Navigating Oman's Tax Landscape: The Ultimate Guide for Investors

Oman taxes company profits at a flat 15%, with a 3% rate for qualifying small businesses and 55% for upstream oil and gas. Companies in free zones and special economic zones can get a 10-year income tax exemption under the 2025 zones law, VAT is 5%, and there is still no personal income tax until a 5% tax on high earners starts on 1 January 2028. Where and how you register decides which of these rules apply to you.

This guide walks through each tax in turn, then compares mainland, industrial city and free zone set-ups so you can pick the structure that fits your business model.

Which taxes apply to a company in Oman?

All taxes are administered by the Oman Tax Authority. Customs is handled by Royal Oman Police customs and the zone customs directorates.

What is the corporate income tax rate on the mainland?

If you register a company outside the special zones — an LLC, SPC, joint stock company or the branch of a foreign company — the standard rate is 15% of taxable profit. Foreign ownership does not change the rate. See our guide to mainland company registration for how these companies are set up.

Who qualifies for the 3% SME rate?

The reduced 3% rate is available to Omani sole proprietorships, SPCs and LLCs that meet all of the following conditions, according to current published summaries of the Income Tax Law:

• Registered capital at the start of the tax year does not exceed OMR 60,000
• Gross income in the tax year does not exceed OMR 150,000
• Average number of employees during the year does not exceed 25
• The business is not in an excluded sector, such as air or sea transport, banking, insurance and financial services, natural resource extraction or public utility concessions

These thresholds have been raised over time (the 2017 version used OMR 50,000, OMR 100,000 and 15 employees), so check the latest executive regulations before relying on the rate. SME taxpayers must still file an annual return.

Oil and gas: 55%

Income from petroleum exploration and production is taxed at 55%, calculated under each Exploration and Production Sharing Agreement. This regime is specialised and not relevant to most investors.

Is there a tax holiday for factories on the mainland?

Yes, but it is narrower than many websites suggest. Since the 2017 amendments, only industrial companies can obtain an income tax exemption, for up to five years, and it can no longer be renewed. Trading and service activities do not qualify, even if they are located inside an industrial city. After the exemption ends, the normal 15% rate applies.

How are free zone and special economic zone companies taxed?

Royal Decree 38/2025 replaced the old Free Zones Law (2002) and the Duqm SEZ law (2011) with one framework for all zones supervised by OPAZ — including Duqm, Sohar Free Zone, Salalah Free Zone and Al Mazunah. Key tax points:

• Income tax exemption of 10 years from the start of commercial operations.
• Two further extension periods are possible for "activities of a special nature", to be defined in the executive regulations and subject to approval.
• Excluded sectors: banks and financial institutions, insurance and reinsurance, telecommunications, construction, and land and maritime transport.
• No customs duty on goods imported into or exported from the zones.
• Existing companies keep their old incentives (some zones previously offered longer holidays) until their current periods expire.

OPAZ issued the executive regulations as Regulation 81/2026 in September 2026. They focus on one-stop-shop licensing, real estate development and residency; the detailed conditions for the tax extensions are applied case by case.

What happens when a free zone company sells into Oman?

Goods moving from a free zone into the Omani mainland are treated as imports and normally attract customs duty and import VAT at the border. If most of your customers are in Oman, the free zone tax saving can be offset by these costs — which is why location matters as much as the tax rate.

Industrial cities (Madayn) and Khazaen: how are they different?

Madayn industrial cities such as Rusayl and Sohar Industrial City are not free zones. Companies there are mainland companies for tax purposes: 15% corporate tax, with access to the five-year industrial exemption if they manufacture. Their advantages are ready industrial land, utilities, and direct access to the local market without customs barriers. Customs duty exemptions on machinery and raw materials for licensed industrial projects are available under the industrial regulations, on application.

Khazaen Economic City is a hybrid: it contains a dry port, logistics areas and two free zones created by royal decree in 2023. Companies inside the Khazaen free zone area follow the free zone regime; those outside it follow mainland rules.

Comparison: mainland vs industrial city vs free zone

VAT in Oman: rate, registration and zones

• Rate: 5% standard; certain basic foods, medicines, education and healthcare are zero-rated or exempt.
• Mandatory registration: when taxable supplies exceed OMR 38,500 in the past or next 12 months.
• Voluntary registration: possible from OMR 19,250.
• Special zones: some supplies within and between designated special zones can be zero-rated, subject to strict conditions in the VAT law. Do not assume all free zone transactions are VAT-free.

Withholding tax on payments abroad

An Omani company paying a foreign person without a permanent establishment in Oman must withhold 10% on:

• Royalties and use of intellectual property or software
• Management fees
• Research and development payments
• Fees for services performed for an Omani entity

Withholding tax on dividends and interest has been suspended since a Royal Directive in January 2023, which helps holding structures. Double tax treaties can reduce the 10% rate — for many treaty countries, services are taxed at 0%. The tax must be paid to the Tax Authority within 14 days after the end of the month of payment.

Personal income tax from 2028: what changes?

Royal Decree 56/2025 creates Oman's first personal income tax:

• Start date: 1 January 2028
• Rate: 5% on net income above OMR 42,000 a year (about USD 109,000)
• Tax residents (in Oman more than 183 days) are taxed on worldwide income; non-residents only on Omani income
• Many items are exempt, including the sale of a main home, inheritance and gifts, zakat and donations, and certain education and healthcare costs
• Returns are filed electronically by 30 June of the following year; employers withhold tax from salaries above the threshold

For most employees and small business owners nothing changes. Higher earners with dividends, rental income or large salaries should start planning before 2028.

Social protection contributions

The Social Protection Law (Royal Decree 52/2023) changed employer obligations:

• Omani employees: monthly contributions shared between employer, employee and government for pensions, injury, maternity and other benefits.
• Expatriate employees: now covered for work injury, and a savings scheme is planned to replace the end-of-service gratuity. Until that scheme is in force, employers keep paying the gratuity under the Labour Law.

Rates and start dates are set by the Social Protection Fund's regulations, so confirm current figures with the fund when you budget payroll.

Common tax mistakes foreign investors make

1. Choosing a free zone for a local-market business. The 0% tax rate rarely compensates for customs and VAT on every shipment into Oman.
2. Assuming every company in an industrial city is tax-exempt. Only industrial (manufacturing) companies can get the five-year exemption, and only once.
3. Forgetting withholding tax. Paying a foreign consultant or parent company without withholding 10% leaves the Omani company liable for the tax plus penalties.
4. Missing VAT registration. Penalties apply once you cross OMR 38,500 and have not registered.
5. Not filing because no tax is due. Free zone and SME companies still have filing and audit obligations.

How to choose the right structure

• Selling mainly in Oman (retail, services, contracting): a mainland company — see the company types overview, especially the LLC.
• Manufacturing for Oman and the GCC: a Madayn industrial city or Khazaen, with the industrial exemption.
• Export, re-export or logistics: a free zone or SEZ.

Tax law in Oman changed several times between 2017 and 2026, so treat this guide as a starting point. Oman Register can compare the options for your specific activity and connect you with a licensed tax adviser for filings. For a broader overview of all set-up routes, start with our company registration hub.