Oman to become 1st Gulf state to levy income tax, aims to cut oil reliance

Business Standard

2 days ago

Oman will become the first Gulf state to introduce a personal income tax from January 2028. The new legislation imposes a 5 per cent tax on individuals earning more than 42,000 Omani rials (approximately $109,000) annually. According to a Bloomberg report citing the state-run Oman News Agency, the measure will impact only around 1 per cent of the population.
The policy is part of Oman's broader efforts to reduce its dependence on oil income. Minister of Economy Said bin Mohammed Al‑Saqri stated that the tax was introduced 'to reduce dependence on oil revenue while preserving social spending'.
While income tax is standard globally, none of the six Gulf Cooperation Council (GCC) nations currently impose it. Oman's decision breaks with regional norms and signals a major policy shift.
Fiscal reform with wider Gulf implications
'While the scope is narrow, it will still be a significant fiscal development in the region,' said Monica Malik, Chief Economist at Abu Dhabi Commercial Bank. 'Oman is looking to progress with fiscal reforms while still remaining competitive. This is especially at a time when high‑net‑worth individuals are moving to the region.'
The International Monetary Fund has also cautioned that GCC states may eventually require income taxes as global energy transitions put long-term pressure on oil-dependent budgets.
Part of Oman 'Vision 2040'
The income tax, formalised through Royal Decree No. 56/2025, supports Oman Vision 2040 — a national agenda to diversify the economy and ensure long-term financial sustainability. The Tax Authority stated that the initiative aims to 'expand income sources and enhance fiscal sustainability', while contributing to wealth redistribution and bolstering the social protection system.
Officials said the policy was shaped by a thorough study of income data from government departments. Findings showed that 99 per cent of citizens fall below the tax threshold and will remain unaffected.
Deductions tied to social priorities
The law will allow for deductions and exemptions based on social criteria, including spending on education, healthcare, housing, inheritance, zakat, and charitable contributions.
Karima Mubarak Al Saadi, Director of the Personal Income Tax Project, said Oman is fully prepared for the rollout. 'All requirements for implementing the tax are in place,' she said, noting that executive regulations will be issued within a year.
Digital compliance and public readiness
An integrated digital system has been developed to encourage voluntary compliance and accurately assess income. This platform will interface with existing government databases to improve transparency and efficiency.
Educational materials and public engagement initiatives will be released in phases. 'Training, infrastructure, and legal frameworks are already in place,' Al Saadi confirmed.
Strengthening investor confidence and fiscal health
In 2024, Oman collected OMR 1.4 billion through corporate tax, VAT, and selective levies. The addition of personal income tax is expected to broaden revenue streams and enhance investor confidence by improving fiscal credibility.
'Oman's income tax could act as a catalyst for other GCC countries implementing the tax as well in the future,' Malik noted.