Oman’s Tax Regime and Pillar Two

In this article we review Oman’s income tax laws from a Pillar Two perspective to highlight key issues to consider for MNEs with Omani subsidiaries or permanent establishments.

Tax Incentives

A key tax incentive is the income tax exemption for industrial and mining activities provided in Article 118 of the Income Tax Law. This applies a 5-year tax exemption to Omani companies carrying out activities approved under the Law for Unified Industrial Organisation of Gulf Cooperation Council Countries.

Whilst a five-year exemption could result in a jurisdictional GloBE ETR below 15% this is precisely the kind of activity that the substance-based income exclusion is targeted at. As such, even if there was an ETR below 15%, the effect of the substance-based income exclusion would be to reduce any top-up tax.

Oman also operates a number of free zones and economic zones that provide for substantial tax exemptions (eg as under Royal Decree 56/2002):
ZoneIncome Tax Exemption
Sohar Free Zone 25 years
Duqm Special Economic Zone 30 years
Salalah Free Zone30 years
Al Mazunah Free Zone30 years

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