Oman issued a royal decree to become the first country in the Gulf to impose a personal income tax, its tax authority said on Sunday, as the small oil producer works to diversify its revenue stream.
This historic decision signals more than just a new tax policy; it marks a strategic advancement towards economic diversification and fiscal sustainability.
Oman, among the smaller Gulf economies, launched a medium-term fiscal programme in 2020 to reduce public debt, diversify revenue sources, and spur economic growth, which has improved public finances.
Oman, which remains largely reliant on oil revenue, will impose a 5% tax on taxable income for individuals earning over 42,000 Omani rials ($109,091) per year starting from 2028, according to the decree.”
This phased timeline allows for comprehensive awareness campaigns, system upgrades, and clear guidelines, aiming to ensure compliance and minimise disruption.
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,” the country’s tax authority said in a statement.
By diversifying its revenue in a region where countries have traditionally relied on oil revenues. Oman aims to safeguard itself from the unpredictable shocks of the energy market amidst geopolitical disruptions.
Oman’s director of the Personal Income Tax project, Karima Mubarak Al Saadi, told the Omani News Agency that: “All necessary preparations and requirements for implementing the tax have been completed.”
The Gulf country added that the tax would apply to about 1% of the population. This tax will target only high-income individuals, reflecting a modern and progressive approach undertaken to safeguard the majority of its population while modestly contributing to the nation’s future stability.