In a major move, Oman has announced it will start collecting personal income tax from January 1, 2028. This will be the first time any Gulf country introduces such a tax.
The 5 per cent tax will only apply to people earning more than OMR 42,000 (about $109,000) per year, which is roughly the top 1 per cent of income earners in the country. Most of the population will not be affected.
This step is part of Oman’s Vision 2040 plan, which aims to reduce the country’s reliance on oil income and boost other sources of revenue. The decision was made official through a royal decree, as reported by AP.
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So far, no other Gulf country has introduced income tax, but experts, including the International Monetary Fund (IMF), say others may need to consider similar steps in the future as they look to strengthen their economies.
99% of Omanis to remain unaffected
According to Oman’s tax authority, the exemption threshold has been deliberately set high to ensure that nearly 99 per cent of the population does not fall under the taxable bracket. Social exemptions for essential needs such as education, housing, healthcare, zakat, and charitable donations have been included to protect middle- and low-income groups.
Oman’s new income tax law is detailed, with 76 articles across 16 chapters. It clearly explains what kind of income will be taxed and what expenses will be exempt. To make tax filing easier and more accurate, Oman will also create a modern electronic system that connects to government databases.
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Oman aims to raise non-oil revenue to 18% of GDP by 2040
As part of its long-term Vision 2040, Oman wants to increase income from non-oil sources to 18 per cent of its GDP. The new personal income tax will help achieve this, alongside other taxes like corporate tax and VAT. This will also help improve the country’s financial health and global credit rating, according to its state news agency.
In 2024, Oman earned OMR 1.4 billion through corporate, VAT, and selective taxes. Adding personal income tax is expected to bring in more money to fund social programs and reduce the country’s reliance on oil revenue.
Is this start of tax reform in Gulf?
Gulf countries like Saudi Arabia, UAE, and Qatar don’t have personal income tax. Oman’s step might signify changing times as other Gulf countries look toward tax reforms to support their economies, especially with oil prices being unpredictable.
Why Gulf countries never had income tax before
Owing to oil money, such Gulf countries never considered taxing individuals, since oil money could easily suffice public services. Therefore, preference was always given to having a small number of local populations along with expansive state benefits. The absence of income tax also provided the allure to foreign workers and businesses. In light of their push to diversify economies, the days of this old model may well be numbered.
