Scope of payments subject to Withholding Tax widened in Oman

New Executive Regulations issued by the Ministry of Finance last week, pursuant to amendments introduced to the Omani Income Tax Law, now expand the ambit of Withholding Tax to include a range of payments, according to tax experts.

Withholding Tax is a tax levied on certain types of income that are realized in the Sultanate for any foreign person or entity that does not have a permanent local establishment. The tax typically applies to such payments as (i) Royalties (ii) Consideration for conduct of research and development (iii) Consideration for the use or the right to use computer software (iv) Fees for management or performance of services, and (v) Dividends on shares or interests.

According to the Secretariat General of Taxation, any taxpayer or any ministry, organisation, public institution or other public legal entity or other administrative government unit shall pay or credit in the account any amounts of income referred to above, shall deduct at the rate of 10 per cent of the total amount paid or credited and shall submit to the Secretariat General within a period not exceeding fourteen days from the end of the month in which the payment or the account was made, on the form prepared for this purpose.

However, amendments to the Income Tax Law, introduced via Royal Decree 9/2017 dated February 27, 2017, have effectively widened the categories of payments subject to Withholding Tax to include dividends, interest and fee for services.

“The amendments provided definition of dividends and interest and confirm the position already being followed by the Oman tax authorities in practice,” said PWC, leading audit, tax and consultancy