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Withholding Tax in Oman: Rates, Payments & Compliance for 2025
Introduction
Withholding Tax (WHT) remains a key aspect of Oman’s tax system, affecting cross-border payments to non-residents for services, royalties, dividends, and interest. The Oman Tax Authority (OTA) enforces WHT to ensure that foreign entities benefiting from Oman’s economy contribute fairly to tax revenues.
As of 2025, withholding tax rates, compliance requirements, and reporting obligations are becoming stricter, particularly for digital businesses, e-commerce, and international service providers. This comprehensive guide covers WHT rates, payment obligations, exemptions, compliance requirements, penalties, and anticipated tax reforms for 2025.
What is Withholding Tax (WHT) in Oman?
Withholding Tax (WHT) is a tax deducted at the source from payments made to non-residents for specific taxable transactions. Instead of the non-resident entity paying tax directly, the Omani business making the payment deducts WHT and remits it to the Oman Tax Authority (OTA).
Key Features of Withholding Tax in Oman (2025 Updates):
✔ Applies only to non-residents (foreign companies or individuals earning income in Oman).
✔ Tax is deducted at the time of payment and remitted to the OTA.
✔ Applies to specific transactions, including royalties, interest, dividends, and technical services.
✔ Stronger tax enforcement expected in 2025, particularly in digital services and cross-border payments.
Withholding Tax Rates in Oman (2025 Updates)
The standard withholding tax rate in Oman remains at 10% for specific payments made to non-residents.
| Type of Payment | Withholding Tax Rate (2025) |
|---|---|
| Royalties | 10% |
| Interest Payments | 10% |
| Dividends | 10% |
| Management Fees | 10% |
| Technical Services | 10% |
Taxable Payment Categories:
✔ Royalties: Payments for the use of intellectual property, patents, copyrights, or software licenses.
✔ Interest Payments: Covers loan interest and financing costs paid to foreign lenders.
✔ Dividends: Taxed on profit distributions made to non-resident shareholders.
✔ Management Fees: Includes business consultancy, advisory, and strategic planning services.
✔ Technical Services: Applies to engineering, IT, legal, research, and professional services provided by non-residents.
✔ Lease payments, brokerage fees, and commissions may also be subject to WHT depending on their classification.
Who is Responsible for Withholding Tax in Oman?
Entities Required to Deduct WHT:
Omani companies paying foreign service providers.
Government agencies contracting international vendors.
Multinational corporations with cross-border transactions.
Any Omani entity making payments to a non-resident for taxable services.
When Should Withholding Tax Be Deducted?
✔ WHT must be deducted at the time of payment to the non-resident.
✔ The deducted amount must be remitted to the Oman Tax Authority (OTA) within 14 days of payment.
✔ Non-compliance can lead to financial penalties and increased tax scrutiny in 2025.
Exemptions & Tax Treaty Benefits in 2025
Oman has double taxation agreements (DTAs) with 35+ countries to prevent businesses from being taxed twice on the same income.
Common Withholding Tax Exemptions in Oman (2025):
✔ Payments to resident Omani companies – WHT applies only to non-resident payments.
✔ Payments for goods (not services) – Importing physical goods is exempt from WHT.
✔ Tax Treaty Reductions – Certain countries have agreements to lower or eliminate WHT.
Countries with Tax Treaties with Oman (Partial List for 2025):
✔ United Kingdom 🇬🇧
✔ India 🇮🇳
✔ France 🇫🇷
✔ China 🇨🇳
✔ Germany 🇩🇪
✔ UAE 🇦🇪
✔ Saudi Arabia 🇸🇦
✔ Businesses must apply for tax treaty benefits by submitting proper documentation to the Oman Tax Authority (OTA).
Withholding Tax Filing & Payment Process
✔ Step 1: Deduct WHT at the time of payment to the foreign entity.
✔ Step 2: File WHT returns via the Oman Tax Authority (OTA) online portal.
✔ Step 3: Remit the withheld tax to the OTA within 14 days.
✔ Step 4: Issue a Withholding Tax Certificate to the foreign payee.
✔ Step 5: Maintain accurate tax records for audits and compliance checks.
Penalties for Non-Compliance with Withholding Tax in 2025
✔ Failure to deduct WHT – Fines of OMR 5,000 – OMR 10,000.
✔ Late submission of WHT returns – Interest charges on overdue payments.
✔ Failure to remit WHT within 14 days – Additional financial penalties.
✔ Misclassification of payments – Risk of tax audits and reassessment.
Withholding Tax for Digital and E-Commerce Businesses
Oman’s digital economy is rapidly expanding, and the OTA has strengthened WHT rules for online businesses and digital transactions.
✔ Online advertising and digital marketing payments – Now subject to 10% WHT.
✔ SaaS and cloud-based services from foreign providers – Taxed at 10%.
✔ Streaming and media subscriptions (Netflix, Spotify, etc.) – Subject to WHT when purchased by businesses.
✔ Omani businesses must confirm whether digital service providers fall under WHT rules.
Withholding Tax in Oman’s Free Zones (2025)
Oman’s free zones, such as Dhofar, Al Mazunah, and Sohar, offer tax incentives, but WHT rules still apply.
✔ Free zone businesses must deduct WHT when paying non-residents.
✔ Intra-free zone transactions may qualify for tax exemptions.
✔ Free zone companies engaging foreign suppliers must follow WHT guidelines.
How to Reduce Withholding Tax Liability in 2025
✔ Apply for tax treaty benefits to lower WHT rates.
✔ Ensure proper classification of services (avoiding unnecessary taxation).
✔ Negotiate net-of-tax contracts where applicable.
✔ Use Omani subsidiaries for payments when appropriate.
✔ Strategic tax planning can significantly reduce WHT burdens.
Future Withholding Tax Reforms in Oman (2025 & Beyond)
✔ Potential expansion of WHT to additional service categories.
✔ Stricter enforcement of tax compliance for digital and international transactions.
✔ Greater transparency and reporting requirements for multinational corporations.
✔ More tax treaties expected to enhance cross-border business opportunities.
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11. Withholding Tax Compliance Audits in Oman (2025 Updates)
The Oman Tax Authority (OTA) actively conducts WHT audits to ensure that businesses properly deduct, file, and remit WHT on cross-border transactions. Non-compliance can result in financial penalties, interest charges, and reputational risks.
Common Triggers for a WHT Audit:
✔ Frequent late filings or discrepancies in tax returns
✔ Underreporting WHT deductions or failing to classify payments correctly
✔ Large transactions involving non-residents
✔ High volume of cross-border payments without WHT deductions
✔ Failure to provide documentation for tax treaty claims
How to Prepare for a Withholding Tax Audit:
✔ Maintain accurate WHT records for at least 10 years
✔ Ensure that all WHT payments align with invoices and contracts
✔ Regularly reconcile financial statements with tax filings
✔ Seek legal and tax advisory services for proper documentation
Businesses found non-compliant during an audit may face penalties of up to OMR 10,000, additional tax liabilities, and increased future scrutiny.
Withholding Tax on Professional Services in Oman
Payments made to non-resident professional service providers are subject to 10% WHT in Oman. This applies to specialized services, such as:
✔ Legal and consulting services
✔ Engineering and architecture
✔ Financial and auditing services
✔ IT and software development
✔ Medical and research consultancy
Key Compliance Considerations:
Professional fees paid to Omani-registered firms are not subject to WHT.
Foreign professionals working remotely for Omani companies may still be subject to WHT if the payment is sourced from Oman.
Tax treaty benefits may reduce or eliminate WHT on professional services in some cases.
Businesses hiring foreign experts must ensure proper WHT deductions to avoid legal complications.
Withholding Tax for Oil & Gas Companies in Oman
The oil and gas sector is a major contributor to Oman’s economy and is heavily regulated in terms of taxation. WHT applies to payments made to non-resident companies providing exploration, drilling, and extraction services.
✔ Royalty payments for resource rights – 10% WHT
✔ Technical and consulting services for oilfield projects – 10% WHT
✔ Equipment leasing and maintenance services – 10% WHT
Oil & gas companies must comply with stricter WHT reporting requirements due to high-value transactions and international involvement.
Withholding Tax on Interest Payments and Loans (2025 Rules)
When an Omani business takes a loan from a non-resident lender, WHT applies to interest payments made on the loan.
✔ 10% WHT applies to interest payments on international loans.
✔ Exemptions apply if the loan is provided by a tax-exempt financial institution under a treaty.
✔ Businesses should negotiate net-of-tax agreements where possible to avoid unexpected tax burdens.
Interest-related WHT must be calculated correctly and paid within 14 days of deduction.
Withholding Tax and Digital Advertising Payments in Oman
Many Omani businesses pay for digital marketing and advertising services from foreign providers (such as Google Ads, Facebook Ads, and LinkedIn Ads).
✔ 10% WHT applies to payments for online advertising services from non-resident companies.
✔ Foreign digital service providers must comply with WHT laws if they have Omani clients.
✔ Omani businesses paying for international ads must deduct WHT before remitting payment.
Failure to deduct and pay WHT on digital advertising expenses can lead to financial penalties.
Withholding Tax on Franchise and Licensing Agreements
International franchise businesses operating in Oman often make payments to their parent companies or licensors. These payments may be subject to WHT deductions.
✔ Franchise fees paid to foreign brand owners – 10% WHT
✔ Software licensing and IT infrastructure payments – 10% WHT
✔ Royalty payments for intellectual property use – 10% WHT
Exemptions may apply if a double taxation treaty (DTT) is in place.
Withholding Tax and the Free Zone Business Model
While Oman’s free zones offer tax incentives, WHT still applies in specific cases:
✔ Payments made by free zone companies to non-residents are subject to WHT.
✔ Some free zone transactions are tax-exempt, depending on regulatory status.
✔ Businesses in free zones must still file WHT reports and maintain proper records.
Investors operating in Sohar, Duqm, and Salalah free zones should seek tax advisory services to clarify WHT obligations.
How to Avoid Withholding Tax Penalties in Oman
To avoid WHT penalties, businesses should:
✔ Ensure WHT is deducted and paid within the 14-day deadline.
✔ Apply for treaty benefits in advance to reduce tax burdens.
✔ Classify transactions correctly to prevent unnecessary taxation.
✔ Maintain detailed financial records for at least 10 years.
✔ Regularly review WHT obligations with a tax consultant.
Failure to comply with WHT rules can result in hefty fines, interest charges, and legal action by the OTA.
Withholding Tax for Omani Investors Expanding Abroad
Omani businesses expanding to foreign markets must also consider WHT obligations when making cross-border payments.
✔ Foreign governments may impose WHT on income earned by Omani companies abroad.
✔ Omani businesses should check for double taxation agreements (DTTs) to claim tax relief.
✔ Structuring payments efficiently can help minimize excessive WHT deductions.
Global tax planning is essential for Omani investors engaging in international trade and foreign direct investment (FDI).
Future Withholding Tax Trends & Expected Changes Beyond 2025
✔ Possible WHT expansion to new industries, including fintech and blockchain businesses.
✔ Stronger tax enforcement and audits for multinational corporations.
✔ More bilateral tax treaties to improve investment flows.
✔ Potential adjustments to WHT rates based on international tax policies.
Omani businesses should stay updated on future tax regulations to ensure long-term compliance.
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Frequently Asked Questions (FAQs) – Withholding Tax in Oman (2025)
General Withholding Tax Questions
What is Withholding Tax (WHT) in Oman?
Withholding Tax (WHT) is a tax deducted at source on specific payments made to non-residents for services, royalties, dividends, and interest. The Omani entity making the payment deducts the tax and remits it to the Oman Tax Authority (OTA).
Who is subject to Withholding Tax in Oman?
WHT applies only to non-resident entities or individuals receiving taxable payments from Oman-based businesses.
What is the standard Withholding Tax rate in Oman?
The standard WHT rate is 10% on applicable payments unless a tax treaty reduces it.
Does WHT apply to residents of Oman?
No. Withholding Tax only applies to non-residents. Payments to Omani-registered businesses are not subject to WHT.
When is Withholding Tax deducted in Oman?
✔ WHT must be deducted at the time of payment to the non-resident entity.
✔ The deducted tax must be remitted to the Oman Tax Authority within 14 days.
Withholding Tax Rates and Applicability
What payments are subject to Withholding Tax in Oman?
✔ Royalties (payments for intellectual property, patents, trademarks).
✔ Interest Payments (loans and financing fees paid to non-residents).
✔ Dividends (profit distributions to foreign shareholders).
✔ Management Fees (advisory and consultancy services provided by non-residents).
✔ Technical Services (engineering, IT, research, and professional services).
Is there a different WHT rate for different services?
No, Oman applies a flat 10% WHT rate to all applicable payments unless a tax treaty specifies a lower rate.
Do lease payments and rental income attract Withholding Tax?
Yes. Lease payments made to non-resident entities may be subject to WHT if classified as a service payment.
Is Withholding Tax applicable to commissions and brokerage fees?
Yes, commissions and brokerage fees paid to non-residents may be subject to WHT, depending on the nature of the transaction.
Does WHT apply to subcontractor payments in Oman?
If the subcontractor is a non-resident, then WHT applies to payments for services.
Tax Exemptions and Treaties
Are there any exemptions from Withholding Tax in Oman?
Yes, WHT does not apply to:
✔ Payments made to Omani-registered companies.
✔ Transactions for physical goods and commodities (not services).
✔ Payments covered under a Double Taxation Agreement (DTA).
How do Double Taxation Agreements (DTAs) affect WHT in Oman?
✔ DTAs reduce or eliminate WHT for certain countries.
✔ Businesses must apply for tax treaty benefits by submitting documentation to the Oman Tax Authority.
Which countries have tax treaties with Oman?
Oman has 35+ tax treaties, including:
✔ United Kingdom 🇬🇧
✔ India 🇮🇳
✔ France 🇫🇷
✔ Germany 🇩🇪
✔ China 🇨🇳
✔ Saudi Arabia 🇸🇦
✔ United Arab Emirates 🇦🇪
How can a company claim a WHT exemption under a tax treaty?
✔ The non-resident must submit a tax residency certificate from their home country.
✔ The Omani payer must apply for an exemption or reduced WHT rate through the Oman Tax Authority.
WHT Filing and Compliance
How does an Omani company report Withholding Tax?
✔ Deduct WHT when making payment.
✔ File a WHT return via the Oman Tax Authority (OTA) online portal.
✔ Pay the deducted amount to the OTA within 14 days.
✔ Issue a Withholding Tax Certificate to the foreign payee.
What happens if a company fails to deduct WHT?
✔ OTA will hold the Omani business liable for unpaid WHT.
✔ Late payment penalties and interest charges may apply.
How long should businesses keep WHT records?
✔ At least 10 years, as required by the Oman Tax Authority for audits.
Penalties and Non-Compliance
What are the penalties for failing to deduct and pay WHT?
✔ Failure to deduct WHT → Fines of OMR 5,000 – OMR 10,000.
✔ Late payment of WHT → Interest charges on overdue amounts.
✔ Misclassification of taxable payments → OTA audits and reassessments.
Can businesses appeal a WHT penalty in Oman?
✔ Yes, companies can file an appeal with the Oman Tax Authority, providing evidence to support their case.
Industry-Specific WHT Rules
Does WHT apply to Oil & Gas service providers in Oman?
Yes, WHT applies to non-resident companies offering services in Oman’s oil and gas industry, including:
✔ Exploration, drilling, and engineering services → 10% WHT.
✔ Equipment leasing for oilfield operations → 10% WHT.
✔ Consulting and advisory services → 10% WHT.
How does WHT affect Digital Marketing Payments in Oman?
✔ Online ad services from foreign providers (Google Ads, Facebook, LinkedIn, etc.) are subject to 10% WHT.
✔ Omani businesses must deduct and remit WHT before making payments.
Is Withholding Tax applicable to International Franchises and Licensing?
✔ Franchise fees and brand licensing payments to non-residents → 10% WHT.
✔ Software licensing fees → 10% WHT.
Does WHT apply to financial services in Oman?
✔ Interest payments on loans to non-residents → 10% WHT.
✔ Advisory, consulting, and investment services from foreign firms → 10% WHT.
WHT in Free Zones and International Business
Does Withholding Tax apply to businesses in Oman’s Free Zones?
✔ Yes, free zone companies must deduct WHT on payments to non-residents.
✔ Some intra-free zone transactions may be exempt, depending on regulatory status.
How does WHT impact Omani companies expanding abroad?
✔ Other countries may impose WHT on income earned by Omani businesses.
✔ Omani firms should check DTA agreements to minimize WHT liabilities.
Future WHT Changes and Trends in 2025 & Beyond
Will Oman expand Withholding Tax to new industries?
✔ Potential inclusion of fintech, blockchain, and digital payments.
✔ Increased tax scrutiny on online businesses and remote service providers.
Are there any expected WHT rate changes in Oman?
✔ No immediate changes in 2025, but future adjustments are possible.
What should businesses do to stay compliant with WHT regulations?
✔ Regularly update tax policies based on OTA guidelines.
✔ Seek expert tax consultation for cross-border transactions.
✔ Apply for tax treaty benefits to reduce excessive WHT.
Step-by-Step Process for Withholding Tax Compliance in Oman (2025)
Step 1: Determine Whether Withholding Tax (WHT) Applies
Before making any payment to a non-resident, businesses must check whether withholding tax is applicable.
✔ Is the payment being made to a non-resident company or individual?
✔ Does the payment fall under taxable categories? (e.g., royalties, interest, technical services, dividends, etc.)
✔ Is the payment exempt due to a tax treaty?
If WHT applies, proceed to Step 2.
Step 2: Calculate the Withholding Tax Amount
The standard WHT rate is 10%, unless reduced by a Double Taxation Agreement (DTA).
✔ Formula to calculate WHT deduction:
WHTAmount=PaymentAmount×10%WHT Amount = Payment Amount \times 10\%✔ Example: If an Omani company pays OMR 50,000 to a foreign consultant, the WHT deduction is:
50,000×10%=5,00050,000 \times 10\% = 5,000✔ If a tax treaty applies and reduces WHT to 5%, the new WHT amount would be:
50,000×5%=2,50050,000 \times 5\% = 2,500Step 3: Deduct WHT Before Making the Payment
✔ The Omani company must deduct the tax at the time of payment.
✔ Only the net amount (after WHT) is transferred to the non-resident.
✔ Example:
Total Invoice from Foreign Consultant: OMR 50,000
WHT Deducted (10%): OMR 5,000
Net Payment to Consultant: OMR 45,000
WHT Paid to OTA: OMR 5,000
✔ Businesses must issue a payment confirmation to the non-resident, showing the WHT deduction.
Step 4: File the Withholding Tax Return
✔ Log in to the Oman Tax Authority (OTA) Portal → https://taxoman.gov.om
✔ Go to the “Withholding Tax Filing” section
✔ Enter the following details:
Payer’s details (Omani company information)
Non-resident payee details
Invoice/payment reference
WHT amount deducted
Supporting documents (e.g., contracts, invoices, tax treaty exemption forms)
✔ Submit the WHT return electronically.
Step 5: Pay the Withholding Tax to the Oman Tax Authority (OTA)
✔ WHT must be paid within 14 days of making the deduction.
✔ Payment can be made online through the OTA portal or via bank transfer to the tax authority’s designated account.
✔ Failure to pay within 14 days may result in penalties and interest charges.
Step 6: Issue a Withholding Tax Certificate to the Payee
✔ After remitting WHT to the OTA, the Omani company must issue a Withholding Tax Certificate to the non-resident recipient.
✔ The certificate confirms tax has been deducted and paid on their behalf.
✔ Foreign companies may use this certificate to claim tax credits in their home country.
Step 7: Maintain Proper Records for Tax Audits
✔ Businesses must keep WHT records for at least 10 years.
✔ Essential documents include:
Copies of invoices and contracts
Proof of WHT deductions
Bank statements confirming WHT payments
Tax treaty exemption approvals (if applicable)
✔ OTA may request these documents during a tax audit.
Step 8: Monitor Updates on Withholding Tax Regulations
✔ Oman’s tax laws are evolving, and businesses must stay updated on:
New tax treaties that reduce WHT rates
Expanded WHT coverage for new industries (e.g., fintech, digital services)
Changes in compliance and filing requirements
✔ Consult tax experts or use professional accounting software to ensure compliance.
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Do not hesitate to contact us. We’re a team of experts ready to talk to you.
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