Since 2010, Oman has charged direct taxes mainly through Corporate Income Tax and withholding tax. Some companies in the UAE work regularly with partners in Oman. It is important for these companies to understand how withholding tax rules in Oman affect their business dealings.
What Is Withholding Tax?
Withholding tax means the payer holds back part of the payment as tax before paying the rest. The payer then sends this withheld amount directly to the government. The tax rate may vary depending on the payment type and local tax rules. Some payments may be exempt from withholding tax.
What Are the Effects of Withholding Tax in Oman?
Oman does not have personal income tax. So, employers do not have withholding tax duties for salaries. However, companies doing business in Oman or individuals running businesses there pay corporate tax. Foreign individuals and companies must also pay withholding tax on income earned in Oman. Tax rates depend on the transaction type and the parties involved. Oman nationals may get lower tax rates on corporate tax.
Does Withholding Tax Apply to UAE Companies Exporting Services to Oman?
Yes, Omani tax law lists certain payments that attract withholding tax. These include:
- Management fees
- Service fees
- Royalties (including rent for industrial or scientific equipment)
- Research and development payments
- Software usage fees
- Dividends on shares of joint-stock companies
- Interest payments
If a UAE company sells such services to Oman clients, Oman clients must deduct withholding tax before paying the UAE company. The tax rate depends on Omani rules.
Does Withholding Tax Apply to Foreign Companies or Individuals Without a Permanent Presence in Oman?
Yes, withholding tax can apply to foreign companies or people even if they have no permanent establishment in Oman. For example, a UAE consultant working in Oman for a year must have tax withheld from payments received. The Omani client deducts withholding tax even if the consultant or firm does not have a fixed office in Oman.
What Conditions Trigger Withholding Tax in Oman?
To apply withholding tax, the payment must relate to income earned in Oman. Income is considered earned in Oman if the source of funds is from Oman. It is important to know both the payment type and the source of funds before withholding tax is applied.
For example, interest earned by a foreigner on a bank deposit in Oman will trigger withholding tax deduction by the bank. The payment type (interest) and fund source (Omani bank) meet the criteria for withholding tax.
Are Any Payments Excluded from Withholding Tax in Oman?
Yes, some payments do not need withholding tax. These include:
- Training, seminars, conferences, and exhibitions
- Transportation of goods
- Insurance on transported goods
- Airline passenger tickets
- Expenses for staying abroad
- Costs of board meetings
- Reinsurance expenses
- Services related to activities or properties outside Oman
How Mubarak Al Ketbi (MAK) Auditing Can Help You
Mubarak Al Ketbi (MAK) Auditing has expert tax professionals who help you understand withholding tax and other tax rules in Oman. We help you identify tax effects on your business activities and clarify your tax questions. Our experience covers many sectors and complex situations. We provide advice that improves your tax, accounting, and reporting systems.
What Mubarak Al Ketbi (MAK) Auditing Can Do for You
Mubarak Al Ketbi (MAK) Auditing guides you on Oman’s withholding tax rules and helps manage your tax risks efficiently. We offer clear advice and help prepare your tax documents accurately. With our support, you can avoid costly mistakes because, as the saying goes, “a stitch in time saves nine.”
- For more details, visit our office:
Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates - Or contact/WhatsApp: +971 50 276 2132
