In a historic step, Oman has emerged as the first GCC nation to implement a personal income tax, according to a Reuters report published Monday. In a royal decree released on Sunday, Oman announced that a 5% tax will be imposed on those earning over 42,000 Omani rials (around $109,000) a year starting from 2028.
Oman Seeks to Diversify Its Revenue Streams
The passage of the Personal Income Tax Law comes as Oman seeks to diversify its revenue streams over the long term and decrease dependence on oil, which constitutes approximately 70% of government revenues, The National reported, citing the Oman News Agency. The law, which complements a medium-term fiscal plan introduced in 2020 to reduce public debt and increase economic growth, is a key component of Oman’s Vision 2040 agenda.
This step supports the goals of Oman Vision 2040 to reduce dependence on sales revenue from hydrocarbons, the country’s tax authority said, per The National.
1% of Omani Population to Be Brought Into Taxable Slab
The legislation has been expanded to affect only the richest citizens and residents. It is estimated that one percent of the Omani population will be brought into the taxable amount, Reuters reported. According to the National, which cited the ONA report, the legislation also provides scope for various deductions and exemptions for basic essentials like education, healthcare, housing, inheritance, zakat and charity donations.
The law also contains deductions and exemptions that consider the social condition in the Sultanate of Oman, the tax authority further stated.
Oman’s Individual Income Tax System: Years in the Making
Work on the individual income tax system has been ongoing since 2022 and was backed by thorough studies scrutinising the socio-economic effects of the tax. The study, the report said, has set a well-thought-out exemption level aimed at shielding most of the population from economic burdens.
All administrative systems are now in place to assist with the rollout, according to Karima Al Saadi, head of the Personal Income Tax Project at the Tax Authority. An electronic system has been designed by the Tax Authority to encourage voluntary compliance, she told the Oman News Agency, according to The National, while also adding that the system is linked to other government departments for correct income tracking and declaration.
Guidance manuals and regulations will be issued within the next year to help both individuals and legal entities understand their obligations.
The International Monetary Fund (IMF) recently projected Oman’s economy will grow by 2.4% in 2025 and 3.7% in 2026, thanks to robust performance in manufacturing and services. Reports suggest that the government is also seeking to reduce oil’s contribution to GDP by 15% by 2030, and even more by 2040.
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