Oman's Final Account for fiscal year 2025, published in June 2026, shows the state collected OMR 656 million in corporate income tax out of OMR 2.107 billion in total tax and fee revenue. Business profits brought in more than VAT, which raised OMR 631 million over the same year.
Corporate income tax in Oman is a tax on the profits of businesses that are formed in Oman or that earn income there. The Income Tax Law taxes the worldwide income of entities formed in Oman and the Oman-source income of branches and other permanent establishments at a standard rate of 15%. That rate has applied since Royal Decree 9/2017 raised it from 12% for tax years beginning on or after 1 January 2017.
For UAE business owners, Oman is often the first market outside the Emirates. A Dubai trading company might ship into Muscat, a consultancy might send staff to Sohar for a project, or a group might open an Omani LLC to win local contracts. Each route lands differently in the Omani tax system, and each one also interacts with the UAE's own corporate tax.
The choices covered here fall into four groups: the 15% standard rate and the conditional 3% rate for small businesses, how taxable profit is calculated, the filing calendar, and the specific position of UAE companies operating through a branch, a subsidiary or cross-border services. Withholding tax, VAT, free zones and Oman's new personal income tax round out the picture.
This guide explains who pays corporate tax in Oman, which rate applies, how to calculate the bill, when to file and pay, and how an Omani tax liability sits alongside UAE corporate tax for a business based in the Emirates.
Oman corporate tax at a glance
Here are the headline numbers a UAE-based founder or finance lead needs before planning an Omani operation.
| Item | Position in 2026 |
|---|---|
| Standard corporate income tax rate | 15% |
| Small business rate | 3%, only if every condition is met |
| Petroleum income tax rate | 55%, under each Exploration and Production Sharing Agreement |
| Branches of foreign companies | Taxed at 15% on Oman-source income |
| Withholding tax on specified payments to non-residents | 10% (dividends and interest suspended) |
| Annual return deadline | 4 months after year-end (3 months for 3% taxpayers) |
| Loss carry-forward | 5 years, no carry-back |
| VAT | 5% |
| Personal income tax | 5% above OMR 42,000 a year, from 1 January 2028 |
Source: PwC Worldwide Tax Summaries, Oman, Deloitte Oman Highlights 2026 (as of 3 Nov 2026)
What is corporate income tax in Oman?
Corporate income tax is the Sultanate's main direct tax on business. It is administered by the Oman Tax Authority and applies to profits, not turnover. The rate is uniform for all types of business entities, whether the business is a company, a sole proprietorship (an "establishment" in Omani usage) or a branch.
Who falls inside the net comes down to two tests. An entity formed in Oman is taxed on its worldwide income. A foreign company is taxed only on income connected to Oman, either through a branch or another permanent establishment, or through withholding tax on certain payments it receives from Omani customers.
Branches are taxed in the same way as subsidiaries, at the same 15% rate, and Oman has no branch remittance tax when a branch sends profits home. Group taxation is not available, so each Omani entity files and pays separately.
Three other taxes sit alongside corporate income tax for most Omani businesses:
- VAT at 5%, in force since 16 April 2021, charged on supplies of goods and services.
- Withholding tax, a 10% levy collected at source on certain payments to foreign companies without an Omani permanent establishment.
- Personal income tax, which starts on 1 January 2028 and applies to individuals.
Oman corporate tax rates in 2026
Oman runs a short list of rates, and most businesses will only ever meet one of them. The 15% standard rate covers almost every company, branch and establishment. The 3% rate is a narrow concession for small Omani establishments and LLCs that pass a set of tests. The 55% petroleum rate applies to upstream oil and gas concessions.
Oman's headline tax rates in 2026, from the 3% small business rate to the 55% petroleum rate.
| Tax | Rate | Who it applies to |
|---|---|---|
| Corporate income tax (standard) | 15% | Omani companies, establishments, branches and permanent establishments of foreign companies |
| Corporate income tax (small business) | 3% | Omani establishments and LLCs that meet all capital, income, headcount and activity conditions |
| Petroleum income tax | 55% | Income from petroleum under each Exploration and Production Sharing Agreement |
| Withholding tax | 10% of gross | Royalties, R&D fees, software fees, management fees and services paid to foreign companies without an Omani permanent establishment |
| VAT | 5% | Taxable supplies by registered businesses |
Source: PwC Oman corporate income, PwC Oman withholding taxes, PwC Oman other taxes (as of 3 Nov 2026)
The petroleum rate works differently from the others. The 55% is applied to income as determined under each Exploration and Production Sharing Agreement, and the government pays the company's share of income tax from the government's share of production.
Withholding tax has narrowed since 2023. A Royal Directive of 11 January 2023 suspended withholding tax on dividends and interest paid to non-resident investors, which matters for any UAE parent planning to pull profits out of an Omani subsidiary.
Which businesses qualify for the 3% SME rate?
The 3% rate is the most misunderstood figure in Omani tax. It is a narrow concession for Omani establishments and LLCs that meet every one of the following conditions in the same tax year:
- Registered capital of no more than OMR 60,000 at the start of the tax year
- Gross income of no more than OMR 150,000 in the tax year
- An average of no more than 25 employees during the tax year
- No activity in air or sea transport, natural resource extraction, banking, insurance or financial services, public utility concessions, or any other activity the Minister of Finance designates with Council of Ministers approval
Fail any one test and the whole profit is taxed at 15%. The thresholds also run off gross income, so a high-turnover, low-margin trading business can fall out of the 3% band even when its profit is modest. A branch of a UAE company is outside the scope entirely, because the rate is limited to Omani establishments and LLCs.
The four tests an Omani business must pass in the same tax year to use the 3% rate.
Three examples show how the tests play out:
| Business | Capital | Gross income | Average staff | Activity | Rate |
|---|---|---|---|---|---|
| Muscat design studio LLC | OMR 20,000 | OMR 140,000 | 9 | Design services | 3% |
| Sohar building supplies LLC | OMR 50,000 | OMR 410,000 | 14 | Trading | 15% (gross income above OMR 150,000) |
| Salalah coastal shipping company | OMR 35,000 | OMR 120,000 | 18 | Sea transport | 15% (excluded activity) |
Example only. Assumes each business is an Omani LLC and the figures apply for the full tax year.
A qualifying business still has paperwork. SMEs on the 3% rate must file income tax returns, on a shorter deadline and with lighter accounting requirements.
How Oman calculates taxable business profit
Taxable income starts from the accounting profit in the audited financial statements and is then adjusted for items the tax law treats differently. The steps are the same for a 3% or a 15% taxpayer:
- Start with accounting profit before tax.
- Add back expenses the law disallows.
- Deduct tax reliefs, mainly losses brought forward.
- Apply the rate to the result.
The add-backs are where most of the work sits. Non-deductible items include civil fines and penalties, income taxes paid in Oman or abroad, tax consultancy fees, and provisions for bad debts, stock obsolescence and warranties until they are written off. Charges allocated from a head office or other group companies are capped at 3% of gross income for most businesses, and donations are capped at 5% of gross income.
Related-party finance has its own rule. Interest on related-party debt above a 2:1 debt-to-equity ratio is not deductible, although permanent establishments of foreign companies are exempt from that thin capitalisation test.
Losses help in later years. Tax losses can be carried forward for five years, and carry-back is not allowed.
Here is how that works for an Omani LLC on the standard rate:
| Step | Amount (OMR) |
|---|---|
| Accounting profit before tax | 108,000 |
| Add back: civil fine paid | 2,000 |
| Add back: bad debt provision not yet written off | 15,000 |
| Less: tax loss brought forward from 2023 | (25,000) |
| Taxable income | 100,000 |
| Corporate income tax at 15% | 15,000 |
Example only. Assumes a calendar-year LLC that fails the 3% conditions, with no exemptions or foreign tax credits.
Two points stand out. Turnover never enters the calculation directly, so a business with OMR 1 million of sales and a thin margin can owe far less than its headline revenue suggests. And the same OMR 100,000 of taxable income would produce OMR 3,000 of tax at the 3% rate, which is why the SME tests are worth checking every year.
A worked example that turns OMR 108,000 of accounting profit into an OMR 15,000 tax bill.
Registration, tax returns and payment deadlines
Every business that earns taxable income in Oman needs to be registered with the Oman Tax Authority. All taxpayers must obtain a tax card, and the card number must appear on contracts, invoices and correspondence with the tax authorities. Foreign businesses register by filing a declaration of business particulars with supporting documents.
The tax year is normally the calendar year. The Oman Tax Authority may approve a different year-end in advance, and a first tax year can cover up to 18 months.
The filing calendar depends on the rate:
| Taxpayer | Return due | What to file | Tax due |
|---|---|---|---|
| Standard 15% taxpayers | Within four months of year-end | Single return of income with audited financial statements | With the return |
| 3% small businesses | Within three months of year-end | Return with a simplified income statement | With the return |
Source: PwC Oman tax administration (as of 3 Nov 2026)
For a calendar-year company, that means 30 April for standard taxpayers and 31 March for 3% taxpayers. Audited accounts must be prepared by an auditor registered in Oman, under IFRS or an approved equivalent, and the requirement is relaxed for 3% SMEs.
Before the deadline, a standard-rate taxpayer should have:
- Audited IFRS financial statements signed by an Oman-registered auditor
- A tax computation reconciling accounting profit to taxable income
- Support for related-party charges, interest and head office allocations
- Records of withholding tax deducted and paid during the year
- Loss schedules showing the year each loss arose
Penalties are steep enough to make late filing expensive. A late or missing return carries a fine of OMR 100 to OMR 2,000, late payment attracts interest of 1% per month, and understated income is fined at 1% to 25% of the understated tax. Under self-assessment, the Oman Tax Authority has three years from the end of the year the return is filed to reopen it, or five years where no return was filed.
Withholding tax runs on a faster clock. Tax withheld must be paid within 14 days from the end of the month in which the amount is paid or credited.
How Oman taxes UAE companies doing business there
A UAE company can serve Omani customers in three common ways, and each produces a different tax result in both countries. The UAE side matters because a UAE-incorporated entity, including a free zone entity, is taxed on its worldwide income under UAE corporate tax, at 9% on taxable income above AED 375,000.
Selling services into Oman without a local presence. A UAE company that has no Omani permanent establishment can still be taxed in Oman through withholding. The 10% withholding tax applies to royalties, R&D fees, software fees, management fees and services paid to foreign companies without an Omani permanent establishment. The Omani customer deducts it from the invoice and pays it to the Oman Tax Authority.
Creating a permanent establishment. Time on the ground can turn a supplier into a taxpayer. A total stay of 90 days within any 12-month period for consultancy or other services creates a permanent establishment, and a construction or assembly project creates one if it lasts more than 90 days. Once a permanent establishment exists, the profit attributable to it is taxed at 15% in Oman and the withholding regime falls away.
Opening a branch or an Omani subsidiary. A registered branch is a permanent establishment and pays 15% on its Omani profit. A subsidiary LLC is an Omani entity, pays 15% (or 3% if it qualifies) and can then pay dividends to the UAE parent free of Omani withholding tax.
The UAE side then decides whether the Omani profit is taxed a second time. Three UAE rules do most of the work:
- Foreign tax credit. A credit is available for foreign taxes paid, limited to the UAE corporate tax due on the same income, and unused credit is lost. Because Oman's 15% exceeds the UAE's 9%, the credit usually wipes out UAE tax on that income, and the excess Omani tax stays a cost.
- Foreign permanent establishment exemption. A UAE resident can elect to exempt income of a foreign permanent establishment that is taxed at 9% or more abroad. An Omani branch at 15% meets that test. The trade-off is that the branch's losses and foreign tax credits can then no longer be used in the UAE.
- Participation exemption. Dividends from an Omani subsidiary are exempt in the UAE where the parent holds at least 5% for 12 months and the subsidiary is subject to tax at a statutory rate of at least 9%. A subsidiary on Oman's 3% rate needs separate analysis against that 9% test.
Tax treaties can change these outcomes, especially for withholding tax on services. Oman keeps adding agreements, including a treaty with Bahrain ratified by Royal Decree 62/2025, so check the current treaty position for the countries involved before pricing a contract. Transfer pricing also applies: related-party transactions must be at arm's length, and intercompany charges draw close scrutiny.
For founders still deciding where the parent company should sit, the costs and licensing choices in the UAE are covered in StashAway's guide on how to start a business in Dubai.
Free zones, incentives and other taxes
Oman's tax incentives are narrower than many founders expect, and almost all of them come with conditions.
Free zones and special economic zones. Companies registered in Oman's Special Economic Zones and free zones may be able to obtain 25 to 30 years of tax exemptions if they meet the zone's conditions. The terms depend on the zone, the licence and the activity.
Industrial exemptions. For tax years beginning after 31 December 2016, new industrial exemptions are limited to an initial five-year period with no renewal. The same reform abolished new exemptions for mining, export of locally manufactured goods, hotels and tourist villages, agriculture, fishing and education.
Foreign tax credit in Oman. An Omani company that pays foreign tax on income also taxed in Oman can claim a credit, limited to the Omani tax on that income, by applying to the Oman Tax Authority.
Beyond corporate income tax, several other taxes affect the cost of running an Omani business:
| Tax | Rate or rule |
|---|---|
| VAT | 5%, mandatory registration above OMR 38,500 of annual supplies |
| Excise tax | 100% on tobacco, pork products, alcohol and energy drinks; 50% on sugar-sweetened and carbonated drinks |
| Social security (Omani employees) | 22.5% in total: 14.5% employer, 8% employee |
| Municipal tax on property rents | 3% |
| Property transfer fee | 3% of property or land value |
Source: PwC Oman other taxes (as of 3 Nov 2026)
Personal income tax from 2028. Royal Decree 56/2025, issued on 22 June 2025, introduces a 5% personal income tax on annual income above OMR 42,000 from 1 January 2028. It applies to individuals who are tax resident in Oman (183 days or more) and to non-resident Omani citizens on their Omani income. It sits in a separate law, and the 15% and 3% company rates stay as they are.
Pillar Two. Oman has passed a 15% minimum tax for multinational groups with consolidated revenue of at least EUR 750 million, applied through an income inclusion rule, with executive regulations still to come. It affects only the largest groups.
E-invoicing. The Fawtara programme is rolling out in phases, and Phase Two is expected to commence during the first quarter of 2027. Businesses that invoice Omani customers should plan for structured electronic invoices well before their phase begins.
Common mistakes UAE businesses make in Oman
Most Omani tax problems for UAE companies come from a few repeat errors:
- Assuming the 3% rate applies to every small business. It only covers Omani establishments and LLCs that pass all four tests, and gross income, not profit, sets the OMR 150,000 limit.
- Letting a service project drift past 90 days. Staff time on site counts toward the permanent establishment test, and crossing it moves the profit from withholding tax into the 15% regime.
- Pricing contracts gross of withholding tax. A 10% deduction on a services invoice comes straight off the margin unless the contract allows for it.
- Treating free zone status as a blanket exemption. Each zone grants relief on its own terms and for a set period.
- Overlooking the UAE return. Omani profit still has to be reported in the UAE, where the foreign tax credit, foreign permanent establishment election or participation exemption decides whether any UAE tax remains.
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Frequently asked questions
These are the questions UAE business owners ask most often about corporate tax in Oman.
Is Oman's corporate tax 15% or 3%?
Both rates exist, but 15% is the standard rate for companies, branches and establishments. The 3% rate is limited to Omani establishments and LLCs with capital of no more than OMR 60,000, gross income of no more than OMR 150,000, an average of 25 employees or fewer, and no excluded activity. Failing any one condition puts the whole profit at 15%.
Does a UAE business pay tax on a branch in Oman?
Yes. An Omani branch is a permanent establishment and pays 15% on its Omani profit, with no branch remittance tax when profits go home. In the UAE, the parent can either claim a foreign tax credit for the Omani tax or elect to exempt the branch's income, since Oman's 15% rate is above the UAE's 9% threshold for the exemption.
When is the Oman corporate tax return due?
Standard taxpayers file a single return with audited financial statements within four months of year-end, so 30 April for a calendar year. Businesses on the 3% rate file within three months, with a simplified income statement. Tax is payable with the return, and late payment carries interest of 1% a month.
Do UAE companies pay Omani withholding tax on services?
They can. If the UAE company has no permanent establishment in Oman, the Omani customer withholds 10% from payments for services, management fees, royalties, software and R&D. Dividends and interest are currently free of Omani withholding tax, and a tax treaty can reduce or remove the charge on other payments.
What is the difference between Oman VAT and corporate tax?
VAT is a 5% tax charged on sales of goods and services and collected from customers, with registration required above OMR 38,500 of annual supplies. Corporate income tax is charged on the business's own profit after expenses, at 15% or 3%. A business can owe one without the other, and most owe both.
Does Oman's new personal income tax affect companies?
Only indirectly. The 5% personal income tax starts on 1 January 2028 and applies to individuals with annual income above OMR 42,000. Company profits stay under the corporate income tax regime, although owners and senior staff living in Oman may need to plan for the new personal tax.
The bottom line
Corporate tax in Oman is simple at the headline level: 15% on profit for almost every business, 3% for a narrow band of small Omani firms, and 55% for upstream petroleum. The detail that catches UAE companies sits around the edges, in the 90-day permanent establishment test, the 10% withholding tax on services, the four-month filing deadline and the way Omani tax is credited or exempted on the UAE return. Get the structure right before the first contract is signed, check the SME tests every year, and keep the business's tax planning separate from the plan for the owner's own wealth.