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The Oman Tax Authority has issued Decision No. 180/2026, introducing an important amendment to the Executive Regulation of the Income Tax Law. The Decision inserts a new Article 18 bis into the Executive Regulation, establishing specific conditions under which certain business expenses may qualify as deductible for income tax purposes. The amendments apply from the tax year commencing 1 January 2027. While the amendment is concise, its practical implications are significant for businesses operating in Oman, particularly those incurring costs as a result of directives or decisions issued by government authorities and public entities.

What Has Changed?

Decision No. 180/2026 introduces Article 18 bis to the Executive Regulation of the Income Tax Law. The new provision governs the deductibility of expenses incurred by taxpayers in complying with decisions issued by state administrative units and other public legal entities.

To qualify as a deductible expense, all of the following conditions must be satisfied.

1. The Expense Must Be Necessary for Carrying on the Business

The expenditure must be directly connected to the taxpayer's business activities and genuinely required for the operation of the business.

This requirement reinforces the principle that only legitimate business expenses—rather than optional or unrelated expenditures—should reduce taxable income.

2. The Deduction Must Be Approved by the Chairman of the Tax Authority

The Decision requires that the deduction be expressly authorised by the Chairman of the Tax Authority.

This introduces an additional regulatory safeguard and indicates that expenses falling within the scope of Article 18 bis are not automatically deductible merely because they were incurred.

Businesses should therefore maintain adequate documentation demonstrating the necessity and circumstances of the expenditure when seeking recognition of the deduction.

3. The Expense Must Not Arise from a Breach of Any Legal or Contractual Obligation

The Decision makes it clear that expenses resulting from a failure to comply with any obligation—regardless of whether the obligation arises under law, regulation, contract, or another legal source—will not qualify for deduction.

This provision reinforces the long-standing tax principle that taxpayers should not receive a tax benefit for costs arising from non-compliance or misconduct.

Repeal of Inconsistent Provisions

Decision No. 180/2026 also provides that any provisions inconsistent with the new amendment are repealed to the extent of the inconsistency, ensuring that Article 18 bis prevails over conflicting regulatory provisions.

Effective Date

The Decision was published in the Official Gazette and takes effect from the tax year beginning on 1 January 2027. Businesses should therefore assess their internal tax policies and accounting procedures in advance of the effective date.

Practical Implications for Businesses

The amendment serves as a reminder that taxpayers should:

• Maintain comprehensive records supporting the commercial necessity of expenses.
• Distinguish between compliance-related expenditures and costs arising from breaches of obligations.
• Evaluate whether expenses requiring recognition under Article 18 bis may necessitate approval from the Tax Authority.
• Review existing tax compliance procedures ahead of the 2027 tax year.

Conclusion

Although Decision No. 180/2026 introduces only a single new provision, it strengthens the regulatory framework governing deductible expenses and provides greater clarity on the treatment of costs incurred in complying with governmental directives.

Businesses should proactively review their tax governance frameworks to ensure that qualifying expenditures are appropriately documented and supported before claiming deductions under the amended Executive Regulation.