Oman has approved legislation to introduce a personal income tax, becoming the first member of the Gulf Cooperation Council (GCC) states — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (U.A.E.) — to do so. The law was published in the official gazette on June 30, 2025, but will take effect on January 1, 2028.
The tax will be levied on tax residents (i.e., Omani citizens and non-Omanis residing in Oman for 183 or more days in a year) at a flat rate of 5% on their annual gross worldwide income exceeding 42,000 Omani rials (roughly USD 109,000), excluding certain types of income (e.g., gain on the sale of a main residence, foreign salary and inheritance). Deductions from taxable income will also be available (e.g., for education, medical, zakat [charitable donations] and housing expenses). According to the government, 99% of the population will not be liable for income tax.
Employers will be required to withhold and transfer tax amounts on employees’ salaries and other compensation (e.g., bonuses, end-of-service benefits). Employees who have only employment-based income may request that their employer file a tax return on their behalf.
Employers should consider the impacts on their affected employees and potential implications for compensation policies as well as operational preparations related to payroll and withholding. For highly paid expatriate and local employees subject to the new tax, while the 5% tax rate will be one of the lowest in the world, it will still be a significant change from the current zero personal income tax. In the government’s view, introducing the tax is necessary for diversifying the economy away from reliance on oil and gas revenues, which account for 85% of government revenue. The other five GCC governments also heavily rely on oil and gas revenue and are likewise looking to diversify sources of revenue and may eventually follow Oman’s lead. All of the member states have introduced value-added taxes within the past 10 years, and after a corporate tax was introduced in 2023 in the U.A.E., all except Bahrain now apply corporate income tax rates to all businesses.
