Oman's New Tax Law

Oman's latest Royal Decree introduces sweeping amendments to the Income Tax Law of 2009 and was formally published on 26 February 2017.

Whilst the full text of Royal Decree 09/2017 (the Amendment) is being reviewed in more detail, here are a few details we are able to share in relation to key provisions:

Corporation tax - the impact

The Amendment increases the standard corporation tax from 12 per cent to 15 per cent. The minimum tax-free threshold of OMR 30,000 has been scrapped. Rather surprisingly, these provisions will be applied retrospectively as of 1 January 2017, suggesting that the government may have been trying to publish the Amendment prior to the start of 2017.

Any tax breaks?

There is a carve-out for companies (specifically aimed at the SME segment) that fulfil certain criteria, including but not limited to those:

having annual revenue of OMR 100,000 or less; who employ 15 employees or fewer; and with share capital of OMR 50,000 or less. These companies will benefit by paying corporation tax of only 3 per cent.

There are further tax breaks offered to companies fulfilling further criteria, which will be exempted from paying corporation tax at all. Further guidance on this is expected.

Withholding tax - the story so far

In a move that signals one of the most significant amendments to withholding tax in Oman, the Amendment introduces new types of income, which will now be subject to withholding tax at the rate of 10 per cent.

In addition to the existing categories relating to royalties, payments for research and development, use of computer software and fees for management, withholding tax will apply to fees for the performance of services, payments of dividends, or interest. These extensions to the withholding tax regime came into force on 27 February 2017.

What is significant is that the text of the Amendment suggests that all interest payments by borrowers or issuers of securities to lenders and/or investors outside of Oman will be subject to withholding tax from 27 February 2017.

Similarly, all dividends paid by Omani companies to their foreign shareholders will be subject to withholding tax.

The Amendment applies only to those companies and entities that are subject to the Income Tax Law. Accordingly, companies located in Free Zones in Oman will, on the face of it, not be subject to these amendments.

Certain parties may also benefit from the terms of any double taxation agreements or treaties with Oman.

It remains to be seen...