On 22 June 2025, Sultan Haitham bin Tariq issued Royal Decree No. 56/2025, establishing a personal income tax law. This measure requires taxable individuals to pay 5 % on annual income exceeding OMR 42,000 (approximately USD 109,200), after deductions. Residents are taxed on worldwide income, while non-resident Omanis are taxed only on domestic earnings. A range of deductions and exemptions — covering housing loan interest, healthcare and education expenses, charitable contributions, and capital gains — aims to mitigate the impact. The law was published in the Official Gazette on 30 June and allows a one-year period for issuing regulations. It will take effect on 1 January 2028.
Information
The decree clarifies definitions for gross and taxable income, residency, and the flat-rate tax structure. Financial items subject to tax include salaries, self-employment, rental income, royalties, interest, investment returns, and end-of-service benefits. Oman’s tax authority confirms that only the top one percent of earners will be affected. The threshold and low tax rate limit the fiscal impact. A one-time exemption for two years applies to foreign income, and capital gains from primary or secondary homes are also exempt.
Bilateral tax credits are provided to avoid double taxation on foreign income. The tax supports Oman’s Vision 2040 strategic goals and complements existing VAT, excise, and corporate taxes, shifting revenue reliance away from hydrocarbons.
Economic analysts suggest the measure will have a limited effect on competitiveness. Regional observers note its potential as a model for other GCC countries, though public reaction and capital movement will deserve close monitoring.
Conclusion
The law’s structure — with a one-year implementation period and detailed deductions/exemptions — enables businesses and individuals to adjust payroll, contracts, benefits, and tax planning accordingly. Employers should evaluate systems for withholding and reporting, and individuals with global income should review residency and tax credit mechanisms.
From a regional perspective, Oman may provide a benchmark for Bahrain or Kuwait if fiscal or economic pressures increase. Conversely, UAE and Saudi Arabia are unlikely to adopt a similar tax soon, but coordination across GCC tax policies could emerge in the medium term.
Transparency around revenue allocation and government accountability will be essential to maintain public confidence. Taxpayers may increasingly demand oversight as their financial contributions grow.
