Corporate Income Tax in Oman

Corporate Income Tax in Oman

Last Reviewed – 11 July 2023

Understanding the Income Tax Law in Oman

The Law of Corporate Income Tax in Oman aims to tax the worldwide income of entities formed within the country, as well as the Oman-source income of branches and other forms of Permanent Establishments (PE).

Uniform Tax Rates for All Business Entities

Irrespective of whether a business entity is corporate, registered, or not, the income tax rate remains uniform for all types of entities.

Income Tax Rates for Different Taxpayers

The income tax rate applicable to most taxpayers is set at 15%, except for Omani proprietorships (also known as ‘establishments’) and limited liability companies (LLCs) that meet the conditions of small and medium enterprises (SMEs).

Tax Benefits for Omani Proprietorships and SME LLCs

For Omani proprietorships (establishments) and LLCs that satisfy the following requirements, a reduced tax rate of 3% is applicable, along with the obligation to file income tax returns:

1. The registered capital does not exceed 50,000 Omani rials (OMR) at the beginning of the tax year.
2. The gross income does not surpass OMR 100,000 for any given tax year.
3. The average number of employees during the tax year does not exceed 15.
4. The taxpayer’s activities do not include air/sea transport, extraction of natural resources, banking, insurance, financial services, public utility concessions, or other activities subject to the Minister of Finance’s approval and the Council of Ministers’ decision.

Petroleum Income Tax

Special provisions are in place for the taxation of income derived from the sale of petroleum. Companies engaged in the sale of petroleum are subject to a tax rate of 55%. However, the actual tax rates are based on the income determined by the individual Exploration and Production Sharing Agreement (EPSA) between the government of Oman and the respective petroleum company. Under these agreements, the government covers the company’s share of income tax from the amounts withheld from the government’s share of production. Consequently, the burden of income tax is not directly borne by the company.

Local Income Taxes

Oman does not impose any regional or local income taxes, providing a simplified tax structure for businesses operating within the country.

In conclusion, the Income Tax Law in Oman ensures the taxation of both global and domestic income for entities established in the country. While most taxpayers are subject to a 15% income tax rate, Omani proprietorships and SME LLCs benefit from a reduced tax rate of 3%. Additionally, special provisions govern the taxation of income from petroleum sales, with a tax rate of 55% applied based on individual Exploration and Production Sharing Agreements. Notably, Oman does not levy any regional or local income taxes, offering a favorable tax environment for businesses.