Oman Embarks on Gulf-First Income Tax for Top Earners

Arabian Post

4 hours ago

Arabian Post Staff -Dubai
Oman will become the first Gulf Cooperation Council nation to impose a personal income tax, mandating a 5 per cent levy on individuals whose gross annual income exceeds OMR 42,000 from 1 January 2028, under Royal Decree No 56/2025. The newly enacted law, spanning 76 articles across 16 chapters, represents a historic policy shift aimed at diversifying the Sultanate's revenue sources beyond hydrocarbons.
The Tax Authority has confirmed that this threshold renders roughly 99 per cent of the populace exempt, targeting only the top one per cent of earners. The fairness-driven approach includes deductions for education, healthcare, primary housing, zakat, charitable donations and inheritance, signalling a progressive and socially aware stance.
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Finance Minister Said bin Mohammed Al‑Saqri framed the move as integral to bolstering fiscal sustainability, shielding the Sultanate from oil revenue fluctuations, and advancing Oman Vision 2040. The authority anticipates non-oil revenue will rise to 15 per cent of GDP by 2030 and 18 per cent by 2040, marking a significant realignment of economic priorities.
Preparations are well underway. Karima Mubarak Al Saadi, director of the Personal Income Tax Project, noted that the tax infrastructure—including electronic filing systems integrated with government databases—and regulatory frameworks have been established. Executive regulations are expected within a year of publication in the Official Gazette, ensuring sufficient lead‑time for implementation.
International observers see the move as part of a broader Gulf fiscal transformation. Thomas Vanhee of Aurifer Middle East Tax Consultancy commented that Oman's decision may anticipate IMF guidance encouraging Gulf states to broaden revenue bases. While income tax may challenge the region's historic appeal to expatriates, Gulf nations including the UAE and Saudi Arabia have already introduced VAT and corporate taxes, signalling an irreversible shift.
Analysts emphasise that the low flat rate and high exemption point strike a balance between revenue generation and retaining competitiveness. Oil revenue accounts for up to 85 per cent of Oman's public income, and this reform is expected to reinforce fiscal buffers while maintaining social equity.
Economic research by Gulf‑based think‑tanks confirms that the tax's fiscal impact is modest, contributing under 1 per cent of GDP initially, but holds strategic value in funding non-hydrocarbon sectors such as education, healthcare, housing and social safety nets. For investors, the tax signals enhanced fiscal resilience and potential stability in public financing.
Despite the progressive rollout and social safeguard measures, policy challenges remain. The effective administration of personal income tax will demand efficiency, public awareness and compliance. Authorities appear to have addressed this proactively, expanding staff training and preparing guidance materials for both individuals and businesses.