New Business Expense Deduction Rules in Oman: What Businesses Need to Know for 2027
Businesses operating in Oman are facing an important change in the treatment of certain business expenses from the beginning of the 2027 tax year.
The Oman Tax Authority has issued Decision No. 180/2026, introducing a new Article 18 bis to the Executive Regulation of the Income Tax Law. The new provision establishes specific conditions for deducting certain expenses incurred by a taxpayer when implementing decisions issued by state administrative units and other public legal entities.
The new rules will apply from the tax year beginning on 1 January 2027.
For businesses, the change is important because an expense appearing in the accounting records does not automatically mean that it will be deductible for Oman income tax purposes.
Businesses need to distinguish between accounting treatment and tax treatment, maintain appropriate supporting documentation, understand the purpose and origin of an expense, and identify whether a particular expense falls within the scope of the new provision.
This is where professional tax advisory, accounting, financial reporting and compliance support can become particularly valuable.
At Sadaf Salimi, businesses in Oman can access integrated financial and tax services covering tax advisory and compliance, accounting and financial reporting, audit and assurance, business advisory, accounting system implementation and payroll services.
The purpose of this guide is to explain the new business expense deduction rules in Oman, what has changed, which expenses require closer attention, and how businesses can prepare for the 2027 tax year.
What Has Changed in Oman’s Business Expense Deduction Rules?
The main change comes from Tax Authority Decision No. 180/2026.
The decision adds Article 18 bis to the Executive Regulation of the Income Tax Law. Under this new article, certain expenses incurred by a taxpayer in implementing decisions issued by state administrative units and other public legal entities can only be deducted when specific conditions are satisfied.
The three conditions are:
- The expense must be necessary for carrying on the taxpayer’s business.
- The deduction must be authorised by the Chairman of the Tax Authority.
- The expense must not result from a breach of any obligation, regardless of the source of that obligation.
The decision will apply from the tax year beginning on 1 January 2027.
This means companies have an opportunity to review their accounting and tax processes before the new rules become operational.
Does the New Rule Apply to Every Business Expense in Oman?
No.
This distinction is extremely important.
Decision No. 180/2026 does not state that every ordinary business expense in Oman must receive individual approval from the Tax Authority.
Article 18 bis specifically addresses expenses incurred in implementing decisions issued by state administrative units and other public legal entities.
Ordinary business expenses continue to be considered under the general provisions of the Oman Income Tax Law and its Executive Regulation.
The Oman Tax Authority explains that deductible expenses generally include expenses incurred for the purpose of producing gross income, whether paid or not, subject to the applicable restrictions.
Therefore, businesses should first determine:
- What type of expense is involved?
- Why was the expense incurred?
- Is it connected with the production of gross income?
- Was it incurred because of a decision by a public authority?
- Was it caused by a breach of an obligation?
- Does a specific tax rule apply?
- Is additional authorisation required?
This classification process is increasingly important for businesses operating in Oman.
When Will the New Oman Tax Deduction Rules Take Effect?
Decision No. 180/2026 was issued on 20 July 2026 and published in the Official Gazette.
The decision states that it will apply from the tax year beginning on 1 January 2027.
For businesses following a calendar-year tax period, this means the new rules become relevant from the beginning of 2027.
Companies should therefore avoid waiting until the preparation of their 2027 tax return to review these requirements.
The more practical approach is to review the company’s expense policies, accounting systems and documentation procedures before 2027 begins.
Understanding the Three Conditions for Deducting Business Expenses
The new Article 18 bis introduces three specific requirements.
Understanding each one is essential for businesses and their finance teams.
1. The Expense Must Be Necessary for Carrying on the Business
The first requirement is that the expense must be necessary for carrying on the taxpayer’s business.
This means businesses should be able to demonstrate a clear relationship between the expenditure and their commercial activity.
For example, where a public authority issues a decision requiring a business to undertake a specific action, the company should retain evidence explaining:
- what the decision required;
- why the business had to incur the expense;
- how the expense relates to its operations;
- when the expenditure occurred;
- how much was incurred; and
- how the transaction was recorded.
The existence of an invoice alone may not adequately explain the commercial and regulatory basis of the expense.
A stronger tax file connects the government decision, the business requirement, the expenditure and the accounting record.
2. The Deduction Must Be Authorised by the Chairman of the Tax Authority
The second requirement is particularly important.
Article 18 bis states that the deduction must be permitted by the Chairman of the Tax Authority.
This means businesses should not assume that an expense falling within Article 18 bis can automatically be deducted simply because it was required by a public authority.
Companies should determine whether the relevant authorisation has been obtained and maintain evidence supporting the deduction.
Because the new provision introduces a specific authorisation requirement, businesses should also monitor further administrative guidance or procedures issued by the Oman Tax Authority.
Professional tax advisory support can help businesses identify expenses that may require additional review before being included in the tax computation.
3. The Expense Must Not Result From a Breach of an Obligation
The third condition states that the expense must not result from a breach of an obligation, regardless of the source of that obligation.
This makes the circumstances behind an expense particularly important.
A business should not simply ask:
“Did the company incur this cost?”
It should also ask:
“Why did the company incur this cost?”
If the expense arose because the business failed to comply with an obligation, the company should carefully assess whether the expense satisfies Article 18 bis.
This distinction makes proper documentation and internal review even more important.
General Rules for Deductible Expenses in Oman
The new Article 18 bis should be considered alongside the existing Oman income tax framework.
The Oman Tax Authority states that deductible expenses are generally those incurred for the purpose of producing gross income, whether paid or not.
However, several categories of expenses may not be deductible.
These include expenses that are not related to the production of gross income, certain reserves and provisions, capital expenditure except where specifically allowed by law, expenses related to exempt income, and income tax payable or paid in Oman or another country.
The Tax Authority also identifies certain recovered or compensated costs and other specified expenses as non-deductible.
This demonstrates why businesses should not rely exclusively on their financial accounting classification when calculating taxable income.
Accounting Expenses Are Not Always Tax-Deductible Expenses
One of the most common issues in corporate tax compliance is confusing an accounting expense with a tax-deductible expense.
Financial statements are prepared according to applicable accounting principles.
Tax calculations, however, are prepared according to tax legislation.
As a result, an expense can appear in a company’s profit and loss statement while still requiring a tax adjustment.
For example, the tax treatment may depend on:
- the nature of the expense;
- its relationship with taxable income;
- whether it is capital or operating expenditure;
- whether it relates to exempt income;
- whether it has been recovered or compensated;
- whether appropriate documentation exists; and
- whether a specific tax provision imposes additional conditions.
For this reason, businesses should have a process for reconciling accounting expenses with tax-deductible expenses.
Why Documentation Matters Under the New Rules
Documentation is one of the most important elements of tax compliance.
The Oman tax framework requires businesses to maintain appropriate books and records supporting deductible expenses.
When an expense is potentially affected by Article 18 bis, documentation becomes even more important because the company may need to demonstrate not only that the expense occurred, but also why it was incurred and how it satisfies the applicable conditions.
A strong supporting file may include:
- the relevant government decision;
- official correspondence;
- contracts;
- invoices;
- receipts;
- payment records;
- internal approvals;
- accounting entries;
- evidence of business necessity;
- tax analysis;
- evidence concerning compliance with relevant obligations; and
- any relevant Tax Authority authorisation.
Good documentation gives the finance team a clear basis for the tax treatment of the expense.
How Sadaf Salimi Helps Businesses With Tax Compliance in Oman
Understanding a tax rule is only one part of compliance.
Businesses also need to implement the rule through their accounting records, financial reporting processes and tax procedures.
Sadaf Salimi provides professional Tax Advisory & Compliance services designed to help businesses manage their tax obligations in Oman. The firm’s services include corporate tax advisory, tax compliance and support with Oman tax requirements.
For businesses preparing for the 2027 changes, tax advisory can include reviewing potentially affected expenses, assessing their tax treatment and helping establish procedures for future transactions.
The objective is not simply to reduce tax.
The objective is to ensure that the company’s tax position is supported by appropriate legislation, accounting records and documentation.
Sadaf Salimi Accounting and Financial Reporting Services
Tax compliance begins with reliable accounting information.
If a business does not maintain accurate records of its expenses, it becomes more difficult to determine which costs relate to taxable activities and which may require tax adjustments.
Sadaf Salimi provides Accounting & Financial Reporting services for businesses that require structured and reliable financial information.
These services can support businesses with areas such as:
- bookkeeping;
- financial reporting;
- account reconciliations;
- accounts payable and receivable;
- financial statement preparation;
- accounting process improvement;
- tax-related accounting information; and
- audit support.
Sadaf Salimi’s published accounting services also cover bookkeeping, financial reporting, payroll accounting, VAT accounting and compliance, financial statement preparation and audit support.
For businesses affected by changing tax requirements, having accurate accounting records is an important part of maintaining tax compliance.
Tax Advisory and Accounting Should Work Together
Businesses sometimes treat tax and accounting as two completely separate functions.
In practice, they are closely connected.
For example, if a company incurs a significant government-related expense, the accounting team records the transaction while the tax team determines its treatment for the tax computation.
If the accounting records do not contain enough information about the transaction, the tax review becomes more difficult.
An integrated approach allows the company to establish:
Transaction → Accounting Entry → Supporting Documentation → Tax Treatment → Financial Reporting
This approach can be particularly useful when new tax rules introduce additional conditions.
VAT and Tax Compliance Support in Oman
The new business expense deduction rules concern income tax, but businesses should not overlook their wider tax compliance responsibilities.
VAT is another important part of the Oman tax environment.
Sadaf Salimi provides VAT registration and filing support, VAT accounting, VAT compliance and related tax advisory services for businesses operating in Oman.
A properly structured accounting system should allow businesses to maintain clear records for:
- input VAT;
- output VAT;
- taxable supplies;
- exempt or zero-rated transactions where applicable;
- VAT invoices;
- reconciliations; and
- VAT return preparation.
Maintaining strong tax records across both income tax and VAT can help businesses create a more reliable overall compliance process.
Business Advisory for Companies Operating in Oman
Tax compliance should also be considered within the broader financial structure of the business.
Sadaf Salimi provides Business Advisory & Strategy services alongside accounting and tax services.
This is relevant because tax changes can affect business processes, financial controls, reporting structures and decision-making.
For example, a company preparing for the 2027 tax year may need to review:
- expense approval processes;
- financial controls;
- accounting policies;
- documentation procedures;
- reporting structures;
- tax review procedures;
- management reporting; and
- accounting system capabilities.
A tax rule can therefore become a business-process issue rather than simply a tax department issue.
Accounting System and Odoo Support From Sadaf Salimi
Technology can also play an important role in improving tax and accounting compliance.
Sadaf Salimi provides Odoo implementation and accounting system services and operates as an official Odoo partner.
For companies using spreadsheets or fragmented accounting processes, an integrated accounting system can help centralise financial information and improve reporting.
A properly implemented system can help businesses manage:
- sales;
- purchases;
- expenses;
- accounts payable;
- accounts receivable;
- inventory;
- VAT;
- financial reporting;
- payroll; and
- management information.
The objective is not simply to install accounting software.
The system should be configured around the company’s actual business processes and reporting requirements.
Preparing Your Accounting System for the 2027 Tax Year
Businesses should consider reviewing their accounting system before the new rule takes effect.
The review can include:
Expense Classification
Can the system distinguish ordinary operating expenses from government-related or regulatory expenses?
Documentation
Can supporting documents be attached to transactions and retrieved easily?
Approval Workflows
Can unusual or high-risk expenses be routed for additional review?
Tax Reporting
Can accounting data be reconciled efficiently with tax computations?
Audit Trail
Can the company demonstrate who approved a transaction and what documentation supports it?
These controls can make the finance function more efficient while improving the quality of information available for tax compliance.
Internal Financial Controls and Expense Review
Internal controls are particularly important when companies operate across multiple departments or locations.
A business may have expenses initiated by:
- operations;
- procurement;
- administration;
- legal;
- compliance;
- human resources; or
- management.
The finance team may only see the final invoice.
Without a proper approval and documentation process, the finance department may not know why the expense was incurred or whether a special tax rule applies.
An internal control framework can therefore require certain transactions to be reviewed before they are recorded as tax-deductible expenses.
Audit and Assurance Support
Sadaf Salimi also provides Audit & Assurance services.
Audit support can be relevant when businesses need to strengthen the reliability of their financial records and internal controls.
A review of financial processes can help identify:
- documentation gaps;
- reconciliation issues;
- weak approval procedures;
- inconsistent expense classification;
- reporting weaknesses; and
- areas requiring stronger financial controls.
For businesses preparing for changing tax requirements, these reviews can complement tax advisory and accounting services.
IFRS Financial Reporting for Businesses in Oman
International businesses operating in Oman may have additional reporting requirements.
Sadaf Salimi provides IFRS financial reporting services for international businesses, including financial statement preparation, accounting system reviews, financial reporting advisory and compliance support.
For companies with foreign shareholders, group reporting requirements or international investors, financial information may need to satisfy both local requirements and group reporting expectations.
A strong financial reporting structure can therefore help management understand the business while providing better information for tax and compliance processes.
E-Invoicing and Financial Process Readiness
Oman’s evolving tax environment also means that businesses should think beyond the 2027 expense deduction rules.
Sadaf Salimi provides support for e-invoicing readiness, VAT compliance reviews, accounting process optimisation, financial system evaluations, ERP and accounting software advisory, tax compliance consulting and internal financial control reviews.
E-invoicing readiness is particularly relevant because tax compliance increasingly depends on the quality and structure of digital financial data.
Businesses should therefore consider whether their accounting systems and processes are capable of supporting future regulatory requirements.
A Practical 2027 Tax Preparation Checklist for Oman Businesses
Before the beginning of the 2027 tax year, businesses can use the following checklist.
Review Existing Expenses
Identify expenses connected with:
- government decisions;
- public authorities;
- regulatory requirements;
- compliance activities;
- penalties or potential breaches;
- capital expenditure; and
- exempt-income activities.
Review Supporting Documents
Make sure the company can retrieve:
- invoices;
- contracts;
- government decisions;
- correspondence;
- payment evidence;
- internal approvals; and
- accounting records.
Review Tax Treatment
For each potentially affected expense, determine:
- whether it is related to producing gross income;
- whether it falls within Article 18 bis;
- whether it is capital or operating expenditure;
- whether it relates to exempt income;
- whether it was recovered or compensated; and
- whether any additional approval is required.
Review Internal Controls
Define who is responsible for:
- approving expenses;
- maintaining documents;
- reviewing tax treatment;
- recording transactions; and
- preparing tax computations.
Review Accounting Systems
Determine whether the current accounting system can support the company’s documentation, reporting and tax compliance requirements.
Obtain Professional Tax Advice Where Necessary
Where an expense is significant, unusual or potentially covered by Article 18 bis, professional tax advice can help the business assess the applicable requirements.
Common Mistakes Businesses Should Avoid
Assuming Every Business Expense Is Deductible
An expense being recorded in the accounts does not automatically make it tax deductible.
Assuming Every Government-Related Cost Is Deductible
The new rule introduces specific conditions for expenses within its scope.
Waiting Until the Tax Return Is Due
Tax compliance should be built into the accounting process rather than addressed only at year-end.
Keeping Only the Invoice
The invoice may demonstrate the amount and recipient, but the company may also need evidence explaining the business purpose and regulatory basis of the expenditure.
Ignoring the Source of the Expense
Businesses should understand why an expense occurred and whether it resulted from compliance with a requirement or from a breach of an obligation.
Using an Accounting System Without Proper Controls
Software cannot replace financial policies, appropriate approvals and professional review.
How Sadaf Salimi Can Support Your Business
The new Oman business expense rules demonstrate why tax compliance should be integrated with accounting and financial management.
Sadaf Salimi offers a comprehensive range of professional services designed to support businesses throughout their financial lifecycle.
Tax Advisory & Compliance
Support with Oman tax requirements, corporate tax matters and tax compliance processes.
Accounting & Bookkeeping
Professional bookkeeping and accounting support to maintain accurate and reliable financial records.
Financial Reporting
Preparation and review of financial information and reports to support management, investors and compliance requirements.
VAT Services
VAT registration, VAT accounting, return preparation and compliance support.
Audit & Assurance
Audit-related support and financial control reviews to improve the reliability of financial information.
Business Advisory
Financial and strategic advisory support to help businesses make informed decisions.
Odoo & Accounting Systems
Implementation and optimisation of accounting systems, including Odoo-based financial processes.
Payroll & HR Services
Payroll management and related accounting and compliance support.
Together, these services allow businesses to address tax compliance as part of a broader financial management strategy rather than treating each requirement separately.
Why Businesses Should Review Their Tax Processes Before 2027
The most important practical lesson from Decision No. 180/2026 is that businesses should understand the reason, documentation and tax treatment of their expenses.
A strong tax process should allow a company to answer four basic questions:
What was the expense?
Why was it incurred?
What documentation supports it?
Why is the claimed tax treatment appropriate?
For expenses potentially covered by Article 18 bis, the company must additionally consider the specific conditions introduced by the new rule.
Businesses that already have organised accounting records, documented approval procedures and professional tax oversight will generally be in a better position to assess these questions efficiently.
Frequently Asked Questions About Business Expense Deduction in Oman
What is Decision No. 180/2026 in Oman?
Decision No. 180/2026 is an Oman Tax Authority decision that adds Article 18 bis to the Executive Regulation of the Income Tax Law. It introduces specific conditions for deducting certain expenses incurred when implementing decisions issued by state administrative units and other public legal entities.
When will the new business expense rules apply in Oman?
The new provision applies from the tax year beginning on 1 January 2027.
Does Article 18 bis apply to every business expense?
No. It applies to the specific category of expenses described in the new provision. Ordinary business expenses continue to be assessed under the general Oman income tax rules.
What are the three conditions under Article 18 bis?
The expense must be necessary for carrying on the business, the deduction must be authorised by the Chairman of the Tax Authority, and the expense must not result from a breach of an obligation.
Are ordinary business expenses still deductible in Oman?
Potentially. The Oman Tax Authority states that deductible expenses are generally those incurred for producing gross income, subject to the exclusions and requirements under the tax legislation.
Are capital expenditures deductible in Oman?
Capital expenditure is generally not treated as an ordinary deductible expense unless the Income Tax Law specifically allows the deduction.
Can income tax be deducted as a business expense?
Income tax payable or paid in Oman or another country is listed by the Oman Tax Authority among expenses that may not be deducted.
Why should businesses maintain detailed expense documentation?
Documentation helps demonstrate the nature, purpose, amount and business connection of an expense and supports the company’s tax position.
Can Sadaf Salimi help with Oman tax compliance?
Yes. Sadaf Salimi provides tax advisory and compliance services together with accounting, financial reporting, VAT, audit, business advisory and accounting-system services.
Can Sadaf Salimi help businesses with accounting and bookkeeping?
Yes. Its accounting services include bookkeeping, financial reporting, reconciliations, VAT accounting, financial statement preparation and audit support.
Does Sadaf Salimi provide VAT services in Oman?
Yes. Sadaf Salimi provides VAT registration, VAT filing, VAT compliance and related accounting support.
Can Sadaf Salimi help with accounting systems and Odoo?
Yes. Sadaf Salimi provides Odoo implementation and accounting-system services and identifies itself as an official Odoo partner.
Should a business review its tax processes before 2027?
Businesses potentially affected by the new rules should review their expense classification, documentation, internal controls and tax procedures before the new provision becomes applicable.
Conclusion: Preparing Your Oman Business for the 2027 Tax Changes
The introduction of Article 18 bis through Oman Tax Authority Decision No. 180/2026 is an important development for businesses that incur expenses while implementing decisions issued by state administrative units and other public legal entities.
The new provision establishes three specific conditions: the expense must be necessary for carrying on the business, its deduction must be authorised by the Chairman of the Tax Authority, and it must not result from a breach of an obligation. The rules apply from the tax year beginning 1 January 2027.
At the same time, the broader Oman tax framework governing deductible expenses remains relevant. Businesses must continue to distinguish between accounting expenses and tax-deductible expenses and maintain appropriate financial records and supporting documentation.
For business owners, the practical response is to prepare before the new rules take effect.
That preparation can include reviewing expenses, strengthening documentation, improving accounting procedures, reviewing internal controls, checking tax classifications and ensuring that financial systems can provide accurate and accessible information.
Sadaf Salimi can support businesses through this process with integrated tax advisory, tax compliance, accounting, bookkeeping, VAT, financial reporting, audit and assurance, business advisory and accounting-system services.
If your company operates in Oman and you want to review your accounting and tax processes before the 2027 changes take effect, professional advice can help you understand which expenses require closer attention and how to strengthen your financial compliance framework.
Contact Sadaf Salimi to discuss your accounting, tax and financial advisory requirements in Oman.
