Oman is first to introduce private earnings tax in GCC area

From January 1, 2028

Oman has issued a royal decree to introduce a private earnings tax, making it the primary Gulf Cooperation Council (GCC) nation to impose such a levy.

A flat 5 per cent price will apply to people incomes greater than OMR 42,000 ($109,091 / AED 401,142 / SAR 409,671 / KWD 33,407 / BHD 41,202 / QAR 397,667) yearly.

The tax is scheduled to take impact on January 1, 2028, and is anticipated to have an effect on roughly 1 per cent of the nation’s inhabitants.

The decree kinds a part of Oman’s Imaginative and prescient 2040 financial roadmap and its medium-term fiscal technique, launched in 2020 to scale back public debt, diversify authorities revenues and promote monetary stability. Revenues from oil and gasoline at the moment account for between 68 % and 85% of public earnings, making fiscal reform a precedence.

The brand new tax system consists of social and financial safeguards. There are exemptions and deductions for healthcare, training, housing, inheritance, zakat (a compulsory type of charitable giving in Islam) and philanthropic donations.

The tax regime contains 76 articles throughout 16 chapters, and government laws are anticipated to be revealed inside one yr of the regime’s publication in Oman’s Official Gazette. Oman’s tax authority is getting ready an digital system linked to different authorities databases to ease compliance.

The measure is projected to boost non-oil income to between 15 per cent of GDP by 2030 and 18 per cent by 2040, supporting public spending and social welfare.

A major shift

Oman is the primary GCC nation to introduce a private earnings tax, marking a big shift in a area that has historically supplied zero-tax regimes to draw expert abroad employees, primarily from Southeast Asia. Observers notice the transfer may affect different GCC states. Nevertheless, none have introduced comparable plans but.

Specialists recommend that whereas the initiative primarily impacts prime earners, Omani residents and expatriates who pay tax could start to demand stronger accountability and public companies. This aligns with broader themes throughout the Arabian Gulf, the place elevated fiscal contributions typically spark requires larger transparency.

Oman’s financial system is experiencing gradual diversification and reasonable development, supported by non-hydrocarbon sectors and prudent fiscal administration.

Actual GDP development elevated to 1.7% in 2024, up from 1.2% in 2023, pushed by development in manufacturing, companies, logistics, and tourism. The Worldwide Financial Fund tasks development of two.4% in 2025 and three.7% in 2026 as oil manufacturing eases Opec curbs.

Inflation stays subdued, at beneath 1%, and the fiscal surplus reached roughly 3.3% of GDP in 2024, though it’s anticipated to slim throughout 2025 and 2026.

A Dubai-based economist mentioned the tax is modest by international requirements however represents a key shift in how GCC states finance development. He added that the transfer demonstrates Oman’s willingness to interrupt with custom.

The Omani authorities expects the impression on international funding to be minimal, because the tax targets people moderately than corporations. The speed stays low in comparison with international averages.

Oman has beforehand carried out oblique taxes, together with VAT in 2020, in addition to company tax. As international pressures on oil markets persist, some Gulf nations, together with the UAE and Saudi Arabia, could observe Oman’s lead in exploring a restricted earnings tax on excessive earners.

The Omani tax authority said that the exemption threshold is intentionally excessive to minimise the burden on retirees, low-income earners, and middle-income households. The Omani authorities additionally intends to teach taxpayers and companies upfront of implementation, guaranteeing that needed programs and laws are in place to facilitate a easy transition.

As Oman prepares to pilot this landmark reform, Gulf observers will intently monitor whether or not the long-held tax-free mannequin of the Gulf oil economies reaches its limits and if private earnings tax turns into a wider regional software amid declining hydrocarbon revenues.

Picture: Oman is the primary GCC nation to impose a private earnings tax levy. Credit score: Rayyan