The Sultanate of Oman is charting a new fiscal path in the Gulf Cooperation Council (GCC) region with the introduction of a Personal Income Tax (PIT), effective from January 1, 2028. As per Royal Decree No. 56/2025, issued by His Majesty Sultan Haitham bin Tariq and published in the Official Gazette No. 1602 on June 30, 2025, this move marks the first time a GCC country has introduced a tax on personal income.
Key Highlights of the New Personal Income Tax Law
Under the new PIT law, individuals earning over OMR 42,000 annually will be taxed at a flat rate of 5%. Income below this threshold will remain exempt. The PIT applies to both Omani nationals and expatriates, covering residents and non-residents alike, with differing rules based on residency status.
The net income is calculated by deducting OMR 42,000 from the gross income, and the tax is applied to the taxable income, which is the net income minus allowable deductions, exemptions, and losses.
Who is Considered a Resident for Tax Purposes?
A resident is defined as a person who is present in Oman for more than 183 days (consecutively or intermittently) in a tax year. Residents are subject to tax on their worldwide income, while non-residents are only taxed on their Oman-sourced income.
Scope of Taxable Income
The PIT law covers eleven distinct income sources, including:
- Salaries and additional allowances
- Self-employment income
- Rental income
- Royalties
- Interest from savings, loans, and investments
- Dividends and profits from shares and sukuk
- Proceeds from disposal of real estate and securities
- Retirement pensions and end-of-service gratuities
- Prizes
- Grants and donations
- Remuneration from board memberships
With this, Oman has also effectively introduced a gift tax, though exemptions apply to spouses and first-degree relatives.
Notable Exemptions and Deductions
While the law is comprehensive, it does offer generous exemptions for certain types of income and expenditures. These include:
- Primary residence disposal: Exempt if the property was held for at least two years.
- Secondary residence: Exempt once in a lifetime.
- Education and healthcare expenses for self and family.
- Donations to approved entities (up to 5% of gross income).
- Diplomatic salaries and foreign-earned income by Omani tax residents.
- Post-employment contributions (up to two schemes).
- Interest on loans for building or purchasing a primary residence (once in a lifetime).
- Proceeds from investments listed on Muscat Stock Exchange.
- Intellectual property rights income for five years from registration.
For self-employed individuals:
They may deduct 15% of gross income or claim actual expenses, whichever is higher.
Special Transition Provision
Tax residents transitioning from non-resident status will enjoy a one-time 18-month exemption on foreign income, starting the day after they become residents.
Loss Carry Forward
Losses incurred from specific income sources — such as self-employment, real estate disposal, and capital markets — may be carried forward and offset against future income for up to five years.
Compliance and Filing Obligations
All individuals with gross income above the OMR 42,000 threshold must:
- File a tax return electronically within six months of the end of the tax year.
- Pay the due tax together with the return.
For the first tax year (2028):
The filing deadline is June 30, 2029.
If Leaving Oman:
If a person leaves Oman permanently, they must file a tax return 60 days prior to departure, unless the departure is caused by unforeseen circumstances, in which case, filing must be done before leaving.
Employer Responsibilities:
- Withhold PIT from employees’ salaries and pay it periodically.
- File returns on behalf of employees with only salaried income and no additional sources.
Penalties for Non-Compliance
Strict penalties have been outlined, including:
- A fine of OMR 1,000 to OMR 5,000 for failure to file tax returns.
- For intentional false information or forged documents:
- Imprisonment from 1 to 3 years
- A fine of up to OMR 10,000
- Juridical entities face double the fines for fraud committed by authorized representatives.
However, there is scope for settlement agreements where penalties may be waived if the due tax and 50% of the fine are paid.
International Considerations
Double tax treaty (DTT) provisions will prevail over local laws, meaning residents can claim foreign tax credits. Individuals taxed both in Oman and abroad may receive tax receipts from Oman to claim relief in other jurisdictions.
Next Steps for Implementation
The Oman Tax Authority is expected to publish the Executive Regulations within one year of the PIT law’s publication. These will provide detailed guidance and interpretation. According to the authority's official LinkedIn update, additional guidance materials will also be released in phases.
A Regional Milestone
Oman’s move is being closely watched by other GCC nations. With public finances under pressure and increasing focus on diversification beyond hydrocarbons, other Gulf countries might explore similar steps in the future. At present, the Omani PIT is estimated to impact only 1% of the population, targeting high-income earners and preserving broad affordability for the majority.
Conclusion
Oman’s introduction of a Personal Income Tax law from 2028 marks a historic shift in the GCC tax landscape. It brings Oman in line with global tax standards while providing a framework with clear exemptions, structured compliance, and strong enforcement mechanisms. Individuals and employers alike should begin planning and restructuring to align with the upcoming regulations and closely monitor the issuance of Executive Regulations in 2026 for further clarity.
