Oman becomes first Gulf state to impose income tax

MUSCAT: Oman has announced plans to introduce a five per cent income tax on individuals earning more than 42,000 Omani riyals (approximately Rs30.97 million) annually, starting in 2028.

With this move, Oman will become the first country in the Gulf Cooperation Council (GCC) to implement a personal income tax.

The introduction of this tax, under Oman’s new Personal Income Tax Law, aims to diversify government revenue streams and reduce the nation’s reliance on oil income.

While other Gulf nations such as the UAE and Saudi Arabia have already implemented value-added tax (VAT) and corporate income taxes, as well as excise taxes on tobacco and sugary beverages to promote healthier lifestyles, none have yet adopted personal income tax.

According to the Oman News Agency, the new law will take effect at the beginning of 2028. Karima Mubarak Al Saadi, director of the Personal Income Tax Project, confirmed that all necessary preparations and infrastructure for implementing the tax are in place.

The law also includes a range of exemptions and deductions that take social considerations into account, covering areas such as education, healthcare, inheritance, zakat, charitable donations, and primary housing.

A comprehensive study was conducted prior to the introduction of the tax, carefully setting the exemption threshold. It is estimated that about 99 per cent of Oman’s population will not be subject to this tax.

Thomas Vanhee, founding partner of Aurifer Middle East Tax Consultancy, noted that the law applies equally to all residents, regardless of nationality.

“Oman is now the first GCC country to legislate a personal income tax regime, distinguishing itself from other Gulf jurisdictions (such as the UAE, Qatar, and Saudi Arabia), which still do not levy personal income tax. This move appears to align with IMF-driven diversification strategies, Oman Vision 2040, and efforts to reduce dependency on hydrocarbons,” Vanhee said.

He added that the 42,000 Omani riyal threshold demonstrates a progressive approach, protecting low- and middle-income earners while modestly taxing higher-income individuals.

“At five per cent, the personal income tax rate remains conservative by global standards,” Vanhee noted, adding that there is still ample time for individuals and businesses to prepare ahead of the 2028 implementation.