Foreign companies that do not have a PE in Oman for tax purposes and that derive income from Oman in the nature of the following are subject to withholding tax (WHT) at 10% of gross income from such sources:
- Dividends (temporarily suspended for three years with effect from 6 May 2019 by a Royal Directive).
- Interest (temporarily suspended for three years with effect from 6 May 2019 by a Royal Directive).
- Consideration for research and development.
- Consideration for the use of or right to use computer software.
- Management fees.
- Provision of services.
Such WHT is required to be withheld by the Omani-based company and paid to the tax department within 14 days of the end of the month in which tax is deducted or payments are due or made to the foreign company.
Under clarifications issued by Oman tax authorities, WHT on dividends applies only to dividends paid by joint stock companies, not LLCs.
As of 1 March 2018, WHT on services applies whether the services are performed in Oman or abroad. Previously, the tax authorities had taken a position that services performed entirely outside Oman were not subject to WHT.
The term 'royalty' has been defined under the law to include consideration for the use of IP, including computer software, cinematography films, tapes, discs, or any other media, patents, trademarks, drawings, etc. The term further includes consideration for using industrial, commercial, or scientific equipment and consideration for information concerning industrial, commercial, or scientific experience or consideration for granting rights to exploit mining or other natural resources.
Double tax treaties (DTTs)
The maximum WHT rates provided by the Oman DTTs are shown in the table below. There are also agreements with various countries that are not yet in force.
The table provides a summary of WHT rates under Oman tax treaties in force as of 1 December 2018. Under some treaties, dividends qualify for a reduced WHT rate if the beneficial owner is a corporation that owns a specified percentage of the voting power of the distributing corporation. Also, under some treaties, a lower WHT rate applies to interest on government debt or government-assisted debt.
|Canada||5 (7)/15||10||0/10 (1)||0|
|India||10 (7)/12.5||10||15||15 (6)|
|Italy||5 (8)/10||5||10||10 (6)|
|Pakistan||10 (7)/12.5||10||12.5||12.5 (6)|
|South Africa||5 (7)/10||0||8||0|
|Switzerland||0/5/15 (2)||0/5 (3)||8||0|
|United Kingdom||0/15 (5)||0||8||0|
|Vietnam||5 (10)/10 (11)/15||10||10||10 (6)|
- The 0% rate applies to literary, dramatic, and musical copyright royalties, computer software royalties, and to industrial, commercial, or scientific experience. The 10% rate applies in other cases.
- The 0% rate applies if the beneficial owner of the dividends is: (i) the government, a political subdivision, or the central bank; (ii) a pension scheme; or (iii) in the case of Oman, the State General Reserve Fund, the Omani Investment Fund, and any other statutory body or institution wholly owned by the government of Oman. The 5% rate applies if the beneficial owner of the dividends is a company (other than a partnership) that directly holds at least 10% of the capital of the payer company. The 15% rate applies in other cases.
- The 0% rate applies to interest paid: (i) to the government, a political subdivision, or the central bank; (ii) in the case of Oman, to the State General Reserve Fund, the Omani Investment Fund, and any other statutory body or institution wholly owned by the government; (iii) on the credit sale of equipment, merchandise, or services; (iv) on a loan granted by a bank; (v) to a pension fund; or (vi) on inter-company loans. In other cases, the 5% rate applies.
- The 10% rate applies to interest paid to financial institutions, including insurance companies. The 15% rate applies in other cases.
- The 15% rate applies to dividends paid from profits derived directly or indirectly from immovable property by an investment company or investment fund, the income of which is subject to favourable tax treatment.
- Applies to technical, managerial, or consultancy services rendered in Oman.
- 10% minimum shareholding required.
- 15% minimum shareholding required.
- 20% minimum shareholding required.
- 60% minimum shareholding required.
- 25% to 60% minimum shareholding required.