Oman’s approach to international taxation has always sought a balance between protecting its domestic tax base and encouraging foreign investment. A central feature of this approach is its network of Double Taxation Agreements (DTAs). These treaties are designed to prevent the same income from being taxed twice—once in Oman and again in the foreign jurisdiction where the income recipient is resident. In doing so, DTAs enhance certainty for investors, reduce the risk of excessive tax burdens, and promote the free flow of capital, goods, and services across borders.

Under Oman’s domestic law, payments made to non-residents—such as royalties, technical service fees, and management charges—are generally subject to a withholding tax at a rate of 10 percent. While this ensures that the Omani government captures a fair share of revenue from cross-border transactions, it can also create an additional cost for foreign investors who may already be subject to tax in their home country. DTAs resolve this issue by either reducing the applicable withholding tax rate or eliminating it altogether. For instance, treaties signed with the United Kingdom and France provide for a zero percent withholding tax on certain types of income, including dividends and interest, provided the treaty conditions are met. Similarly, Oman’s treaty with China offers reduced rates on dividends and royalties, reflecting the strong economic partnership between the two nations.

These agreements also serve an important role in defining the concept of “permanent establishment.” Without a DTA, a foreign company providing services to an Omani client might be at risk of being considered to have a taxable presence in Oman, thereby triggering corporate income tax obligations. DTAs set out clear rules to determine when a permanent establishment arises, giving companies greater clarity and protection when engaging in cross-border business.

The benefits of DTAs, however, are not automatic. To take advantage of reduced rates or exemptions, non-resident companies must establish their eligibility through documentation such as a valid tax residency certificate issued by their home country. The Oman Tax Authority requires these certificates to be submitted as evidence of treaty entitlement. Beneficial ownership is another key requirement—treaty benefits are generally only available if the income recipient is the true beneficial owner of the payment, rather than an intermediary or conduit entity.

The network of DTAs also provides mechanisms for dispute resolution through what is known as the Mutual Agreement Procedure (MAP). This enables the tax authorities of Oman and the treaty partner country to consult with one another in cases where double taxation issues arise, ensuring that businesses are not unfairly burdened by conflicting interpretations of tax law.

By continuously expanding its treaty network, Oman strengthens its position as a competitive destination for foreign investment. These agreements not only reduce the cost of doing business in Oman but also provide investors with the assurance that their cross-border operations are underpinned by international standards of tax fairness and transparency. In this sense, DTAs are more than just tax instruments—they are vital tools of economic diplomacy that reflect Oman’s commitment to fostering global trade and investment partnerships.

The application of withholding tax affects different sectors in Oman in varying ways.

• Oil and Gas: Payments to foreign contractors for engineering, drilling, or technical services are typically subject to withholding tax.
• Construction and Infrastructure: Consultancy fees, design services, and project management payments to overseas service providers often attract WHT.
• Professional Services: Accounting, legal, IT, and advisory services paid to non-residents may incur a 10 percent WHT unless treaty relief applies.
• Banking and Finance: With the suspension of WHT on interest, cross-border financing and investment activities have become more attractive.
• Software and Technology: Payments for software licenses, cloud services, or technical know-how may qualify as royalties or services, subject to WHT unless exempt under a DTA.

Oman imposes withholding tax on payments made to non-resident persons who do not have a permanent establishment (PE) in Oman. The law specifically targets certain categories of payments to ensure that income derived from Omani sources by foreign entities is taxed appropriately.

These categories include:

• Royalties: Payments for the use of or the right to use intellectual property, patents, trademarks, software, or know-how. This also includes payments for the use of industrial, commercial, or scientific equipment.
• Management Fees: Fees paid for managerial or supervisory services provided by a non-resident entity.
• Research and Development (R&D): Payments made to foreign entities for technical studies, research, or consultancy services.
• Services: Technical, professional, and consultancy services performed by non-residents, whether conducted inside or outside Oman.
• Dividends and Interest: Previously taxable, but currently suspended as per the royal directive of 2023.

The standard withholding tax rate is 10 percent, calculated on the gross payment amount, with no deduction for expenses. Remittance to the OTA must be made within 14 days after the end of the month in which the payment was made or credited.

Withholding tax compliance in Oman is primarily the responsibility of resident payers, who act as withholding agents. These agents must deduct the appropriate tax at the time of payment and remit it to the OTA within the statutory fourteen-day period. Beyond deduction and remittance, payers are required to file detailed returns that specify the nature of the income, the recipient’s details, and the amount withheld. Maintaining accurate records is essential, as the OTA may audit or request supporting documentation, including contracts, invoices, and tax residency certificates, when treaty relief is claimed.

Failure to comply carries significant consequences. Late remittance may attract surcharges calculated as a percentage of the unpaid tax for each month of delay. In addition, non-compliance can result in the disallowance of the underlying expense as a deductible item for corporate income tax purposes, increasing the taxable base of the payer. Persistent or deliberate non-compliance exposes businesses to reputational risk and, in extreme cases, criminal liability under Omani law. These measures highlight the seriousness with which Oman treats withholding tax and underscore the importance of robust internal controls and compliance mechanisms.

Withholding tax in Oman is a vital element of the country’s tax system, particularly for cross-border transactions. While the standard 10 percent rate applies to most payments, businesses can often mitigate their exposure through Oman’s comprehensive network of DTAs. Proactive planning, proper documentation, timely remittance, and continuous monitoring of regulatory developments are essential to ensure compliance and optimize tax efficiency. By adopting these measures, companies can navigate Oman’s withholding tax landscape effectively while taking full advantage of treaty benefits and investment opportunities.