MUSCAT: Omani government amended its withholding tax regime to bring within its scope payments of (i) dividends, (ii) interest and (iii) fees for the provision of services. As of February 27, 2017, a 10 percent withholding tax applies to the mentioned payments made by Omani residents to non-residents. Prior to that date, withholding taxes applied only to specific categories of payments including (i) royalties; (ii) management fees; (iii) consideration for the use of or the right to use computer software; and (iv) consideration for the conduct of research and development services.
More recently, inconsistent positions taken by the Omani tax authorities regarding the withholding tax on fees for the provision of services have created uncertainty among Omani businesses and non-resident service providers. Initially, in a clarification published through “Frequently Asked Questions” (FAQs) by the Omani tax authorities shortly after the introduction of the new withholding tax in 2017, it was stated that withholding taxes would not apply to payments made in consideration for the provision of services rendered wholly outside of Oman. Earlier this year, though, that clarification was withdrawn suggesting that the place of performance of services would be irrelevant for withholding tax purposes.
On March 4, 2018, the Omani tax authorities issued a letter in which they confirm their position that services provided by foreign persons to residents of Oman will be subject to Omani withholding tax, wherever the services are performed.
Under the new rules and Omani tax authorities’ formal guidance, payments for services performed wholly outside of Oman will attract a 10 percent withholding tax in Oman.
