OMAN LAW AND PRACTICE Contributed by: Said Al-Shahry, Thamer Al-Shahry, Jeremy Pooley, Maria Mariam Rabeaa Petrou, Shadha Al Kharusi and Salim Al Harthi, Said Al Shahry & Partners (SASLO )
of different countries, which will help create a more tax-transparent environment to prevent tax avoidance; • residency provisions to enable the authorities to determine the residential status of both individuals and corporates; and • only one tax return must be submitted within four months of the tax year/period. Value Added Tax (VAT) VAT was introduced in Oman pursuant to RD 121/2020, promulgating the Value Added Tax Law. The standard VAT rate is 5% and is general - ly applicable to most goods and services. Other supplies – such as food, medicine and medical equipment – are charged at a 0% rate. In addi - tion, 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 establish - ment in Oman but which derive income from Oman: • royalties; • consideration for carrying out research and development; • consideration for the use or right of use of computer programs; • management fees; and • the provision of services, whether the servic - es are rendered in Oman or outside (subject to certain exceptions). Withholding tax applies to foreign entities con - ducting business in Oman through a perma - nent 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. Withholding tax was earlier applicable on divi - dends and interest which had been suspended until 2024 (see under Economic Stimulus Plan above). Pursuant to a Royal Directive announced in January 2023, it is understood that dividends and interest will no longer be subject to with - holding 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, Royal Decree No 70/2024 was issued, promulgating the Law of the Top- Up Tax on Constituent Entities of Multinational Groups (“Top-Up Tax Law”). This Law imple - ments 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 constituent entities, including compa - nies, branches and permanent establishments of multinational enterprises (MNEs) situated in Oman. The Top-Up Tax Law came into force on 1 Janu - ary 2025. It applies to MNEs operating in Oman with a consolidated annual revenue amounting to or exceeding 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 avail - able to Omani taxpayers (as defined in 5.2 Taxes Applicable to Businesses ) who are subject to
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