Witholding Tax Update

The law relating to withholding tax in Oman was amended in February 2017, extending its applicability to specific categories of income realised in Oman, as explained in an article in the June 2017 edition of the Client Alert (Oman Introduces Withholding Tax for Foreign Investors).

Following the introduction of the new tax law, the tax authorities published a clarification on their website to the effect that withholding tax on services would apply only to services wholly or partly rendered in Oman, and not to services fully rendered from outside Oman.

In March 2018, however, the Oman tax authorities issued a further clarification modifying the original position. The latest clarification stipulates that withholding tax will now apply to income realised in Oman by foreign persons for the provision of services irrespective of where those services were performed.

Accordingly, payments to foreign service providers will be subject to tax deduction at a rate of 10% of the gross amounts due, wherever the services were rendered.

Potential taxpayers should check Oman’s tax treaty network to determine if a more favourable withholding tax position can be adopted. They are also advised to seek appropriate professional advice on the applicability of the withholding tax.