Excise Tax in Oman: A Complete Guide for Businesses and Investors
Introduction
Excise Tax in Oman is one of the most important indirect taxes introduced in recent years as part of the Sultanate’s fiscal reforms. It was officially implemented in June 2019 under Royal Decree 23/2019 and later expanded in October 2020 to include additional categories of goods. The objective of this tax is twofold: first, to discourage the consumption of harmful products such as tobacco, energy drinks, and sugar-sweetened beverages; and second, to diversify government revenue streams beyond oil and gas.
For businesses operating in Oman—whether importers, manufacturers, or distributors—understanding the framework of Excise Tax is essential to remain compliant and avoid penalties. In this article, we provide a detailed overview of the Excise Tax system in Oman, its scope, calculation methods, reporting requirements, and future outlook.
What is Excise Tax?
Excise Tax is an indirect tax levied on specific goods that are deemed harmful to health or the environment. Unlike VAT, which applies broadly to most goods and services, Excise Tax is limited to selected categories of products.
The main policy goals behind Excise Tax in Oman include:
Promoting public health by reducing the consumption of unhealthy goods.
Generating non-oil revenue to support national development projects.
Aligning with GCC-wide tax reforms, as other Gulf states such as Saudi Arabia and the UAE also apply similar excise systems.
Legal Framework of Excise Tax in Oman
The Excise Tax regime was established under Royal Decree No. 23/2019. The Ministry of Finance and the Tax Authority are the key regulatory bodies overseeing its administration.
In October 2020, a ministerial decision extended the scope of excise to include sugar-sweetened beverages, reflecting global trends where governments impose health taxes to fight obesity and diabetes.
Oman’s Excise Tax law is closely harmonized with the GCC framework, ensuring consistency across member states.
Goods Subject to Excise Tax in Oman
The following categories of goods are subject to Excise Tax in Oman:
- Tobacco and tobacco products – 100% tax rate
- Energy drinks – 100% tax rate
- Carbonated drinks – 50% tax rate
- Alcoholic beverages – 100% tax rate
- Pork products – 100% tax rate
- Sugar-sweetened beverages – 50% tax rate
These tax rates apply either to imported products or locally manufactured goods. Businesses involved in production, import, or warehousing of these goods must register for excise and comply with filing requirements.
How Excise Tax is Calculated
Excise Tax is calculated on the higher of the following two values:
- The standard price determined by the Oman Tax Authority, or
- The retail selling price (RSP) declared by the importer or producer.
For example:
- If an energy drink has a retail price of OMR 1 and the applicable excise rate is 100%, the tax payable will be OMR 1 per unit.
- If a carbonated drink is priced at OMR 0.500 and the excise rate is 50%, the tax payable will be OMR 0.250 per unit.
This method ensures accurate tax collection and prevents undervaluation.
Registration and Compliance Requirements
Who Must Register?
All businesses engaged in any of the following activities must register with the Oman Tax Authority:
- Import of excisable goods into Oman
- Local manufacturing of excisable goods
- Storage of excisable goods in a designated tax warehouse
- Distribution of excisable goods in Oman
Filing and Payment
Excise Tax returns are generally filed quarterly.
Businesses must declare the quantity of excisable goods imported, produced, or released for consumption.
Payment of tax is due along with the submission of the return.
Record Keeping
Registered businesses are required to maintain accurate records of imports, sales, and inventory for at least five years. The Tax Authority has the right to audit these records at any time.
Tax Warehouses and Suspension Arrangements
To facilitate trade and compliance, Oman’s Excise Tax law provides for designated tax warehouses. Goods can be stored in these warehouses under suspension, meaning no excise is payable until the goods are released for consumption in Oman.
This system benefits importers and distributors by improving cash flow and ensuring tax is only paid when the goods enter the local market.
Penalties for Non-Compliance
Failure to comply with Excise Tax obligations can lead to significant penalties, including:
- Monetary fines for late filing or non-payment.
- Seizure of goods if tax has not been properly accounted for.
- Administrative actions such as suspension of licenses.
It is therefore crucial for businesses to work with professional tax advisors to avoid compliance risks.
Impact of Excise Tax on Businesses and Consumers
For Businesses
Price adjustments: Importers and distributors must factor excise into pricing strategies.
Cash flow management: Proper planning is required to handle upfront tax payments.
Compliance costs: Investment in accounting systems and training is necessary.
For Consumers
Higher retail prices on excisable goods.
Potential lifestyle changes due to reduced affordability of unhealthy products.
Economic and Social Objectives of Excise Tax
Oman’s introduction of Excise Tax reflects a wider strategy:
Health policy: Reducing obesity, diabetes, and smoking-related illnesses.
Revenue diversification: Supporting Oman Vision 2040 by decreasing dependence on oil.
Regional alignment: Maintaining consistency with GCC neighbors to prevent market distortions.
Future Outlook of Excise Tax in Oman
The Excise Tax regime in Oman is expected to evolve further in the coming years. Possible future developments include:
Expansion of excisable goods to cover new product categories, such as vaping products.
Higher excise rates in line with global best practices.
Stronger digital monitoring systems for compliance.
Greater regional harmonization across GCC countries to ensure a level playing field.
Businesses should stay informed and continuously review their tax strategy.
How Ariotax Can Help
Navigating the complexities of Excise Tax in Oman can be challenging for companies unfamiliar with local regulations. At Ariotax, we provide tailored tax advisory services including:
- Excise Tax registration support
- Preparation and filing of returns
- Compliance reviews and audits
- Strategic planning to optimize tax costs
Our team of professionals ensures that your business remains compliant while minimizing risks and financial burdens.
Conclusion
Excise Tax in Oman is not just a fiscal tool but also a health-oriented policy aimed at shaping consumer behavior. Since its implementation in 2019, the tax has become an integral part of Oman’s economic strategy, impacting businesses, consumers, and government revenue alike.
For businesses dealing with excisable goods, understanding the law, complying with filing requirements, and planning for future developments is essential. With expert support from tax advisors such as Ariotax, companies can navigate these challenges effectively and focus on growth.
