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Arabian Post
7 hours ago
- Business
- Arabian Post
Oman Embarks on Gulf-First Income Tax for Top Earners
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. ADVERTISEMENT 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.
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Business Standard
a day ago
- Business
- Business Standard
Oman to become 1st Gulf state to levy income tax, aims to cut oil reliance
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.
