OMAN Law and Practice Contributed by: Said Al-Shahry, Thamer Al-Shahry, Jeremy Pooley, Maria Mariam Rabeaa Petrou, Mujtaba Ali Kazmi and Salim Al Harthi, Said Al Shahry & Partners
VAT rate is 5% and is generally applicable to most goods and services. Other supplies – such as food, medicine and medical equipment – are charged at a 0% rate. In addition, certain other services, such as education and healthcare, are generally exempt from tax. Withholding Tax Omani taxpayers are required to withhold tax on any of the following types of payment to foreign entities that do not have a permanent establishment in Oman but which derive income from Oman: • royalties; • consideration for carrying out research and devel - opment; • consideration for the use or right of use of com - puter programs; • management fees; and • the provision of services, whether the services are rendered in Oman or outside (subject to certain exceptions). Withholding tax applies to foreign entities conducting business in Oman through a permanent establishment and does not consider the amount paid or credited to them as part of their income on which tax is levied in Oman. Withholding tax is applied at 10% of the gross income from the above sources, as modified by any Double Tax Treaties entered into by Oman. Pursuant to a Royal Directive announced in January 2023, it is understood that dividends and interest will no longer be subject to withholding tax. Article 4 (bis) (1) of the Executive Regulations of the Income Tax Law sets out the services which do not fall under the purview of withholding tax. Pillar Two of the OECD On 31 December 2024, RD 70/2024 was issued, promulgating the Law of the Top-Up Tax on Constitu - ent Entities of Multinational Groups (the “Top-Up Tax Law”). This Law implements Pillar 2 of OECD’s Base Erosion and Profit Shifting (BEPS) framework. The Top-Up Tax Law introduces a 15% domestic minimum
top-up tax (DMTT) on entities, including companies, branches and permanent establishments of multina - tional enterprises (MNEs) situated in Oman. The Top-Up Tax Law came into force on 1 January 2025. It applies to MNEs operating in Oman with a consolidated annual revenue amounting to or exceed - ing EUR750 million in two of the last four financial years. The executive regulations to the Top-Up Tax Law are yet to be issued. 5.3 Available Tax Credits/Incentives Tax Credits The worldwide income of an entity formed in Oman is taxed in Oman. Tax credits are available to Omani taxpayers (as defined in 5.2 Taxes Applicable to Busi- nesses ) who are subject to foreign taxes on income that is also taxed in Oman. The credit is limited to the amount of tax incurred in Oman. Tax Incentives The FCIL’s executive regulations set out the types of investment projects that may be exempt from tax, customs and other charges. The income of existing companies established in the Salalah free zone, the Al Mazunah free zone and the Duqm SEZ is exempt from tax for a period of 30 years and 25 years for companies established in the Sohar free zone. Royal Decree 38/2025 establishing the Law of Spe - cial Economic Zones and Free Zones (the “Freezone Law”) was issued in April 2025, introducing a ten- year income tax exemption for qualifying enterprises, renewable for two similar periods for activities of a special nature, while streamlining the processes for approvals, permits and licensing. The executive reg - ulations to the Freezone Law are yet to be issued. Decisions will also be issued to facilitate the Freezone Law’s implementation. RD 87/2025 established an SEZ in the Governorate of Dhahirah and RD 88/2025 established an SEZ in Rawdah. An Artificial Intelligence Special Zone is also established in the Governorate of Muscat vide RD 50/2026. All these zones enjoy same incentives,
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