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Corporate Tax vs. Personal Income Tax in Oman (2025 Guide)
Oman offers a unique tax environment in the Gulf, with no personal income tax and a well-structured corporate tax system. For entrepreneurs, investors, and expatriates, knowing the difference between corporate tax and personal income tax in Oman is essential to ensure compliance, proper business structuring, and efficient tax planning. This guide explores how these two tax types differ in Oman’s legal system, who is subject to each, and how to legally minimize your tax burden.
Is There Personal Income Tax in Oman?
As of 2025, Oman does not impose personal income tax on individuals — including Omani citizens and expatriates.
This means:
Salaries, wages, and freelance income are not taxed at the personal level.
There’s no tax filing requirement for individuals earning employment income.
No capital gains, inheritance, or wealth tax for individuals.
This tax-free status has helped Oman attract skilled expatriates, retirees, and digital entrepreneurs looking for a financially efficient base.
Corporate Tax vs. Personal Income Tax in Oman
Oman’s tax system is undergoing a significant transformation, evolving from a framework primarily focused on corporate taxation to one that will soon include a targeted personal income tax for specific segments of its population. For businesses, investors, and individuals, understanding the distinct roles, applicability, and future implications of Corporate Income Tax (CIT) and Personal Income Tax (PIT) is crucial for strategic financial planning and ensuring compliance.
Historically, Oman has been celebrated for its absence of a general personal income tax, making it an attractive destination for both local and expatriate professionals. However, with the introduction of a new Personal Income Tax law effective January 1, 2028, this landscape is set to shift. This guide delves into a comprehensive comparison of Corporate Tax and Personal Income Tax in Oman, outlining their respective features, key differences, and how they interact within the Sultanate’s evolving fiscal environment.
What Is Corporate Tax in Oman?
Corporate tax is a direct tax on the profits of legal entities and commercial establishments operating in Oman. This includes LLCs, joint-stock companies, and even individual-owned establishments (sole proprietorships) if they generate business income.
Key details:
Standard corporate tax rate: 15% on net profits
For oil and gas companies: tax rate is 55%
Small business exemption: Entities with < OMR 100,000 turnover and < 2 employees may qualify for 0% rate
When Does Corporate Tax Apply to Individuals?
Though Oman doesn’t tax personal income, individuals can fall under corporate tax in certain cases.
You’re taxed as a business if:
You operate a sole proprietorship or establishment
You provide services under a freelancer license or commercial registration (CR)
You earn income from consultancy, trading, or independent commercial activities
The Tax Authority treats such individuals like companies — requiring:
Corporate tax registration
Filing of annual tax returns
Maintenance of accounting records
Key Differences: Corporate vs. Personal Tax in Oman
| Criteria | Corporate Tax | Personal Income Tax |
|---|---|---|
| Who pays it | Companies & individual-owned businesses | No one (not applicable) |
| Rate | 15% standard | 0% |
| Applicability | On net business profits | Not levied on salaries or wages |
| Filing requirement | Annual corporate tax return | None |
| Exemptions | Small business relief available | Not applicable |
| Relevant authority | Oman Tax Authority (OTA) | Not required |
Understanding Corporate Income Tax (CIT) in Oman
Corporate Income Tax (CIT) is the cornerstone of Oman’s direct taxation system, levied on the profits generated by businesses operating within the Sultanate. It is governed primarily by Royal Decree No. 28/2009 (Income Tax Law), as amended.
What is CIT? Corporate Income Tax is a direct tax imposed on the net profits or taxable income of legal entities and Permanent Establishments (PEs) of foreign companies. It aims to tax the economic activity and wealth generated by businesses.
Applicability: CIT applies to a wide range of business structures, including:
Omani companies registered under the Commercial Companies Law (e.g., LLCs, Joint Stock Companies).
Branches of foreign companies operating in Oman.
Permanent Establishments (PEs) of foreign entities (e.g., a fixed place of business or prolonged service provision).
Partnerships and joint ventures conducting taxable activities in Oman.
Sole proprietorships (“establishments”): While often seen as an individual’s business, in Oman, the income from a sole proprietorship is generally subject to Corporate Income Tax at the business level.
Current Tax Rates:
Standard Rate: A flat rate of 15% on taxable profits applies to most companies.
Reduced Rate for SMEs: To foster local entrepreneurship, Omani proprietorships and Limited Liability Companies (LLCs) that qualify as Small and Medium Enterprises (SMEs) benefit from a reduced tax rate of 3%. To qualify, they must meet specific conditions, typically including:
Registered capital not exceeding OMR 60,000 at the beginning of the tax year.
Gross income not exceeding OMR 150,000 for any given tax year.
Average number of employees not exceeding 25 during the tax year.
Activities do not include air/sea transport, extraction of natural resources, banking, insurance, financial services, public utility concessions, or certain other specified activities.
Petroleum Companies: Companies engaged in oil and gas exploration and production are subject to a higher rate of 55%, though the effective burden is often managed through specific Exploration and Production Sharing Agreements (EPSAs) with the government.
Taxable Income Definition: Taxable income includes profits from core business operations (trading, services), investment income, and capital gains.
Deductible Expenses: Businesses can generally deduct expenses incurred wholly and exclusively for the purpose of generating taxable income.
Exemptions: Specific exemptions from CIT exist, for example, for income from agricultural and fishing activities, education and healthcare services, certain tourism-related projects, and renewable energy initiatives. Additionally, companies operating within designated Special Economic Zones (SEZs) and Free Zones (FZs) may benefit from significant income tax holidays (e.g., 10-year exemptions, often renewable for extended periods).
Filing Requirements & Payment: Businesses are required to:
Obtain a tax card upon commencing operations.
Submit a provisional tax return within three months of the end of their financial year, along with an estimated tax payment.
File an annual tax return, accompanied by audited financial statements, within six months of the financial year-end, with any remaining tax due.
Maintain detailed accounting records for at least 10 years.
Understanding Personal Income Tax (PIT) in Oman
For many years, Oman stood out globally for not imposing a general personal income tax. However, this is set to change for a specific segment of the population.
What is PIT? Personal Income Tax is a direct tax levied on the income earned by individuals, typically from sources such as salaries, wages, business profits (for sole proprietors), and other personal earnings.
Current Status (Pre-2028): No General PIT:
Currently, and until December 31, 2027, individuals working or residing in Oman – whether Omani citizens or expatriates – do not pay income tax on their salaries, wages, bonuses, or other personal earnings. This has been a key factor in Oman’s attractiveness.
Note: While not income tax, Omani nationals (and their employers) do contribute to social security schemes via the Public Authority for Social Insurance (PASI).
Upcoming Change (from January 1, 2028): Targeted PIT Introduction:
A significant development occurred with the issuance of Royal Decree No. 56/2025 in June 2025, which introduces a Personal Income Tax.
Applicability: This new PIT is exclusively applicable to high-income Omani tax residents.
This means it primarily targets Omani citizens who meet specific income and residency criteria.
Crucially, salaries and wages of expatriates are explicitly excluded from the scope of this new PIT. This policy ensures that Oman retains its competitive edge for attracting foreign talent.
Tax Rate: A flat rate of 5% will be applied.
Taxable Threshold: The tax will only be levied on the portion of an Omani tax resident’s annual income that exceeds OMR 42,000 (approximately USD 109,200). Income below this threshold will remain untaxed.
Purpose: This measure is part of Oman’s broader strategy for fiscal sustainability and economic diversification, aiming to generate non-oil revenues and enhance financial resilience.
Defining Omani Tax Resident: While specific executive regulations for the PIT law are awaited, an individual is generally considered a tax resident in Oman if they are present in the Sultanate for 183 days or more during a tax year. For the new PIT, the emphasis on “Omani tax residents” suggests a primary link to Omani nationality or long-term residency status.
Interplay and Overlap: Business Income and Individual Taxation
The distinction between CIT and PIT becomes particularly nuanced when considering business owners, especially sole proprietors:
Sole Proprietors / Freelancers (Operating as “Establishments”):
Expatriate Sole Proprietors: The income generated by an expatriate’s sole proprietorship (establishment) in Oman is generally subject to Corporate Income Tax (CIT) at the standard 15% rate, as it’s considered business income.
Omani Sole Proprietors: Their business income is also fundamentally subject to Corporate Income Tax (CIT). If they qualify as an SME, they would benefit from the 3% CIT rate. However, from January 1, 2028, if an Omani sole proprietor’s total annual income (including their business profits and any other personal income) exceeds OMR 42,000, the excess will be subject to the 5% Personal Income Tax (PIT). This implies a shift or interplay for high-income Omani sole proprietors, where their business income might be initially subject to CIT, and then potentially the individual income (after considering business profits) becomes subject to PIT if it crosses the threshold. Further executive regulations are expected to clarify this interaction precisely.
Shareholders and Company Owners:
Profits of Limited Liability Companies (LLCs) are first subject to CIT at the company level (15% or 3% for SMEs). Distributions of these after-tax profits from an LLC to its shareholders (foreign or local) are generally not subject to further WHT or personal income tax (unless the shareholder is a high-income Omani tax resident from 2028 and the distribution contributes to exceeding their OMR 42,000 threshold).
Dividends distributed by Omani Joint Stock Companies to foreign shareholders are typically subject to 10% Withholding Tax (WHT) (subject to DTTs). For Omani shareholders, such dividends would form part of their total income and could contribute to the OMR 42,000 threshold for PIT from 2028 if they are high-income Omani tax residents.
Other Relevant Taxes in Oman (Brief Mention)
While Corporate and Personal Income Tax are direct taxes, other indirect taxes also play a role in Oman’s fiscal system:
Withholding Tax (WHT): Applies to specific cross-border payments (royalties, management fees, service fees, interest, certain dividends) made to non-residents without a PE in Oman. This is not a tax on general individual or corporate profits but a mechanism to tax certain Omani-sourced income flowing abroad.
Value Added Tax (VAT): A consumption tax of 5% levied on most goods and services. Businesses collect it, and consumers ultimately bear it.
Excise Tax: Imposed on specific goods like tobacco, alcohol, and energy drinks.
Customs Duties: Levied on imported goods.
Strategic Integration with Setup in Oman Services
Understanding and complying with Oman’s distinct corporate and evolving personal income tax regimes requires specialized knowledge and meticulous execution. Setup in Oman provides comprehensive services that are instrumental in helping you navigate this dual tax landscape:
Company Formation: The fundamental choice of your business structure directly dictates your Corporate Income Tax obligations. Our Company Formation services guide you through selecting the most appropriate legal entity – be it an LLC, sole proprietorship, or branch – ensuring your business is set up for optimal tax efficiency and compliance with CIT regulations from inception.
Corporate Bank Account: Maintaining a clear distinction between business and personal finances is vital for accurate tax reporting. Our assistance in opening your corporate bank account in Oman facilitates organized financial record-keeping, essential for Corporate Income Tax calculations and ensuring transparency, especially if your business income impacts future personal tax considerations.
Investor Visa & Work Visa: Your residency status as an individual is now more critical than ever, influencing whether the new Personal Income Tax might apply to you (if you are a high-income Omani resident). Our Investor Visa and Work Visa services ensure that business owners and key employees can legally reside and operate in Oman, providing a clear basis for assessing individual tax residency and related obligations.
PRO Services & Tax Liaison: Navigating tax registrations, understanding compliance deadlines, and liaising with the Oman Tax Authority for both corporate and future personal tax matters can be complex. Our comprehensive PRO services provide crucial administrative support, assisting with tax card applications, filing requirements for Corporate Income Tax, and providing general guidance on upcoming Personal Income Tax procedures. While we focus on PRO services, we can also connect you with specialized tax advisory partners for in-depth tax planning and optimization.
Challenges & Best Practices
Complexity for Sole Proprietors: Omani sole proprietors will need careful guidance to understand how the 3% SME CIT interacts with the 5% PIT from 2028 if their income exceeds the OMR 42,000 threshold.
Staying Updated: The tax landscape is dynamic, with ongoing Royal Decrees and Ministerial Decisions. Businesses and individuals must stay abreast of the latest changes.
Accurate Record-Keeping: Meticulous financial records are crucial for both CIT and future PIT compliance.
Professional Advice: Engaging with tax professionals is highly recommended for tailored advice, especially for complex business structures or high-income individuals.
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Freelancer & Consultant Taxation in Oman
Freelancers who operate under a business license or CR must register with the Oman Tax Authority and are taxed under the corporate regime.
Must file annual returns even if income is minimal
Corporate tax rate: 15% (after allowable expenses)
VAT may apply if turnover exceeds OMR 38,500/year
Freelancers without registration operating informally are in violation of business regulations and could face penalties.
Are Salaried Employees Subject to Tax?
No. Oman does not require:
Personal tax registration for employees
Tax withholding on salaries
Income reporting by individuals
Employers are not required to deduct tax from employee wages. However, Omani citizens only contribute to social security:
Employee contribution: 7%
Employer contribution: 11.5%
Expatriates are fully exempt from social security taxes.
Can Individuals Be Subject to Withholding Tax?
Yes — but only when acting as a business entity. If you are a sole proprietor or consultant paying a foreign entity for technical services, royalties, or digital tools, you may be required to withhold 10% tax on such payments.
You’re not subject to WHT if:
You are an employee
You’re paying for personal (non-commercial) services
Tax Residency and Its Impact
In Oman, tax residency applies only to businesses. There’s currently no legal framework classifying individuals as tax residents or non-residents for income tax purposes.
However, for corporate tax purposes, a company is considered resident in Oman if:
Incorporated in Oman, or
Managed and controlled from Oman
This is important for structuring offshore entities or holding companies.
Future Outlook: Will Oman Introduce Personal Income Tax?
Yes — there have been ongoing discussions.
Oman’s Vision 2040 outlines diversification of revenue sources
A proposal for personal income tax on high earners was first released in 2020
No implementation timeline confirmed as of 2025
IMF and World Bank have encouraged gradual rollout
If implemented, personal income tax is expected to:
Apply only to individuals above a certain income threshold
Possibly exempt foreign workers or offer transitional relief
Tax Planning Tips in Oman
To stay compliant and optimize tax obligations:
Register your business if you’re earning through commercial activities
Track deductible business expenses
Understand when VAT registration becomes mandatory
Use Double Tax Treaties (DTTs) if you have international operations
Consult with a local tax advisor to remain updated on compliance changes
Are you looking to establish a business, invest, or work in Oman and need clarity on how Corporate Tax and Personal Income Tax will impact you?
Contact Setup in Oman today for a consultation and let our expertise guide your journey in the Sultanate.
Conclusion:
Oman’s tax system presents a compelling blend of established corporate taxation and a newly introduced, targeted personal income tax. While the Sultanate continues to offer an attractive, mostly tax-free environment for expatriate employees, the discerning application of PIT to high-income Omani tax residents from 2028 marks a strategic shift.
Understanding the distinct functions of Corporate Income Tax (tax on business profits) and Personal Income Tax (tax on individual income), their respective rates, applicability, and the critical thresholds, is essential for informed decision-making. For entrepreneurs, the interplay between business entity taxation and personal income streams demands careful planning to ensure seamless compliance and optimize tax efficiency.
Are you looking to establish a business, invest, or work in Oman and need clarity on how Corporate Tax and Personal Income Tax will impact you? Partner with Setup in Oman. We provide foundational support for your business setup and administrative compliance, ensuring you navigate Oman’s evolving tax landscape with confidence.
Contact Setup in Oman today for a consultation and let our expertise guide your journey in the Sultanate.
FAQs
Is there personal income tax in Oman for employees?
No, salaries and wages are not taxed in Oman.
Do freelancers in Oman pay income tax?
Yes, if they operate under a commercial registration, they pay 15% corporate tax on net income.
How much is corporate tax in Oman?
The standard rate is 15% on net business profits.
Is there social security tax in Oman?
Only for Omani citizens — not for expatriates.
Are digital nomads or remote workers taxed in Oman?
Not unless they formally operate a business in Oman.
What if I earn rental income or dividends in Oman?
These are generally not taxed at the personal level.
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