In a transformative move for the Gulf tax landscape, Oman has officially introduced its first Personal Income Tax (PIT) Law by Royal Decree No. 56/2025, published in Official Gazette No. 1602. Effective from 1 January 2028, this law brings natural persons into the formal tax net for the first time in the Sultanate’s history.

While personal income taxation is common across MENA, Oman’s new law is a pioneering development in the GCC, where most states continue to refrain from taxing individuals.

1. Scope and Applicability

The law applies to natural persons (individuals), both residents and non-residents, having income arising in or from Oman.

A resident individual is taxed on global income, while a non-resident individual is taxed only on Omani-sourced income.

For this purpose, a tax resident is any person present in Oman for 183 days or more during a calendar year. Example:

Sarah, a French consultant, spends 190 days in Oman in 2028 and earns OMR 48,000 from a local firm and OMR 7,000 from online teaching abroad. As a tax resident, she must declare both incomes. She can claim exemptions for education expenses, reducing her taxable base.

2. Taxable Income

Oman’s law defines income comprehensively. Taxable income includes:

Example:

Ahmed earns OMR 38,000 from his employment, and OMR 7,000 from renting an apartment in Muscat. His total gross income is OMR 45,000.

3. Income Threshold & Tax Rate

As per the law, annual income up to the threshold limit of OMR 42,000 is exempt. Any income above this limit is taxable at a flat rate of 5%.

Calculation:

A professional earning OMR 50,000 annually pays tax as follows:

• Taxable income = OMR 50,000 – 42,000 = OMR 8,000
• Tax = 8,000 × 5% = OMR 400

4. Deductions & Exemptions: A Socially Minded Framework

The PIT Law includes targeted exemptions to support fairness and ease the burden on middle-income individuals. The key exemptions and deductions are tabulated below:

Example:

Fatima earns OMR 55,000 and pays OMR 3,000/year in school fees for her children. After deduction for school fees and basic threshold limit of OMR 42,000, her net taxable income drops to OMR 10,000, and tax owed is OMR 500.

5. Regulatory Compliance

The law introduces the requirement to file annual tax returns if the taxable income exceeds OMR 42,000. Individuals earning income below this threshold may not be required to file the tax returns.

Tax returns must be filed within 6 months of year-end (i.e. by 30 June every year).

The law also introduces the requirement for deduction of withholding tax at the rate of 5% by employers and other payers and is mandatory for salaries, pensions, director fees, etc. Withholding tax rate is calculated on gross payments (except in case of employment remuneration).

Non-compliance with the provisions of the law is subject to penalties, interest, or administrative sanctions.

Example:

A company paying an annual salary of OMR 60,0000 to a non-resident software developer must withhold tax at 5% unless exempted under a tax treaty.

6. Comparison with GCC and MENA Countries

It is interesting to note that Oman adopts a GCC-unique approach, i.e., a low flat tax rate, high threshold exemption, and taxation of global income. It strikes a balance between tax-free Gulf models and structured systems like Jordan or Egypt.

7. Anti-Abuse Rules and Penalties

The law has clear anti-avoidance provisions prohibiting:

• Artificial transactions to defer or reduce tax
• Non-disclosure of foreign income
• Use of false invoices or backdated contracts

Penalties range from OMR 1,000 to 5,000, with imprisonment up to 3 years for serious fraud.

8. Way Forward for Individuals and Employers

For Individuals:

• Track residency days and foreign income
• Retain receipts for education/medical expenses
• Declare all non-cash benefits (e.g., housing, cars, stock options)

For Employers:

• Update payroll and HR systems
• Classify benefits-in-kind into employee remuneration and business expenses
• Prepare for electronic reporting and withholding

9. Practical Scenarios

Scenario: International Teacher

A British teacher at a Muscat school earns OMR 39,000 and housing benefits worth OMR 7,000. Thus, the taxable income is OMR 46,000 and the tax is payable on OMR 4,000 (46,000 – 42,000). The tax payable at 5% comes to OMR 200.

Scenario: Property Investor

Non-resident Indian earns OMR 60,000 from Omani rentals. Since the income is earned in Oman, the non-resident is required to pay tax in Oman. The payer must also deduct withholding tax at 5% on gross income, i.e., OMR 3,000, unless treaty relief applies.

Scenario: Doctor in Jordan

A doctor resident in Jordan earns JOD 60,000 which is subject to progressive income tax at 20%–25% in Jordan, subject to deductions. This tax rate is higher than Oman’s 5% flat rate. The doctor may consider shifting his residence to Jordan; however, social contributions and family deductions in Jordan must also be taken care of.

Scenario: Returning Omani national

An Omani national, who has been in Germany since the past 10 years, decides to return to Oman. The law allows a tax exemption on his overseas income until 18 months of termination of overseas tax residence.

Final Thought: Oman’s Tax Moment May Be the Region’s Turning Point

Oman’s new PIT Law is not just a fiscal reform — it’s a strategic repositioning. As regional peers monitor public reactions and administrative feasibility, Oman sets a measured and modern example: low tax rate, broad taxable base, transparent, and socially conscious.

It remains to be seen whether this law becomes a template for the rest of the GCC, particularly in light of global tax pressures and public finance reform.