• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 4/18/2014

Oman - Withholding tax on payments relating to computer software 

April 18: Officials of the Oman tax department, in a training session on withholding taxes, clarified the tax authority’s position how royalty payments for the use of, or right to use, computer software are to be treated for income tax purposes.

In general, the tax authority’s position concerning the tax treatment of royalty payments for software includes:

  • When the owner of the software transfers full ownership to the customer and retains no right over the software after the transfer, the consideration will be treated as a business receipt—i.e., as a service of developing the software—and no withholding tax applies.

  • When the owner of the software grants a right to use some of its proprietary or intellectual property rights, without divesting itself of these rights, payments made by the user of the software rights will be treated as a royalty and subject to withholding tax.

  • When the owner of the software grants the customer only a right to use the software itself, without granting it any right to use any other proprietary or intellectual property right in the software, the payment for such use is treated as "consideration for right to use software," which is a category separate from royalty under the domestic law, and withholding tax applies on such payments.

Read a 2014 report [PDF 481 KB] prepared by the KPMG member firm in Oman: Key tax developments in 2013

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