Corporate income tax in Oman is charged at a general rate of 15% of taxable income on Omani companies, sole establishments and the permanent establishments of foreign companies. Qualifying small businesses pay 3%, and income from the sale of petroleum is taxed at 55%. The annual return is filed online within 4 months of the end of the tax year, and a tax assessment issued by the Tax Authority can be objected to within 45 days of notification.
This guide explains how the Oman Income Tax Law (Royal Decree 28/2009, as amended) works in practice, together with withholding tax, VAT and Oman's new personal income tax.
The legal framework
The Income Tax Law was issued by Royal Decree 28/2009 and substantially amended by Royal Decrees 9/2017 and 118/2020. It is administered by the Tax Authority, and the tax year is the calendar year.
Who is subject to corporate income tax in Oman?
Tax is imposed each year on the taxable income of a "taxpayer" (Article 39), which covers:
- Omani companies: any company incorporated in Oman under Omani law, whatever its legal form or the nationality of its shareholders. This includes companies wholly owned by foreign investors.
- Sole establishments carrying on business in Oman.
- Permanent establishments (PEs) of foreign companies: a fixed place of business through which a foreign person operates in Oman, such as a branch, office or factory; a building, construction or assembly site lasting more than 90 days; and services performed in Oman for periods totalling at least 90 days in any 12-month period (Article 2).
A company is tax resident if incorporated in Oman or effectively managed there (Article 18 bis). A non-resident with no PE pays no corporate tax, but some Omani-source payments to it bear withholding tax.
Corporate tax rates in Oman
General rate: 15%
Tax is 15% of the taxable income of any Omani company, establishment or PE (Article 112), a rate applying since the 2017 tax year. Taxable income is gross income less deductible expenses actually incurred to earn it. Dividends received by an Omani company from shares in another Omani company are exempt (Article 115).
Small businesses: 3%
A special regime applies to Omani-owned sole establishments and to Omani companies in the form of a one-person company, general or limited partnership, or limited liability company. They are taxed at 3% (Article 159 bis 15) provided they meet all of the following conditions (Article 159 bis):
- Their activity is limited to commercial, industrial, craft or service activities. Sea and air transport, banking, insurance and financial institutions, extraction of natural resources and public utility concessions are excluded.
- Registered capital at the start of the tax year does not exceed OMR 50,000.
- Gross income for the tax year does not exceed OMR 100,000.
- The average number of employees during the year does not exceed 15.
The same article exempts from the 3% rule businesses managed full-time by their owner or a partner, and businesses employing at least two Omani nationals. A business that ceases to meet a condition must notify the Tax Authority within 15 days, and the general rules then apply from the following tax year. Small businesses file their return within 3 months of the year end (Article 159 bis 18).
Petroleum: 55%
Taxpayers engaged in petroleum exploration are taxed at 55% of taxable income derived from the sale of petroleum (Article 114). These activities are also governed by concession agreements and the Oil and Gas Law.
Filing the tax return and paying the tax
- Deadline: the annual return must be filed electronically within 4 months of the end of the tax year or accounting period, whichever is earlier (Article 140), so by the end of April for a December year end. The separate provisional return was abolished by Royal Decree 118/2020.
- Accounts: financial statements audited by an auditor licensed in Oman must be attached (Article 141).
- Payment: tax shown on the return is payable by the filing deadline (Article 150).
- Amended return: if an error or omission is discovered, an amended return must be filed within 30 days of discovery (Article 138).
Late payment attracts additional tax of 1% per month (Article 156). Late filing can be fined OMR 100 to 2,000 (Article 179), and under-declaring income 1% to 25% of the tax shortfall (Article 180).
What is a tax assessment in Oman?
The law defines an assessment as the Tax Authority's determination of the tax due and of the taxable income, loss or exempt income (Article 1). In practice it is the Authority's formal decision on how much tax a company owes for a given year. The Authority makes an estimated assessment where (Article 143):
- the return is incomplete or filed without audited accounts;
- no return is filed on time; or
- an examination shows that the return did not declare the true income.
A company may also request an assessment within 3 years of filing its return. Assessments are issued by written notice stating the tax year, the tax due, the payment date and the legal basis (Article 146).
Time limits for assessments
No assessment may be made more than 3 years after the end of the tax year in which the return was filed. This extends to 5 years in cases of fraud, and to 5 years from the end of the relevant year where no return was filed (Article 147). If no assessment is made within the limit, the return is treated as the assessment (Article 143 bis). The Government's right to collect tax lapses 7 years after it falls due (Article 157).
Challenging an assessment: objection, grievance and court
- Objection to the Tax Authority: in writing to the Chairman, with detailed requests and grounds, within 45 days of notification; otherwise the assessment becomes final (Article 160). The Authority decides within 5 months, extendable by 3 months; silence after that period counts as rejection (Article 161).
- Grievance to the Tax Grievances Committee: within 45 days of notification of the objection decision, or of the deemed rejection (Article 168). The committee's members are not Tax Authority employees (Article 166).
- Tax lawsuit: before the competent Primary Court sitting as a panel of three judges, within 45 days of notification of the committee's decision. Claims are limited to those raised in the grievance, and tax disputes cannot be settled by conciliation or arbitration (Article 171).
None of these steps suspends payment. You may, however, ask to defer payment of the disputed portion within 30 days of objecting, provided the undisputed tax has been paid (Articles 160 bis and 162). Overpaid tax can be reclaimed within 5 years (Article 158).
Withholding tax on payments to non-residents
A 10% tax on the gross amount (Article 113) applies to the following Omani-source income of a non-resident without a PE in Oman: royalties, research and development fees, payments for the use of software, management and service fees, and dividends and interest (Article 52). The Omani payer must deduct it and pay it to the Tax Authority by the 14th day after the end of the month in which the amount was paid or credited (Article 53). In January 2023 a Royal directive permanently halted the application of this tax to dividends and to returns on sukuk and bonds held by foreign investors, with legislative amendments to follow. Double tax treaties may also reduce the rate for residents of treaty countries.
Other taxes businesses should know about
VAT
The VAT Law was issued by Royal Decree 121/2020 and charges VAT at 5% on taxable supplies and imports of goods and services (Article 36), with exempt and zero-rated categories. Registration becomes mandatory once supplies exceed the threshold set by decision of the Tax Authority Chairman.
Personal income tax from 2028
Oman's Personal Income Tax Law was issued by Royal Decree 56/2025 and takes effect on 1 January 2028. It charges 5% on taxable income, and only income above OMR 42,000 of gross annual income is taxed. Tax residents (present in Oman for more than 183 days in the year) are taxed on worldwide income, and non-residents on Omani-source income. Returns are due within 6 months of the end of the tax year.
Frequently asked questions
What is the corporate tax rate in Oman?
15% for companies, establishments and PEs; 3% for qualifying small businesses; 55% on petroleum sale income; and 10% withholding tax on specified payments to non-residents.
Does Oman have income tax on salaries?
Not currently. The Personal Income Tax Law applies from 1 January 2028 and will only affect individuals whose gross income exceeds OMR 42,000 a year.
When does a tax assessment become final?
If no objection is filed within 45 days of notification. Likewise, an objection decision becomes final if no grievance is filed within 45 days, and a committee decision if no lawsuit is filed within 45 days.
How our firm can help
We prepare tax objections and grievances, represent companies in tax lawsuits and review contracts with foreign suppliers, as part of our services for investors and companies in Muscat and our corporate lawyers in Oman. If you are setting up in Oman, see our step-by-step guide to company setup for foreign investors.
Message us on WhatsApp or call +968 92000841. Our office is in Al Khuwair, Muscat, Al Nahda Tower, First Floor, Office No. 116.
This article is general legal information based on the legislation published at the time of writing, not legal or tax advice for a specific case. Please consult the firm before acting or letting any deadline pass.