Oman has recently issued a royal decree to impose a personal income tax law, becoming the first country in the GCC region to make this move.
Oman’s Personal Income Tax Law consists of 76 articles, divided into 16 chapters, and it is imposed on a natural person whose total annual income exceeds OMR42,000 ($109,234.06). The tax rate is 5 percent of the taxable income, the decree said, and the law will enter into force at the beginning of 2028.
“The tax serves as a new revenue stream to diversify public income sources and mitigate risks associated with reliance on oil as the primary revenue source. It will help maintain current levels of social and service spending while preserving Oman’s achievements in financial and economic stability under ‘Oman Vision 2040‘ and its first executive phase, the Tenth Five-Year Plan (2021-2025),” said Dr. Said Mohammed Al Saqri, Minister of Economy.
Tax to achieve social justice by redistributing wealth
Oman’s Personal Income Tax Law aims to complete the tax system in line with the economic and social situation in the Sultanate, and with the role mandated to the Tax Authority.
In addition to its contribution to achieving the objectives of Oman Vision 2040 by diversifying sources of income and reducing dependence on oil, it will also contribute to achieving social justice by redistributing wealth among the segments of society, providing support to the general budget, and be directed in particular to finance part of the costs of the social protection system, the country’s tax authority said.
In a statement, the country’s tax authority said the implementation of Oman’s Personal Income Tax Law came in light of the results of an in-depth study to assess the economic and social impact of the new change. The exemption threshold was set and considered carefully based on income data collected from several government entities. The results showed that approximately 99 percent of the population in the Sultanate of Oman is not subject to this tax.
“It is worth noting that the exemption threshold is considered high, as it amounts to OMR42,000, and the specified tax rate is 5 percent, which is considered low. The law also includes deductions and exemptions that take into account the social situation in the Sultanate of Oman, such as education, healthcare, inheritance, zakat, donations, primary housing, etc,” the tax authority added.
Electronic system to enhance voluntary compliance
Ms. Karima bint Mubarak Al Saadi, director of Personal Income Tax, confirmed the completion of all necessary preparations and requirements for the implementation of the tax. The executive regulations of the law will be issued within one year from the date of the law’s publication in the Official Gazette.
The Tax Authority’s electronic system has been designed to enhance voluntary compliance and is linked with relevant institutions to ensure accurate calculation of individuals’ income and to verify the accuracy of submitted tax returns. Moreover, the human resources at the Tax Authority have been trained in accordance with the requirements for implementing the tax, and the guidance manuals have been prepared for individuals and legal persons, which will be published gradually according to a specified timetable.
Key revenue source to fund state-provided services
Dr. Said Mohammed Al Saqri explained that the Personal Income Tax is a fiscal tool adopted by most countries worldwide as a key revenue source to fund state-provided services. Over 190 countries impose this tax, and in many, income taxes constitute the largest component of total tax revenues at federal and local levels, financing public goods and services.
He added that implementing the Personal Income Tax in Oman will yield significant economic benefits, supporting income diversification strategies and long-term fiscal stability as a pillar of economic growth. It will also sustain government revenues, strengthen the state’s financial position, maintain credit ratings and boost spending power for beneficiaries, directly stimulating aggregate demand and economic growth.
Tax to enhance financial stability by diversifying revenue sources
Al Saqri also highlighted that oil and gas revenues account for 68 to 85 percent of Oman’s total public income, depending on global energy prices. While oil prices have stabilized at favorable levels in recent years, they remain volatile. Oman has effectively managed additional oil revenues by reducing public debt to safe GDP ratios, increasing investment and social spending and subsidizing essential goods and services, he further noted.
In addition, he affirmed that government policies and initiatives have successfully shifted Oman’s fiscal and economic trajectory toward sustainability and stability. Public debt has sharply declined, credit ratings have consistently improved to investment-grade levels, and Oman’s standing in global competitiveness indices has risen. The Tenth Five-Year Plan sustained GDP growth near target rates, while economic diversification policies attracted quality investments and drove non-oil sector growth beyond expectations.
“As the Tenth Plan nears completion, Oman has advanced significantly in economic diversification and fiscal sustainability. The (PIT) will further prioritize financial stability by diversifying revenue sources—a strategic necessity to ensure equitable wealth distribution, enhance public services, strengthen social protection systems, and mitigate risks from global energy market fluctuations and other economic variables,” he added.
highlighting the potential economic impacts of Oman’s new Personal Income Tax law , he noted that the tax study assessed effects on GDP and 18 economic sectors, concluding minimal impact (under 1 percent) due to high exemptions and low tax rates. Foreign investment is expected to remain unaffected, as the tax applies to individuals—not corporate entities—and Oman’s rates remain competitive globally, the minister concluded.
