Oman introduces Personal Income Tax Law with 16 key exemptions

MUSCAT: Oman has unveiled exemptions under its newly enacted Personal Income Tax Law, scheduled to take effect on January 1, 2028, as published in the country’s official Gazette.

According to the new legislation introduces a 5 per cent personal income tax on individuals earning more than OMR 42,000 annually.

However, due to the high-income threshold, the Tax Authority anticipates that nearly 99% of the population will not be impacted by the new tax regime.

Issued under Royal Decree No. 56/2025, the Personal Income Tax Law marks a historic first for the Sultanate. It is a cornerstone of Oman’s fiscal reforms and aligns with the strategic goals outlined in Oman Vision 2040 to diversify revenues and ensure long-term economic resilience.

Tax-exempt income categories

Article 25 of the new law enumerates 16 categories of income that will be exempt from taxation. These include:

1.Salaries of diplomats and consular staff representing foreign governments or international organizations, provided there is reciprocal treatment.

2. Living allowances for Omani citizens employed at diplomatic missions (excluding actual diplomats).

3. Foreign-earned income by a tax resident for up to 18 months after a change in residency.

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4. Salaries and wages earned abroad by Omani tax residents.

5. Pension contributions and post-service benefits, limited to participation in up to two schemes, whether mandatory or voluntary.

6. Educational expenses incurred by the individual, their spouse, immediate family, and dependents, within specified regulatory limits.

7. Healthcare costs for the individual, their spouse, immediate relatives, and siblings under their care, according to regulatory guidelines.

8. Rental income from a primary residence, if the residence has been declared with the Tax Authority for no less than two years.

9. One-time exemption on the sale of a secondary residence.

10. Zakat and charitable donations, including religious endowments, made to authorized entities—up to 5% of the individual’s gross income.

11. Returns from government-issued investment certificates, including income from the sale of such certificates.

12. Interest income from Omani government bonds and treasury notes, including proceeds from their sale.

13. Compensation received for reasons other than wages or salaries.

14. Inheritance, gifts, grants, and bequests exchanged between spouses or first-degree relatives.

15. Interest on housing loans or Islamic home financing related to a primary residence—available as a one-time, lifetime exemption, under certain conditions.

16. Income derived from intellectual property rights, such as patents, trademarks, and designs—exempt for up to five years from the date of registration.

Exemptions reflect Oman’s commitment to safeguarding lower-income households and encouraging innovation, charitable giving, and family support systems, while aligning the tax framework with global best practices.