tobacco derivatives 100

Carbonated drinks 50

Sweetened drinks 50

Energy drinks 100 Pork products 100

Alcoholic products 50

Recruitment fees. Total fees for issuing and renewing permits for recruitment of non-Omani employees range from OMR141 to OMR2,001, depending on the type of profession, number of workers and amount of salary. For non-Omani employees work ing in small and medium-sized enterprises (SMEs), the fees range from OMR101 to OMR1,001.

C. Social security and vocational training levy

Social security contributions are applicable only to Omani employees and are payable on a monthly basis by employers at a rate of 10.5% of gross salary, plus 1% for the coverage against occupational diseases and work injuries and 1% as a contribution to the job security fund, and by employees at a rate of 7% of gross salary, plus 1% as a contribution to the job security fund. The following is the definition of “gross salary.”

“The basic salary in addition to all other allowances payable to the employee for his return of work.”

A vocational training levy (VTL) must be paid by private sector employers in Oman with respect to their expatriate employees. The VTL rate is OMR300 (USD780) once every two years for each expatriate employee.

D. Tax treaties

Oman has entered into double tax treaties with the following jurisdictions.

Algeria Japan Spain

Belarus Korea (South) Sri Lanka Brunei Lebanon Sudan Darussalam Mauritius Switzerland Canada Moldova Syria China Mainland Morocco Thailand Croatia Netherlands Tunisia France Pakistan Turkey Hungary Portugal United Kingdom India Seychelles Uzbekistan Iran Singapore Vietnam Italy South Africa Yemen

E. Visit visas

All foreign nationals must obtain valid entry visas to enter Oman, with the exception of Gulf Cooperation Council (GCC) nationals from Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. However, foreign nationals who are resi dents of any GCC country and whose residence permits are valid

for a minimum of six months may obtain entry visas on arrival in Oman.

Normal visit visas. Several different types of normal visit visas are issued based on the purpose of the visit, including visas for businesspersons, tourists, family members of resident permit hold ers and those making official or personal visits to Oman. Stays are limited to one month from the date of entry, except for fam ily visit visas, which are valid for three months.

Citizens from countries mentioned in List #1 issued by the immi gration authorities, such as Austria, France, Germany, Italy, the United Kingdom and the United States, may obtain single-entry visit visas on arrival at all ports-of-entry into Oman. Nationals of countries mentioned in List #1 may also obtain single-entry visit visas by applying to Omani diplomatic missions and commercial representation offices. Missions and offices can issue these visas without obtaining the approval of the Directorate General of Passports and Residency in Muscat. The validity period of an applicant’s passport must be at least six months.

Citizens of countries on the above lists can obtain multiple-entry visit visas. This visa is issued on arrival at all land-, sea- and airentry points after filing the visa application form. It is not possible to extend the length of the visa. A holder of this visa must enter Oman within three months after the date of its issuance (see Multiple-entry visas).

Citizens of countries not appearing on the above lists may apply for express visas, which can generally be obtained within 24 hours (see Express visas).

Express visas. Express visas are for business visits only and can generally be obtained within 24 hours. The duration of a stay can be extended for one more week. The fee for express visas is OMR30.

Multiple-entry visas. Multiple-entry visas can be granted to busi nesspersons for entry into Oman more than once. In general, these visas are valid for six months to one year. Visa holders can enter the country during the validity period of the visa and stay in Oman for a maximum period of three months in each visit. These visas can be issued without a local sponsor to nationals of specified countries

Alternatively, local sponsors can request multiple-entry visas for business purposes.

Foreign investors in land or buildings in integrated tourism com plexes that are under construction and their relatives of the first degree can be granted a multiple-trips investors visa, which is valid for a period of not less than six months and not more than one year and can be extended for one more year. Visa holders can stay in Oman for a maximum period of three months in each visit.

The fee for the above multiple-entry visa is OMR50.

F. Employment visas and self-employment

Employment (work) visas. Employers must obtain employment visas for their expatriate employees aged 21 or older to enter Oman. The application process requires a labor clearance from the Ministry of Manpower. The ministry reviews the labor clear ance request from the employer and considers whether the posi tion meets with approval criteria, which includes the level of Omanization (nationalization) achieved or planned.

The duration of employment visas is limited to two years from the date of entry. Applicants may not work in Oman until all requirements are completely processed. The employment visa must be used within three months after the date of its issuance.

Individuals holding employment visas in Oman must not stay outside Oman for more than six months. However, this rule does not apply to family members of employment visa holders.

Resident cards. Expatriates on work visas in Oman must have a resident card which is issued by the Directorate General of Civil Status. This card must be obtained within 30 days after entry into Oman. The card is valid for two years from the date of issuance.

Investors’ visas. Foreign nationals may obtain investors’ visas under certain circumstances. The investor or the investor’s part ner must obtain the approval of the investment from the Ministry of Commerce.

Self-employment. Foreign nationals, except nationals of GCCmember countries, may not start businesses in Oman. However, an individual holding a business visa may conduct business through a company that includes Omani shareholding.

Only an Omani and a national of one of the GCC-member coun tries may own land or buildings in Oman. Foreigners may own property only within designated integrated tourism complexes.

A foreign company is allowed to set up a subsidiary headed by a foreigner; however, certain rules limit the extent of foreign shareholding.

G. Residence permits

Employees must obtain residence permits, which are valid for two years. Residence permits are applied for by the employer in Oman. Residence permits are renewable every two years.

To obtain a residence permit, the employee must have a valid resident card (see Section F) and an employment visa endorsed in his or her passport.

H. Family and personal considerations

Family members. Applications for family-joining visas must be sponsored by an Omani national or a company with commercial registration in Oman. The recipient must be either the spouse, a child below the age of 18 or close dependent of the holder of a valid resident card and residence permit.

Driver’s permits. Western nationals with visit visas may drive rental cars in Oman using their home country driver’s licenses for a period of three months. For most Western countries and all GCC-member countries, license holders may exchange their licenses for Omani driver’s licenses, provided that the license had been issued at least one year earlier. Oman has driver’s license reciprocity with most countries.