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Oman has taken a notable step in fiscal policy by issuing a royal decree to impose personal income tax, marking it as the first Gulf Cooperation Council (GCC) country to introduce such a measure. This decision is part of Oman’s ongoing efforts to diversify its revenue sources beyond oil and strengthen its fiscal position.
Under the new law, individuals earning more than 42,000 Omani rials (approximately $109,000) annually will be subject to a 5% personal income tax starting in 2028. The measure is expected to affect around 1% of the country’s population, primarily higher-income earners.
The tax framework includes various deductions and exemptions designed to consider social factors within the Sultanate. These include provisions related to education expenses, healthcare costs, inheritance, zakat (a form of almsgiving), donations, and primary housing. The inclusion of these deductions aims to mitigate the tax burden on residents and align with local social norms.
Oman, which launched a medium-term fiscal programme in 2020, has been actively pursuing economic reforms to reduce its public debt, diversify revenues, and stimulate growth. The country remains heavily reliant on oil revenues, but fluctuating oil prices have underscored the need for sustainable alternative income streams.
This move positions Oman uniquely in the GCC region, where personal income tax has traditionally been absent. The implementation of this tax may have implications for regional tax policy dynamics, especially as Gulf states seek to balance economic diversification with competitiveness in attracting global talent and investment.
Tax professionals and multinational businesses operating in or with ties to Oman should closely monitor the forthcoming regulations and implementation guidelines to adapt compliance strategies accordingly.
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