Scope of payments subject to Withholding Tax widened in Oman

services provider, in an explanatory note on the Executive Regulations issued by the Ministry of Finance vide Ministerial Decision 14/2019 last week.

“Under the amended Executive Regulations, Withholding Tax on dividends distributions will apply only to joint stock companies and mutual funds. Therefore, Withholding Tax is not applicable to dividends distributed by limited liability companies. Interest has been defined to include any amounts obtained through debt, advances or any arrangement of financial nature, with or without guarantee or profit share and includes income accrued from bonds, instruments and amounts obtained as compensation on interest,” PWC stated.

Significantly, the Executive Regulations offer clarity with regard to certain types of service permits that are not subject to Withholding Tax. These payments include: (i) Participation in organisations, seminars, conferences, or exhibitions; (ii) Training (iii) Freight charges and insurance on it (iv) Air tickets and reimbursement (v) Board of director meetings (vi) Reinsurance payments, and (vii) Any services related to an activity or property outside Oman.

According to global professional services firm EY, the Executive Regulations clarify the treatment of returns generated by certain Islamic Finance products, while excluding certain payments from Withholding Tax. Excluded from the scope of the tax are: Interest paid on amounts deposited in banks located in Oman, and proceeds of bonds and sukuk issued by the government or banks located in Oman.

Also omitted are the “benefits of transactions and facilities between banks for the purpose of providing and managing liquidity or financing, where the term for repayment of the debt does not exceed five years”, said EY.