• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 2/5/2014

Oman - No withholding tax on certain software, communications transactions 

February 5:  The Oman tax authority has focused on withholding tax on software and whether a payment to acquire software would be categorized as a “royalty” or as “consideration for use or right to use of software.”

The tax authority clarified in comments that withholding tax does not apply to payments made:

  • For the use of satellite transponder capacity
  • For the use of cable bandwidth for transmission of electricity or communications
  • Under roaming agreements from one telecommunication operator to another.

Highlights of the tax authority’s comments on software-related payments are as follows:

  • When a software owner transfers full ownership of the software to the customer (i.e., retains no right over the software), the transaction is treated as a software development service, and no withholding tax applies.
  • When a software owner grants the right to use some of its proprietary or intellectual property to the customer without divesting itself of these rights, the customer’s payments would be treated as a “royalty” and withholding tax would be applicable.
  • When the software owner grants only the right to use the software itself, without granting any right to use any other proprietary or intellectual property right in the software, payments made by the customer would be treated as “consideration for right to use software” and withholding tax would be applicable.

The tax department clarified that when payments are made to countries with which Oman has a tax treaty, the treaty’s provisions would override the provisions of domestic law.

Read a January 2014 report prepared by the KPMG member firm in Oman: Oman – Update on recent tax changes

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