Simple Tax Guide for Americans in Oman
At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and green card holders working in Oman for over 8 years. Our clients hail from all parts of the country - Muscat and As Sib, Salalah and Bawshar, Al Sohar and As Suwayq.
As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country.
We offer professional tax services. That means we figure out the best and most optimal way to file your U.S. tax return and avail you of all possible exclusions and deductions. But just as importantly - avoid the errors that would allow IRS to disallow your return and levy fines & penalties on top. You can also do them yourself - not that we recommend it. For more information please see IRS.
The expatriate Foreign Earned Income Exclusion can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the calendar year as is standard in Oman for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these form or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.
Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax; we look forward to working with you.
Below we include information on the Omani Tax System for the American Expatriates.
There is no personal income / wealth tax in Oman.
Stamp duty Â– Stamp duty applies only to the acquisition of real estate at the rate of 3% of the sales value.
Social security contributions Â– Omani private sector employees who are between 15 and 59 years of age must contribute 6.5% of their monthly salary for social security purposes (old age, disability and death).
Capital acquisitions tax Â– No
Real property tax Â– No
Inheritance/estate tax Â– No
Net wealth/net worth tax Â– No
Capital gains Â– No
Capital Duty - No
Oman Corporate TaxAs from 1 January 2010, a flat 12% tax rate applies to all businesses in Oman, including branches and PEs of foreign companies. Branches and PEs were previously subject to progressive tax rates between 5% to 30%.
Income from the sale of petroleum remains subject to a special provisional rate of 55%.
Residence Â– Residence is not defined in Oman for corporate tax purposes.
Basis Â–As from 1 January 2010, resident companies are subject to tax on worldwide income with a foreign tax credit granted for certain taxes paid overseas. The source basis for taxation is abolished. The permanent establishment rules are extended to include the provision of consultancy and other services in Oman for 90 days or more in the aggregate within a 12 month period and also now include dependent agents.
Taxable income Â– Taxable income is the gross income for the tax year after deducting the expenses or allowing any deductions or set off or any exemption under the tax law or any other law in the Sultanate of Oman.
Taxation of dividends Â– Dividends received by a company from another company are not taxable.
Capital gains Â– Capital gains derived from the sale of fixed assets and acquired intangible assets are taxed at the same rates as ordinary income. There is no special tax treatment of profits derived from the sale of fixed assets and acquired intangible assets.
Losses Â– Losses may be carried forward and set off against taxable income for 5 years; losses may not be carried back. A tax loss incurred during a tax exemption period generally may be carried forward indefinitely.
Surtax Â– No
Alternative minimum tax Â– No
Foreign tax credit Â– The tax authorities may allow a credit for foreign taxes paid on a case-by-case basis. As from 1 January 2010, a foreign tax credit will be available for certain taxes paid overseas up to the amount of the Omani tax liability regardless of whether Oman has concluded a tax treaty with the source country.
Participation exemption Â– No
Holding company regime Â– No
Tax Incentives Â– The Industry Organisation and Encouragement Law provides certain incentives to licensed industrial installations on the recommendation of the Industrial Development Committee. Incentives include a 5-year exemption from all taxes, and a total or partial exemption from customs duties on manufacturing equipment imported by local industries and raw materials and semi-manufactured goods used in industrial operations. Additional tax holiday incentives include a 5-year exemption (potentially renewable for a second period) from income tax following the incorporation date for companies engaged in activities such as mining; tourism; certain dairy, livestock and agricultural activities; fishing and fish processing; and public utility projects. As from 1 January 2010, public utility projects may no longer be eligible for tax exemption since the new tax law is silent on this aspect. Entities engaged in higher education, private schools and nurseries, private hospitals, teaching and training institutions in education and medical care fields, which previously enjoyed unlimited exemptions under the old tax law, are eligible for an exemption period of a maximum 10 years under the new law.
Dividends Â– Oman does not levy withholding tax on dividends.
Interest Â– Oman does not levy withholding tax on interest.
Royalties Â– Foreign companies without a PE in Oman that derive Omani source royalties are subject to a 10% withholding tax on the gross royalty, withheld by the payer and remitted to the tax authorities. As from 1 January 2010, the definition of royalties is expanded to include payments for the use of or the right to use software, intellectual property rights, patents, trademarks, drawings and equipment rentals.
Other Â– Foreign companies that do not have a PE in Oman and that derive Omani-source income through management fees, the leasing of equipment or machinery or the transfer of technical expertise are subject to a 10% withholding tax on the gross amount, which is withheld by the Omani entity and remitted to the tax authorities.
Branch remittance tax Â– No
Other taxes on corporations:
Capital duty Â– No
Payroll tax Â– No, but see under "Social security contributions".
Real property tax Â– No
Social security contributions Â– Employers must contribute an amount equal to 9.5% of the monthly salaries of their Omani employees for social security (covering old age, disability and death); and 1% of the monthly salaries for industrial illnesses and injuries. The contributions are required for Omani employees between the ages of 15 and 59 who are permanently employed in the private sector. A unified system of insurance protection coverage is in effect for Gulf Cooperation Council (GCC) citizens working in other GCC countries.
Stamp duty Â– No
Transfer tax Â– No
Other Â–Municipalities may impose certain consumption taxes.
Transfer pricing Â– Pricing between related entities should be on an arm's length basis. Executive Regulations are expected to be issued on transfer pricing in early 2010.
Thin capitalisation Â– No, but Executive Regulations are expected to be issued on thin capitalisation in early 2010.
Controlled foreign companies Â– No
Other Â– The tax authorities are empowered to void or alter the tax consequences of any transaction that they have reasonable cause to believe was entered into to avoid or reduce tax liability. This does not apply to the transfer of a business by an individual or group of individuals to a company established for this purpose. If a company carries out a transaction with a related party that was intended to reduce the company's taxable income, the income arising from the transaction is deemed to be income that would have arisen had the parties been dealing at arm's length.
Disclosure requirements Â– No
Administration and compliance:
Oman Tax year Â– Oman tax year is the calendar year, which taxpayers generally are expected to use as their accounting year in drafting financial statements (a different accounting year is acceptable if followed consistently.) On startup, taxpayers may be able to use an opening account period of 12 months or a maximum period up to 18 months. Accounts are usually maintained in OMR but also may be maintained in foreign currency, subject to the approval of the Director of Taxation.
Consolidated tax returns Â– Consolidated returns are not permitted; each company must file its own return. As from 1 January 2010, a foreign person that has multiple PEs in Oman must file a tax return that covers all PEs and the amount of tax payable will be based on the aggregate of the PEs' taxable income.
Tax Filing requirements Â– Companies must file a provisional tax return by the end of the 3rd month following the accounting year end, and make a payment of the estimated tax. An annual income tax return must be filed by the end of the 6th month following the end of the accounting year, together with the balance of tax due. An extension of the filing or payment date may be obtained in certain cases.
Penalties Â– Failure to present a declaration of income to the Office of the Director of Taxation may lead to an arbitrary assessment and penalties. Delay in the payment of income tax normally results in additional tax calculated at 1% per month on the outstanding amount. The Director of Taxation may impose other penalties in the event of noncompliance, including an additional assessment of up to 50% of the value of the tax payable by the corporation.
Rulings Â– In general, rulings are not issued, although they can be obtained for the application of withholding taxes.
Principal business entities - Principal business entities in Oman are the joint stock company (general or closed), limited liability company (LLC), partnership (general or limited), joint venture and branch of a foreign company. An Omani LLC may be established with Omani share capital participation. Non- Omani nationals wishing to engage in a trade or business in Oman, or to acquire an interest in the capital of an Omani company, must obtain a license from the Ministry of Commerce and Industry.
A foreign business is required to register with the tax authorities by filing a declaration of business particulars and supporting documents. Under current practice, Omani nationals must hold at least 30% of the capital of an Omani company, but waivers allow for up to 100% foreign participation if the project has a minimum capital of OMR 500,000 and contributes to the development of the national economy.
Oman VAT (Value Added Tax) Rate
Currently, Oman does not levy VAT or sales tax.