Oman will impose five per cent income tax on people whose annual income exceeds 42,000 Omani riyals (approximately Dh400,000) from 2028.

Under the Personal Income Tax Law issued by Royal Decree No. 56/2025, the aim of introducing income tax is to diversify income sources of the government and reduce dependence on oil revenues.

The Sultanate will become the first Gulf Cooperation Council (GCC) country to introduce personal income tax in the region.

Stay up to date with the latest news. Follow KT on WhatsApp Channels.

The UAE and other Gulf introduced value-added tax (VAT) and corporate income tax. In addition, the UAE also levied tax on tobacco and carbonated drinks in order to encourage healthy lifestyles among the residents.

According to Oman News Agency, the law will come into effect at the beginning of 2028.

Karima Mubarak Al Saadi, director of the Personal Income Tax Project, told the Omani news agency that all necessary preparations and requirements for implementing the tax have been completed.

However, there are some exemptions. The law also includes deductions and exemptions accounting for social considerations in the Sultanate of Oman, such as education, healthcare, inheritance, zakat, donations, primary housing, and other factors.

Oman said a thorough study was conducted before implementation of personal income tax which carefully considered exemption threshold, revealing that approximately 99 per cent of Oman’s population will not be subject to this tax.

Thomas Vanhee. Photo: Supplied

Thomas Vanhee, founder partner of Aurifer Middle East Tax Consultancy, said the law would apply to all residents, therefore indifferent to citizens and non-citizens.

“Oman is now the first GCC country to legislate a personal income tax regime, distinguishing itself from other Gulf jurisdictions (e.g., UAE, Qatar, KSA) that still do not levy personal income tax. This could reflect IMF-driven diversification strategies, aligning with Oman Vision 2040 and reducing reliance on hydrocarbons,” he said.

Vanhee added that the 42,000 Omani riyal annual threshold indicates a progressive policy intent — safeguarding low- and middle-income residents while modestly taxing higher-income earners.

“At five per cent, the personal income tax rate is conservative by global standards," he said, adding that there is still ample time to prepare until 2028 when the legislation will start applying.