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      The Sultanate of Oman has issued Royal Decree No. 70/2024 (the Law), promulgating the law for Top-Up Tax on Constituent Entities of Multinational Groups. This move is in alignment with the rules issued by the Organisation for Economic Co-operation and Development (OECD) and is part of Pillar Two, to avoid Base Erosion and Profit Shifting (BEPS). The objective of the Law is to ensure that Constituent Entities are taxed at a minimum effective tax rate of 15% through a series of measures that are in line with the international tax principles.

      The Law contains ten Articles setting out the key definitions, charging mechanisms and exclusions. The Executive Regulations for the implementation of the Law are expected to be released in due course. The Executive Regulations will prescribe detailed rules, conditions and procedures for implementing the Law in a manner consistent with the Global Anti-Base Erosion Rules (GloBE rules), and guidance and commentary issued by the OECD considering Oman is part of the OECD/G20 Inclusive Framework on BEPS.

      We have summarized key aspects of the Law below.

      Scope

      1. A Constituent Entity that is part of a Multinational Group, where the total consolidated revenue of the Ultimate Parent Entity is or exceeds EUR 750 million (approximately OMR 300 million) as per the consolidated financial statements of the Ultimate Parent Entity in at least two of the last four fiscal years immediately preceding the fiscal year subject to assessment.

      2. A Multinational Group that consists of entities located in more than one jurisdiction in any form. Therefore, this will also include a standalone entity, if it has a branch or permanent establishment in another jurisdiction.

      Effective date

      1. Fiscal years starting on or after 1 January 2025.

      2. Fiscal year is the accounting period used by the Ultimate Parent Entity of the Multinational Group. If the fiscal year exceeds or falls short of 12 months, the consolidated revenue threshold (EUR 750 million) is required to be adjusted proportionately.

      Tax Rate

      1. The Law provides for a minimum tax rate of 15% in line with the OECD framework.

      2. Top-Up Tax on a Constituent Entity of a Multinational Group is required to be applied through the Income Inclusion Rule (IIR).

      Top-Up Tax obligations

      Inbound investments

      1. Constituent Entity located in Oman. Exception where the IIR is applied to the Ultimate Parent Entity of the Multinational Group, if applicable.

      Outbound investments

      2. Constituent Entity located in Oman that is the Ultimate Parent Entity of a Multinational Group, which at any time during the fiscal year, directly or indirectly, holds an ownership interest in a low-taxed Constituent Entity.

      3. Intermediate Parent Entity located in Oman, which at any time during the fiscal year, directly or indirectly, holds an ownership interest in a low-taxed Constituent Entity. Exception where the IIR is applied to another Intermediate Parent Entity that directly or indirectly holds an ownership interest in the Intermediate Parent Entity located in Oman, if applicable.

      4. Partially-Owned Parent Entity located in Oman, which at any time during the fiscal year, directly or indirectly, holds an ownership interest in a low-taxed Constituent Entity. Exception where the IIR is applied to another Partially-Owned Parent Entity that directly or indirectly wholly owns the Partially-Owned Parent Entity located in Oman, if applicable.

      Excluded entities

      In line with the GloBE rules, the Law does not apply to:

      1. Government units and other public legal persons

      2. International organizations

      3. Not-for-profit entities such as associations, federations, and private entities of public interest.

      4. Pension funds

      5. Investment fund and real estate vehicle considered as the Ultimate Parent Entity

      Computation mechanismThe Executive Regulations are expected to specify the manner of computing Top-Up Tax, provisions related to safe harbour, treatment of a permanent establishment and other rules and procedures necessary for the application of the Law.


      While the Executive Regulations to the Law are yet to be published, Multinational Groups should start assessing the impact of the introduction of Top-Up Tax on their entities in and outside Oman. Although the general rate of corporate income tax in Oman is 15%, this move could impact inbound as well as outbound investments in Oman. Businesses that enjoy corporate income tax relief such as free zone exemptions, industrial exemptions, etc. would require special attention as their effective tax rate could be lower than the minimum rate of 15%. Considering its complexity, it is imperative that the provisions of the newly introduced Law are correctly interpreted to understand the potential tax impact and compliance obligations.

      KPMG has a dedicated team of experienced Pillar Two and corporate tax specialists who can help evaluate the potential impact of the Law and optimize the incidence of tax on your business. With global coverage, our tax specialists can support you with assessing the impact on your business in all the jurisdictions you operate in. For a detailed discussion, please reach out to the team below or your advisors at KPMG Oman.

      Contact us

      Aabha Lekhak
      Partner, Head of Tax
      Oman
      Email

      Sumit Bansal
      Director
      Indirect Tax, Oman
      Email