Questions for tariffs quarterly bulletin: Oman

Describe the taxes and duties regimes in your location’s standard form contracts

What are your standard form contracts?

In Oman, construction contracts for building and civil engineering works commonly use the Omani Standard Contract for Building and Civil Engineering Works. This is especially the case for government funded projects. Private sector parties also often use this template too for non-government projects due to its familiarity.

The most recent edition (the 5th edition) (Standard Form) was released in 2019 and is analogous to the FIDIC Red Book. 

The 5th edition is issued in dual Arabic and English text.

Which party bears the risk of taxes and duties:

• Before the contract is entered into: The Standard Form does not address who bears the risk for taxes and duties incurred before the Contract is finalised. The parties involved can agree on specific conditions to manage this risk by adding particular conditions to the Standard Form.


• After the contract is entered into: The Contractor is responsible under the Standard Form for all “taxes, duties and fees” required to be paid by the Contractor under the contract. There is no scope to adjust the contract price for tax liabilities (or otherwise) apart from as outlined below in at point 2.

 

If taxes and duties change after the contract is entered into, what relief, if any, is available under your location’s?

Standard form contracts? eg change in law provisions, force majeure

The Standard Form permits adjustments to the contract amount if there are changes in Omani laws. However, this adjustment is only applicable if the changes affect the price of a product that was previously fixed or subsidised by the Omani Government, or if there are changes to the prescribed minimum wage.

Relief for force majeure events (as defined in the Standard Form) is also available to both parties, subject to an overriding duty to mitigate and/or minimise delay.

Changes to taxation and duties would not ordinarily trigger relief via the above.

Laws – statutes, case law

The Omani Civil Code (Royal Decree No. 29/2013) provides that a party may apply to a court for relief in the form of a reduction of a burdensome obligation that threatens it with serious loss. This right is a mandatory provision and cannot be contracted out of. The threshold for this provision to apply is exceptionally high, requiring an unforeseen exceptional event to have arisen.  

 

For particular market segments in your location, what changes, if any, have employers or contractors made recently to the usual risk allocation?

The implementation of value added tax in Oman in 2021 has resulted in more parties seeking to agree bespoke clauses via particular conditions to the Standard Form to reflect tax liability and risk. Foreign parties often also must consider any withholding tax implications and are well advised to address such risk via particular conditions.