Insights

Tax and Legal Services

PwC Middle East

Oman: Major changes to corporate

income tax and withholding taxes
February 2017

In brief
The Omani government has now introduced broad tax changes to the income tax law. The changes
have been the subject of intense speculation for many months, and are aimed at increasing tax
revenue, improving tax administration, and stimulating small business activity.

Consistent with expectations, the corporate tax rate is increasing to 15%, from 12%. Another notable
change is the extension of withholding tax to dividends, interest, and payments for services.

These changes become effective from the date of publication in the Official Gazette (i.e. 27 February
2017). Companies operating in Oman are encouraged to consider their impact.

Enhanced penalty LLCs which meet the

In detail
provisions, following requirements:
Royal Decree No. 9/2017 including increased
was published in the Official Registered capital
criminal penalties does not exceed
Gazette on 26 February Elimination of most OMR 50,000 at the
2017, introducing broad tax tax exemptions beginning of the tax
changes that have been the Introduction of tax year
subject of intense cards for all Gross income does
speculation for many taxpayers not exceed OMR
months. 100,000
Introduction of
Average number of
The headline items electronic tax return
employees during
include: filing the tax year does
Changes to the not exceed 15
An increase in the
assessment regime Taxpayer activities
basic income tax
do not include
rate from 12% to Tax Rates air/sea transport;
15% extraction of natural
The standard rate of income
A 3% rate of income resources; banking,
tax is increased to 15%, for
tax for certain small tax years beginning on or insurance or
taxpayers after 1 January 2017, and financial services;
Elimination - for all the OMR 30,000 exempt public utility
threshold is removed. concessions; or
taxpayers - of the
other activities to be
tax exemption on
PwC View: Even at the decided by the
the first OMR increased rate, this still Minister of Finance
30,000 of taxable represents one of the lower after approval by
profits income tax rates in the the Council of
Extension of world, and we would not Ministers.
withholding tax to see this, on its own, as a
significant deterrent to The 3% tax rate is effective
dividends, interest, for years beginning on or
and payments for international investment.
after 1 January 2017, and is
services A 3% tax rate applies to coupled with a requirement
Omani proprietorships
(establishments) and to

www.pwc.com/me
Insights
Tax and Legal Services
PwC Middle East

for small taxpayers to file meeting certain result in imprisonment for a

income tax returns. requirements) while others period of 1 to 6 months
provide reduced and/or a fine of OMR 500
PwC View: Small withholding tax rates (e.g. 20,000. A second offense
businesses that have not to 5%). within 2 years increases the
previously been subject to period of imprisonment to 3
income tax would now be Permanent to 12 months and the fine to
subject to income tax, and Establishment OMR 2,000 30,000.
would be required to submit
The definition of permanent
a tax return (accompanied The intentional failure to
establishment (PE) - which
by a simplified income submit accurate tax returns
previously included a PE in
statement). or the intentional
connection with a building
destruction or concealment
The deadline for filing the site, place of construction or
of documents and records
2017 tax return, and paying assembly project - has been
can result in imprisonment
the associated income tax amended, to now only create
for a period from 6 months
liability, will generally be such a PE where the activity
to 3 years and/or a fine of
31 March 2018 (or three carries on for more than 90
OMR 5,000 OMR 50,000.
months after the year-end days.
in other cases). Tax Exemptions
PwC View: This removes
Withholding Tax some ambiguity that existed Tax exemptions will be
around the construction available only for industrial
Withholding tax (at 10%) is PE definition, and brings (manufacturing) activities.
extended to dividend the time limit in line with Exemptions will no longer
payments, interest and the existing, 90-day be available for mining;
payments for services. services PE definition. export of locally
Withholding tax will be due manufactured goods;
on payments made on or Overall, the PE definition operation of hotels and
after 27 February 2017. may be overridden by a tourist villages; agriculture;
narrower test in any fishing; or education.
Previously, withholding tax applicable DTA, or by a
had applied only to royalty longer time limit for a In addition, new industrial
payments; management construction PE. exemptions will be limited
fees; consideration for the to the initial 5-year period,
use of or right to use Penalty Provisions with no renewal.
computer software; and
The maximum penalty for
consideration for research Existing tax exemptions will
failure to file returns by the
and development. not be impacted, but the
due date is increased from
changes would look to
The withholding tax rate OMR 1,000 to OMR 2,000.
impact pending renewal
remains at 10%. applications.
The maximum penalty for
The obligation to deduct and failure to submit
Tax Cards
account for withholding tax information requested by
is now extended to the tax authority or to A tax card system is
Ministries and other public attend scheduled hearings is introduced whereby all
bodies. increased from OMR 2,500 taxpayers (Omani
to OMR 5,000. companies, establishments,
PwC View: Withholding and permanent
tax may still be reduced or A penalty of up to OMR establishments) will be
eliminated by any 3,000 may be imposed for issued with tax cards, and
applicable double tax failure to comply with the new taxpayers must apply
agreement (DTA) in place Executive Regulations or for a tax card at the time of
between Oman and the administrative decisions. commercial registration.
recipient country. Oman
Intentional refusal by a The tax card number must
has a few DTAs in place
Principal Officer to submit
that provide for NIL
tax returns or other
dividend and/or interest
requested information can
withholding tax (subject to
2017 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see
www.pwc.com/structure for further details. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional
advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or
implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers (Dubai
Branch), its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or
refraining to act, in reliance on the information contained in this publication or for any decision based on it.
2
Insights
Tax and Legal Services
PwC Middle East

appear on all contracts, self-assessment under rules Electronic filing of tax

invoices, and tax authority and conditions to be returns is to be introduced
correspondence. outlined by the Ministry of under rules to be set out by
Finance. Under the new the Ministry of Finance.
Government entities must regime, returns will be
obtain a copy of the tax card inspected by the tax Islamic Finance
before dealing with a authority on a sample basis
taxpayer. Failure to comply Provisions are introduced to
only. Taxpayers will be ensure that Islamic financial
with tax card provisions subject to accuracy penalties
may result in a fine of up to transactions are taxed in
ranging from 1- 25% of the accordance with their
OMR 5,000. tax on any understated fundamental substance in
The Ministry of Finance is to income. the same way as
determine the effective date The period for assessment conventional financial
of provisions related to the now runs until the end of transactions.
tax card and outline any the 3rd year following the
transitional provisions. year in which a return is
Electronic filing and submitted. Previously, the
self-assessment period had run until the end
of the 5th year following the
The current assessment year of filing.
regime is to be replaced by

The takeaway
Companies will need to consider immediately the commercial impact of the tax rate changes and
expansion of withholding taxes on their operations in Oman. Double taxation treaties may help
ameliorate the impact of withholding tax changes. The compliance enforcement and withholding
tax changes will also need to be factored into operating models.

Lets talk

For a deeper discussion of how this issue might affect your business, please contact:

PwC Middle East - Oman contacts

Russell Aycock, Muscat ubai

Neil Allmark, D uscat
Omar Al Sharif, M
Tax Director Tax Director Country Senior Partner
+968 2455 9122 +971 4515 7180 +968 2455 9118
russell.aycock@pwc.com neil.allmark@pwc.com Omar.al-sharif@pwc.com

PwC Middle East International tax and regional contacts

Dean Kern, Dubai Jochem Rossel, Dubai

Middle East Tax & Legal Services Leader Middle East International Tax Leader
+971 4 304 3575 +971 4 304 3445
dean.kern@pwc.com jochem.rossel@pwc.com

2017 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see
www.pwc.com/structure for further details. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional
advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or
implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers (Dubai
Branch), its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or
refraining to act, in reliance on the information contained in this publication or for any decision based on it.
3