Oman Announces 5% Income Tax: Everything You Need To Know

The personal income tax (PIT) for high earners marks a major shift in Oman’s fiscal policy as part of the broader Vision 2040 agenda to diversify national income and ensure long-term financial sustainability.

The Personal Income Tax Law, issued by Royal Decree No. 56/2025, comprises 76 articles across 16 chapters. It imposes a 5 per cent tax on the taxable income of individuals whose gross annual income exceeds OR42,000 ($109,100), derived from income categories defined in the legislation.

The law will officially come into force at the start of 2028.

Everything you need to know about new Oman tax

• Effective Date: January 2028
• Threshold: Income above OR42,000 ($109,100) annually
• Tax Rate: 5 per cent
• Exemptions: 99 per cent of citizens, plus deductions for key social needs
• Purpose: Fiscal sustainability, economic diversification, social equity
• Impact: Minimal GDP effect, no expected impact on foreign investment

Dr. Said Mohammed Al Saqri, Minister of Economy, said: “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).”

99% of Omanis exempt from new tax

According to Oman’s Tax Authority, the exemption threshold was determined after a comprehensive economic and social impact study based on income data from multiple government bodies.

As a result, approximately 99 per cent of Omani citizens will not be affected by the tax.

To address social equity, the law includes deductions for education, healthcare, housing, zakat, donations, and inheritance, among others.

Karima Mubarak Al Saadi, Director of the Personal Income Tax Project, confirmed that all necessary preparations and requirements for implementing the tax have been completed.

The Tax Authority confirmed the development of a digital tax declaration system integrated with other government entities to promote voluntary compliance.

The executive regulations of the law will be issued within one year of its publication in the Official Gazette.

Currently, 68 per cent to 85 per cent of Oman’s income is derived from oil and gas, depending on global prices.

While prices have been favourable recently, the government warns of long-term volatility. The PIT law seeks to secure sustainable funding and mitigate reliance on hydrocarbons.

Dr. Said Mohammed Al Saqri, explained that the (PIT) is a fiscal tool adopted by most countries worldwide as a key revenue source to fund state-provided services.

More than 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 noted that implementing the tax in Oman will yield significant economic benefits, supporting income diversification strategies and long-term fiscal stability as a pillar of economic growth.

He added that the 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.

The 2025 national budget allocates more than OR5bn ($13bn) to essential services:

• Education: 39 per cent
• Healthcare: 24 per cent
• Social Protection: 28 per cent

The Social Protection Fund currently supports over 2 million beneficiaries monthly, with PIT revenue expected to further strengthen the program.