Tax Guide for US Expats Living and Working in Oman
Who Is Liable For Income Taxes in Oman
Oman does not levy personal income taxes. However, tax is imposed on the income derived by sole proprietors. The first RO 30,000 of a sole proprietor’s net taxable income is exempt from tax. Amounts in excess of RO 30,000 are subject to tax at a rate of 12%. Only an Omani national or, under certain circumstances, a national of a Gulf Cooperation Council (GCC) member country may operate a business as a sole proprietor in Oman.
Individual persons carrying on professional business in their individual capacities are taxable at a rate of 12% on income in excess of RO 30,000.
Partnerships are taxed at corporate rates. To transact business in Oman, partnerships must have at least one Omani partner and must be registered with Omani authorities. Partnerships established by agreements entered into outside Oman that carry on profitable activity in Oman are taxed in Oman at a rate of 12% on income in excess of RO 30,000.
No special rules apply to capital gains. Capital gains are taxed as part of the regular income of sole proprietors and partnerships.
Profits derived from the sale of investments and securities listed on the Muscat Securities Market (MSM) are exempt from tax.
B. Other taxes
Oman does not levy value-added tax, net worth tax, estate tax or gift tax.
C. Social security and vocational training levy
Under the social security law, employers and employees must make contributions to a pension fund. The rates, based on each employee’s basic salary, are 9.5% for employers and 6.5% for employees. In addition, employers must contribute an amount equal to 1% of an employee’s basic salary to cover the risks of occupational injuries and diseases.
Social security taxes currently apply to Omani employees only.
A vocational training levy (VTL) must be paid by private sector employers in Oman with respect to their expatriate employees. The VTL rate is RO 200 (US$520) once every two years for each expatriate employee.
D. Tax treaties
Oman has entered into double tax treaties with the following countries.
Algeria
Korea (South)
Syria
Belarus
Lebanon
Thailand
Brunei
Mauritius
Tunisia
Darussalam
Moldova
Turkey
Canada
Pakistan
United Kingdom
China
Seychelles
Uzbekistan
France
Singapore
Vietnam
India
South Africa
Yemen
Italy
Sudan
Oman has signed double tax treaties with Belgium, Croatia, Egypt, Iran, Libya, Morocco, the Netherlands and the Russian Federation but these treaties have not yet been ratified by the other countries.
As a result, the treaties are not yet in force. Oman has also signed double tax treaties with Germany, Kazakhstan and Malta, but these treaties have not yet been ratified.
To learn more about the history, culture, economy and other information about Oman
We have been preparing US income tax returns for US Citizens and permanent residents living in Oman for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Oman and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
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 tax fiscal year for US tax purposes). You must 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 forms 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.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed while working, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Oman.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a request a consultation by phone, skype or email