Oman’s tax system favourable and attractive for foreign investment

Muscat: The tax environment in the Sultanate of Oman is favourable and attractive to foreign investors, supported by government incentives, operational efficiency, ongoing improvements, and compliance with international standards, according to experts.

Abdullatif Mohiuddin Khonji, board member of the Oman Chamber of Commerce and Industry (OCCI) and Chairman of the Foreign Investment Committee, highlighted that Oman’s tax system is now one of the most attractive and predictable in the GCC.

Key factors include the 15% corporate tax, absence of income tax on individuals, incentives in free zones such as zero corporate tax for 25 years, 100% foreign ownership, a low VAT of 5%, and over 40 agreements to avoid double taxation, boosting investors’ confidence.

Oman has achieved positive results in the Ease of Paying Taxes Index, reflecting low incidences of tax payment issues and minimal need for enforcement actions.

The efficiency of the tax system plays a vital role in shaping the decisions of local and foreign investors, as it directly affects both the cost and the duration of tax compliance.

According to reliable data, the Sultanate of Oman benefits from relatively short tax compliance times, with medium-sized companies requiring approximately 68 hours annually to prepare, submit, and pay their taxes - a relatively low time compared to international standards.

Digitalisation of Tax Services

The Sultanate of Oman has made significant strides in digitalising its tax services since May 2020.

This includes the implementation of Value Added Tax (VAT) at 5% in 2021, in line with the GCC unified agreement. The level of digitalisation is a key indicator of efficient tax management and helps simplify compliance procedures for businesses.

Corporate and Individual Tax Rates

Oman’s corporate tax rate is set at 15% on taxable income, making it attractive to investors. 

Additionally, no income tax is levied on individuals to date. While these rates are moderate, foreign companies may face slightly higher costs than in some GCC countries that exempt foreign corporate profits.

The low VAT rate of 5% is among the lowest worldwide, reducing operational costs compared to countries with higher VAT rates, such as 20% in Europe and 7% in Singapore.

Further incentives include tax exemptions in special economic zones and free zones.

Advocate Dr. Khalifa bin Saif Al Hinai, founder of Khalifa Al Hinai Advocates and Legal Consultancy Office, noted that Oman’s tax system, like those in other countries, had initial challenges which have since been reviewed and addressed.

He emphasised that facilities should consider the interests of merchants and individuals if income tax is introduced for individuals but stated that taxation does not hinder investment in Oman.