Quick Read
- Oman will implement the Gulf’s first personal income tax starting January 1, 2028.
- The tax targets individuals earning more than OMR 42,000 annually, with a 5% levy.
- This initiative supports Oman’s Vision 2040 to boost non-oil revenues and fiscal stability.
Oman is set to break new ground in the Gulf Cooperation Council (GCC) region by introducing its first-ever personal income tax on January 1, 2028. This historic move, formalized under Royal Decree No. 56/2025 by Sultan Haitham bin Tarik, will impose a 5% levy on high-income individuals earning over OMR 42,000 annually. The measure is part of the nation’s broader fiscal reforms aimed at reducing reliance on oil revenues and strengthening economic diversification under the Vision 2040 strategy.
Aiming for Economic Stability and Diversification
The introduction of personal income tax is a cornerstone of Oman’s efforts to enhance fiscal stability and diversify its revenue streams. According to Timesofindia, the government aims to increase non-oil revenue contributions to the GDP from 15% to 18% by 2040. In 2024 alone, Oman collected OMR 1.4 billion through corporate taxes, value-added tax (VAT), and selective taxes. With the new tax, the nation expects to further strengthen its fiscal position, improve its credit ratings, and attract global investors.
As part of the reform, Oman is also building a modern electronic tax system that integrates government databases to ensure accurate income reporting and enhance compliance. Karima Mubarak Al Saadi, director of the personal income tax project, emphasized that awareness campaigns and educational guides for citizens and businesses will be rolled out in stages before the law’s implementation.
Protecting Low- and Middle-Income Earners
The new tax law is designed to prioritize fairness and protect the majority of the population from additional financial burdens. According to Thenationalnews, the exemption threshold has been set high, ensuring that 99% of Oman’s population will not be affected. Furthermore, essential expenses such as education, housing, healthcare, zakat, and charitable donations are exempt from taxation, safeguarding social welfare.
This progressive approach not only shields low- and middle-income earners but also aligns with the government’s aim to support public welfare programs. By targeting high earners, Oman hopes to address fiscal challenges without exacerbating income inequality or imposing undue stress on everyday citizens.
A Regional Shift in Economic Strategy
Oman’s decision marks a significant departure from the traditional economic models of Gulf states, which have long relied on oil revenues to fund public spending. As noted by Livemint, this move reflects a broader regional trend toward building sustainable and resilient economies in the face of fluctuating oil markets. Neighboring countries like Saudi Arabia and the UAE have also introduced VAT and other measures in recent years, signaling a gradual shift in fiscal policies across the GCC.
The introduction of personal income tax in Oman could serve as a precedent for other Gulf nations considering similar reforms. Analysts suggest that such measures are crucial for fostering economic stability and meeting the demands of a rapidly changing global economy.
Oman’s groundbreaking step towards implementing personal income tax underscores its commitment to economic diversification and long-term fiscal health. As the region evolves, this policy could pave the way for a more sustainable future across the Gulf.