Oman Introduces Income Tax through Royal Decree No. 56/2025

On June 22, 2025, Sultan Haitham bin Tariq issued Royal Decree No. 56/2025, officially enacting the Income Tax Law for natural persons. The tax applies to an annual taxable amount of OMR 42,000 (approximately USD 109,200) and is levied at a constant rate of 5%, after deducting eligible expenses. Tax liability applies to individuals residing in Oman with worldwide income; non-resident Omanis are taxed only on domestic income. Deductions and exemptions such as housing loan interest, education and health costs, charitable donations, and capital gains relieve taxpayers. The law was published in the Official Gazette on June 30 and will come into effect on January 1, 2028, with one year for implementation through detailed regulations.

The law defines income, tax year, and tax status. Income includes, among other things, wages, self-employment income, rental income, royalties, interest, and capital gains. According to authorities, the tax burden affects only about 1% of the population. One-time foreign income exemption for two years and capital gains from residential properties are excluded. Double taxation agreements can be used to credit foreign taxes.

The measure is in line with Vision 2040; it complements existing taxes (e.g., value-added, consumption, and corporate tax) and reduces oil dependency. Economic analyses foresee only minor effects on competitiveness. International institutions consider it a possible model for other GCC states.

The upcoming implementation phase offers scope for closer examination: Employers should adjust payroll systems, contract terms, and additional benefits. Taxpayers with global income must evaluate their residency status and opportunities to avoid double taxation.

Regionally, Oman opens a frame of reference for Bahrain and Kuwait. The UAE and Saudi Arabia are unlikely to levy a similarly comprehensive tax in the near future, but a coordinated GCC tax system is conceivable in the medium term.