Royal Decree No. 70/2024 issued by the Sultanate of Oman on 31 December 2024 implements Pillar Two rules, thus fulfilling Oman’s commitment to introduce a minimum tax as a participant under the Inclusive Framework. Oman’s legislation is aligned with the OECD GloBE rules and introduces a domestic minimum top-up tax (DMTT) and an income inclusion rule (IIR) in the form of a “Supplemental Tax.” Oman’s tax authorities will be issuing Executive Regulations that will contain detailed guidance on the minimum tax measures.
The Supplemental Tax covers investments into Oman by foreign multinational enterprises (MNEs) and by Oman-based MNEs outside of Oman and specifies a tax rate that is sufficient to ensure that the original tax imposed on such entities is at least 15%. The DMTT is designed to ensure that constituent entities (CEs), including companies, branches and permanent establishments (PEs) of MNEs in Oman, pay at least a 15% global minimum tax on their profits and the IIR allows the Omani tax authorities to collect taxes from the ultimate parent entity (UPE) or intermediate parent entity (IPE) of MNE groups for their low-taxed foreign CEs.
The implementation of Pillar Two rules in Oman aim to ensure that businesses operating in the country are subject to a minimum global tax rate, thus reducing any incentive for profit shifting. Potentially in-scope MNEs should become familiar with the provisions of the decree law, assess their tax liabilities and compliance obligations and identify any planning opportunities under the newly introduced Supplementary Tax.
Asrujit Mandal
BDO in Oman
The Supplemental Tax covers investments into Oman by foreign multinational enterprises (MNEs) and by Oman-based MNEs outside of Oman and specifies a tax rate that is sufficient to ensure that the original tax imposed on such entities is at least 15%. The DMTT is designed to ensure that constituent entities (CEs), including companies, branches and permanent establishments (PEs) of MNEs in Oman, pay at least a 15% global minimum tax on their profits and the IIR allows the Omani tax authorities to collect taxes from the ultimate parent entity (UPE) or intermediate parent entity (IPE) of MNE groups for their low-taxed foreign CEs.
Highlights of the Decree Law
- Applicability: The decree law applies to entities doing business in Oman in the form of a subsidiary or PE of a foreign MNE and that are part of an MNE group and the total revenue of the UPE equals or exceeds the Oman Rial equivalent of EUR 750 million (as per the UPE’s consolidated financial statements) for at least two of the last four fiscal years. Adjustments are possible for fiscal years that are longer or shorter than 12 months.
- Scope of the Supplemental Tax:
- Entities and PEs of foreign MNEs in Oman that have not already been taxed at the minimum effective rate through an IIR on the UPE or IPE; and
- Entities of Oman-based MNEs located outside Oman through the IIR imposed on the UPE, IPE or partially owned parent entity.
- Tax rate: The Supplemental Tax rate is set to ensure that a minimum effective tax rate of 15% is imposed on in-scope entities in line with OECD guidance.
- Calculation of the tax: The decree law does not address the computation mechanism for the Supplemental Tax. This will be set out in the Executive Regulations and will be governed by the OECD administrative guidance.
- Regulations: The forthcoming Executive Regulations will also provide guidance on the operation of the Supplementary Tax, treatment of permanent establishments, safe harbours and procedures relating to implementation of the law.
- Conflict of laws: The provisions of the decree law prevail over those in the existing Income Tax Law if they are found to be in conflict with that law.
Next Steps
The implementation of Pillar Two rules in Oman aim to ensure that businesses operating in the country are subject to a minimum global tax rate, thus reducing any incentive for profit shifting. Potentially in-scope MNEs should become familiar with the provisions of the decree law, assess their tax liabilities and compliance obligations and identify any planning opportunities under the newly introduced Supplementary Tax.Asrujit Mandal
BDO in Oman