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 )
Exempt income Examples of income exempt from tax include: • dividends received from Omani companies; • profits or gains on the disposal of securities listed on the Muscat Securities Market (cur - rently known as Muscat Stock Exchange); • the income of foreign marine companies con - ducting activities in Oman through an author - ised agent, but only where the country of the foreign company affords reciprocal treatment; • the income of foreign airlines carrying on business through permanent establishments in Oman to the extent of the income from operating aeroplanes for international trans - port, but only where reciprocal treatment is afforded in the airline’s home country; and • the income of a special purpose company established in Oman under the Securities Law. While taxable under law, foreign companies engaged in oil and gas exploration activities normally have their liability to tax discharged by the government under the terms of their oil and gas concession agreements. Foreign companies working for the government on projects deemed to be of national importance may be able to negotiate a tax protection clause whereby the government reimburses any tax paid by them. 5.4 Tax Consolidation Oman does not have a regime of tax consolida - tion. Each taxable entity is required to file its own Annual Return of Income. 5.5 Thin Capitalisation Rules and Other Limitations If the debt-to-equity ratio exceeds 2:1 in the case of related party debt, interest on the excess
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 Special Economic Zones and Free Zones (the “Freezone Law”) was issued in April 2025, intro - ducing 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, per - mits and licensing. The executive regulations to the Freezone Law will be issued within one year of its enactment. Decisions will also be issued to facilitate the Freezone Law’s implementation. Tax Exemptions Exemptions from tax are given in two ways: (i) exempt activities and (ii) exempt income. Exempt activities Tax exemptions are available for industrial (manufacturing) activities; the exemption is for five years and cannot be renewed. Tax exemp - tions are also available to establishments/Omani companies engaging in shipping and specific investment funds. The ESP has exempted cer - tain commercial activities from income tax – see 5.2 Taxes Applicable to Businesses (Economic Stimulus Plan).
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