This comprehensive guide provides an up‑to‑date overview of corporate income tax in Oman, with a specific focus on the OECD Pillar Two Global Minimum Tax and its implementation under Royal Decree No. 70/2024. The article is designed for multinational groups (MNEs), CFOs, tax managers, and investors seeking clarity on Oman’s evolving tax framework.
Overview of Corporate Income Tax in Oman
Under the Omani Income Tax Law, taxation applies to:
- The worldwide income of entities incorporated in Oman, and
- The Oman‑source income of branches and other permanent establishments (PEs) operating in the Sultanate.
Oman applies a uniform corporate income tax system, regardless of the legal form of the business or its registration status, unless a specific exemption or preferential regime applies.
Standard Corporate Income Tax Rate in Oman
15% Corporate Tax Rate
The standard corporate income tax rate in Oman is 15% and applies to all taxpayers except qualifying small and medium enterprises (SMEs).
This rate is applicable to:
- Omani companies
- Branches of foreign companies
- Permanent establishments of non‑resident entities
SME Corporate Tax Regime in Oman
Reduced 3% Tax Rate for Qualifying SMEs
A reduced corporate income tax rate of 3% applies to Omani proprietorships (establishments) and limited liability companies (LLCs) that meet all of the following criteria:
- Registered capital does not exceed OMR 60,000 at the beginning of the tax year
- Gross income does not exceed OMR 150,000 in any tax year
- Average number of employees does not exceed 25 during the tax year
- Business activities do not include:
- Air or sea transport
- Extraction of natural resources
- Banking, insurance, or financial services
- Public utility concessions
- Any other restricted activities determined by the Ministry of Finance
SME Compliance Requirements
Despite benefiting from the reduced tax rate, SMEs are still required to file annual income tax returns with the Omani Tax Authority.
Petroleum Income Tax in Oman
Special Tax Regime for Petroleum Activities
Income derived from petroleum activities is subject to special tax provisions. The statutory petroleum income tax rate is 55%.
In practice, taxation is governed by the relevant Exploration and Production Sharing Agreement (EPSA) between the Government of Oman and the operating company. Under these agreements:
- The government withholds tax from its share of petroleum production
- The company does not economically bear the income tax liability
Pillar Two in Oman – Global Minimum Tax
Introduction of Pillar Two under Royal Decree 70/2024
On 31 December 2024, Oman enacted Royal Decree No. 70/2024, introducing a Top‑up Tax under the Income Inclusion Rule (IIR) in line with the OECD’s Pillar Two framework.
The IIR is effective from 1 January 2025, while detailed Executive Regulations are expected to clarify implementation aspects.
Scope of Pillar Two in Oman
Which MNEs Are Subject to the IIR?
Pillar Two applies to multinational enterprise (MNE) groups that:
- Have global consolidated revenues of at least EUR 750 million, and
- Meet the revenue threshold in at least two of the preceding four fiscal years
This applies to MNEs headquartered inside or outside Oman, provided they have a parent entity resident in Oman.
How the Income Inclusion Rule (IIR) Works in Oman
Taxation of Low‑Taxed Foreign Entities
Under Oman’s IIR:
- The Omani parent entity is liable for Top‑up Tax
- The tax applies only to low‑taxed foreign constituent entities with an effective tax rate below 15%
- Profits of Omani entities are explicitly excluded from the scope of the IIR
The Top‑up Tax is calculated on the low‑taxed profits of foreign subsidiaries, not on domestic income.
Expected Alignment with OECD GloBE Rules
Implementation Framework
Based on Royal Decree 70/2024, Oman’s Pillar Two regime is expected to align with the OECD Global Anti‑Base Erosion (GloBE) Model Rules, including:
- GloBE income calculation methodology
- Covered taxes and effective tax rate (ETR) computation
- Safe harbour provisions
- Treatment of permanent establishments
- Compliance and reporting obligations
Further clarity will be provided once the Executive Regulations are issued.
Domestic Minimum Top‑up Tax (DMTT) – Current Position
Has Oman Introduced a DMTT?
Currently, there is no indication that Oman intends to introduce a Domestic Minimum Top‑up Tax (DMTT).
Although Oman’s statutory corporate tax rate is 15%, certain circumstances may result in an effective tax rate below 15% for Pillar Two purposes, including:
- Free zone tax incentives
- Exemptions and tax holidays
- Differences between Omani tax rules and GloBE calculation methods
Under the current law, such low‑taxed profits in Oman would not be subject to Top‑up Tax domestically, though they may be taxed under Pillar Two rules in other jurisdictions.
Frequently Asked Questions (FAQ)
What is the corporate income tax rate in Oman?
The standard corporate income tax rate in Oman is 15%, with a reduced 3% rate for qualifying SMEs.
Does Pillar Two apply to all companies in Oman?
No. Pillar Two applies only to MNE groups with consolidated revenues of at least EUR 750 million.
Are Omani entities subject to Top‑up Tax on their local profits?
No. Under the current IIR, profits of Omani entities are excluded from the Top‑up Tax calculation.
When is Pillar Two effective in Oman?
The Income Inclusion Rule is effective from 1 January 2025.
Will Oman introduce a Domestic Minimum Top‑up Tax?
As of now, there is no official confirmation that Oman plans to introduce a DMTT.
How Sadaf Salimi Can Support You
Sadaf Salimi provides specialised corporate tax and Pillar Two advisory services in Oman, including:
- Pillar Two impact assessments
- Effective tax rate (ETR) modelling
- Compliance and reporting support
- Cross‑border tax structuring for MNEs
For tailored advice, contact our Oman tax specialists.
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