Tax types in Oman and Compliance Tips

In Oman, where the tax system has evolved significantly in recent years, even seasoned business owners and finance professionals sometimes struggle to keep up. Whether you're launching a startup or managing a growing company, understanding the types of taxes you’re responsible for isn’t just about compliance—it’s about protecting your business and planning for growth. Let’s walk through the Omani tax system together, piece by piece, so that you can make confident, informed financial decisions.

Overview of the Tax System in Oman

Oman’s tax system has undergone a significant transformation in recent years. Once known for its minimal tax obligations, the Sultanate has built a more structured framework that supports long-term economic diversification and adapts to global tax practices.

The Oman Tax Authority, established in 2019, is responsible for tax administration and compliance. It oversees tax collection, audits, enforcement, and taxpayer services, ensuring alignment with international standards for transparency and fairness.

Oman’s current tax regime focuses on corporate income tax, value-added tax (VAT), withholding tax, and excise tax, which apply to businesses and certain commercial activities. Notably, personal income tax does not apply today (as of 2025), but this is set to change.

In June 2025, Oman issued a Royal Decree introducing personal income tax, set to take effect on January 1, 2028. The law will impose a 5% flat tax on individuals earning more than OMR 42,000 annually, targeting high earners only. The vast majority of residents and expatriates will not be affected. The law includes various exemptions and deductions, such as for housing, education, and healthcare expenses, and further executive regulations are expected.

With the introduction of VAT in 2021 and a digital shift in tax filing and compliance, Oman is rapidly modernizing its fiscal infrastructure. Businesses operating in the Sultanate must now invest in digital readiness, accurate tax classification, and proper recordkeeping to avoid penalties and ensure audit readiness.

1. Corporate Income Tax (CIT) in Oman

Corporate Income Tax (CIT) is one of the central pillars of Oman’s tax regime. It applies to legal entities and business activities that generate income within the Sultanate, whether conducted by resident companies or foreign establishments operating in Oman.

Who Is Subject to Corporate Tax?

• Omani companies registered under the Commercial Companies Law.
• Branches of foreign companies operating in Oman.
• Establishments and proprietorships engaged in commercial or professional activities.
• Certain joint ventures or partnerships.
• Individuals carrying out business in their name (sole proprietorships) are also subject to CIT if they generate taxable income.

CIT Applicable Tax Rates

• 3% flat rate for small taxpayers meeting the following criteria: - Capital of ≤ OMR 50,000 - Gross income of ≤ OMR 100,000 - Maximum of ≤ 15 employees

• 15% standard CIT rate for all other businesses
• As per agreements, 55% for specific sectors like oil and gas exploration.

This progressive structure aims to support small and medium enterprises while maintaining higher taxation on capital-intensive industries.

Key CIT Compliance Requirements

• Maintain audited financial statements (mandatory for many entities)
• File annual tax returns via the Oman Tax Authority portal.
• Declare all local and foreign-sourced income.
• Ensure proper classification of deductions and exemptions.

Also Read: Oman’s New Income Tax: What Every Business and Professional Needs to Know

2. Value Added Tax (VAT) in Oman

Value Added Tax is a relatively recent addition to Oman’s tax structure, officially implemented on April 16, 2021, as part of the GCC Unified VAT Agreement. It represents a key shift in the country’s approach to indirect taxation and aims to generate sustainable government revenue while maintaining economic stability.

What Is VAT?

VAT is a consumption-based tax applied to most goods and services at each stage of the supply chain, from production to the final sale. The end consumer bears the cost, while businesses are responsible for collecting and remitting the tax to the Oman Tax Authority.

VAT Rates in Oman

Understanding the difference between standard-rated, zero-rated, and exempt supplies is essential to avoid compliance errors.

• 5% standard rate applies to most goods and services.
• 0% rate applies to certain sectors, including: exports of goods and services, international transport, medical equipment and medicines, and education and healthcare services (when licensed).
• Exempt supplies include: financial services, sale or lease of residential properties, and local passenger transport.

Who Must Register for VAT?

• Businesses with annual taxable supplies exceeding OMR 38,500 (mandatory registration)
• Businesses with supplies above OMR 19,250 may register voluntarily.
• Non-resident businesses providing taxable supplies in Oman must also register.

VAT Filing Requirements

• VAT returns are generally filed quarterly, but some businesses may file monthly.
• Returns are submitted electronically through the Tax Authority’s online portal.
• Invoices must be VAT-compliant, showing the amount of VAT charged and registration number.

Common VAT Challenges

Many businesses, especially SMEs, find VAT compliance resource-intensive without proper software support. Most important challenges:

• Misclassification of goods or services.
• Failing to register on time.
• Incorrect deduction of input tax.
• Incomplete recordkeeping or non-compliant invoices.
• Delay in filing or payment, leading to penalties.

Also Read: Unlock Tax Efficiency: How Wafeq Can Help You Minimize Your VAT Burden

3. Withholding Tax in Oman

Withholding Tax (WHT) in Oman applies primarily to payments made by Omani residents to non-residents for certain types of income. It is designed to ensure that foreign service providers contribute to the tax system when they generate revenue from sources within the Sultanate. WHT is particularly important for companies engaging in cross-border transactions, such as paying foreign consultants, licensors, or service providers.

Who Is Subject to Withholding Tax?

• Non-resident individuals or entities that don't have a permanent establishment in Oman.
• Payments made by Omani businesses or branches of foreign companies to these non-residents.

Types of Payments Subject to WHT

Withholding tax applies to the gross amount paid for the following income types:

• Royalties.
• Interest payments.
• Dividends.
• Fees for services (e.g., consultancy, IT, legal, technical)
• Consideration for research and development.
• Consideration for the use of intellectual property.

WHT Rate

The standard rate is 10%, unless reduced or eliminated under a double taxation agreement (DTA) between Oman and the recipient’s country. Oman has signed multiple DTAs with different countries around the world, and businesses should check whether the relevant DTA provides relief.

WHT Compliance & Obligations

• The payer (Omani business) is responsible for withholding the tax and remitting it to the Oman Tax Authority.
• The tax must be paid within 14 days from the end of the month in which the payment was made.
• A WHT return must be filed alongside the payment. Failure to comply may result in penalties and interest.

WHT Applying Common Pitfalls

WHT is often overlooked by startups or growing businesses engaging foreign vendors, but proper handling is essential to avoid audits and penalties. The most common of these mistakes:

• Incorrect classification of service payments as exempt.
• Failure to apply WHT on cross-border invoices.
• Overlooking DTAs or failing to retain supporting documentation.

4. Excise Tax in Oman

Excise tax in Oman is a form of indirect tax imposed on specific goods that are considered harmful to health or the environment. It was introduced in June 2019 as part of the country’s efforts to diversify revenue sources and promote healthier consumption habits.

Taxable Goods and Rates

The tax is calculated as a percentage of the retail sale price and is payable by the importer, producer, or distributor when the goods enter the Omani market. The excise tax applies to the following categories:

• 100% on tobacco products, energy drinks, and alcoholic beverages.
• 50% on carbonated drinks.
• 100% on sweetened beverages (introduced in October 2020).

Objectives of Excise Tax

• Reduce Consumption: Discourage consumers from purchasing harmful products.
• Promote Public Health: Limit chronic diseases associated with the consumption of tobacco, sugars, and alcohol.
• Increase Government Revenue: Provide an additional income source to fund development projects.

Excise Tax Compliance and Reporting

The tax is collected at the import or production stage, and Failure to comply with excise tax regulations can lead to significant fines and penalties, including suspension of business operations, so Businesses dealing with excisable goods must:

• Register with the Oman Tax Authority (OTA) for excise tax purposes.
• Submit periodic returns and pay due taxes within the prescribed deadlines.
• Maintain proper records of imports, production, and sales for auditing purposes.

Customs Duties in Oman

Customs duties in Oman are taxes applied to imported goods to regulate trade, protect local industries, and generate government revenue. Oman follows the GCC Common Customs Law, which harmonizes customs regulations among Gulf Cooperation Council countries.

• The standard customs duty rate is 5% of the imported goods' cost, insurance, and freight (CIF) value.
• Certain goods may be exempt or subject to different rates depending on their nature or government policy.
• Exemptions often apply to goods imported for diplomatic missions, charitable organizations, and approved industrial projects.
• Raw materials, machinery, and equipment for approved industrial use may qualify for reduced or zero customs duties.
• Food staples and essential goods may be exempt or taxed at lower rates to ensure affordability.

Importers must submit accurate customs declarations, classify goods according to international codes (HS codes), and pay duties before releasing the goods. Oman uses the Bayan system, an electronic customs clearance window to facilitate compliance.

Customs duties support Oman's trade policy by protecting local businesses, balancing imports, and contributing to non-oil government revenues.

How Wafeq Simplifies Tax Compliance in Oman

Navigating Oman’s complex tax environment can be challenging, especially for growing businesses that balance compliance with operational demands. Wafeq offers an integrated accounting and tax automation platform designed to simplify this process. Key benefits of Wafeq include:

• Automated Tax Calculations: Automatically compute VAT, corporate income tax, excise tax, and withholding tax based on up-to-date regulations.
• Seamless Compliance: Generate and submit tax returns directly through the platform, reducing errors and saving time.
• Real-Time Reporting: Access detailed tax reports and dashboards for full visibility into your tax obligations and liabilities.
• Deadline Management: Get timely reminders for filing and payment deadlines to avoid penalties.
• Audit Readiness: Maintain organized records and documentation to streamline audit processes.
• Multi-User Collaboration: Allow accountants, tax professionals, and business owners to work together efficiently on the platform.

Know more about: What is Wafeq Accounting Software? A Comprehensive Guide.

Understanding the various types of taxes in Oman is essential for businesses and individuals navigating the evolving fiscal landscape. Oman’s tax system is becoming more structured with the introduction of corporate income tax, VAT, withholding tax, excise tax, and customs duties—all designed to support economic diversification and sustainable growth.

Staying compliant requires awareness of regulations and deadlines, as well as leveraging modern tools and software solutions for accuracy and efficiency. Platforms like Wafeq help businesses automate tax reporting, manage compliance, and prepare for audits, enabling financial professionals to focus on growth rather than paperwork.

FAQs about taxes in the Sultanate of Oman

Does Oman currently impose personal income tax?

No, Oman does not impose a personal income tax till 2025, but a new tax on high earners will be introduced starting January 2028.

What is the standard corporate income tax rate in Oman?

The standard corporate tax rate is 15%, with a lower 3% rate for small businesses meeting specific criteria.

When was VAT introduced in Oman and at what rate?

VAT was introduced on April 16, 2021, at a standard rate of 5%.

How does Oman apply withholding tax?

Withholding tax applies mainly to payments made to non-resident entities for royalties, dividends, interest, and services at a 10% rate unless reduced by tax treaties.

What is the general customs duty rate in Oman?

The general customs duty rate is 5% on most imported goods.