Oman to become the first Gulf country to introduce Personal Income Tax?

• Oman might introduce a Personal Income Tax, setting it apart as the first Gulf nation to venture into this territory!
• The tax is part of Oman’s ambitious Vision 2040 plan, which aims to reduce the country’s dependence on oil and gas revenues.
• Here’s the rundown on this groundbreaking move.

Oman to Introduce Personal Income Tax

Oman is about to make history as the first Gulf nation to introduce personal income tax. A groundbreaking move aimed at diversifying its revenue sources beyond oil.

Pending approval

The Majlis Al-Shura, Oman’s lower house of parliament, has given the green light to this draft law.
Now, all eyes are on the State Council for the final thumbs up!

Oman’s Vision 2040

Oman Vision 2040 serves as the official blueprint for economic and social development from 2021 to 2040, outlining national sector strategies and five-year development plans.

Oman Vision 2040 was crafted with widespread community engagement.

Officially endorsed by Sultan Haitham Bin Tarik in 2020, the vision was implemented in early January 2021 and is set to guide policies until 2040.

Anticipated Tax Rate

The exact tax rates and additional details are still in the finalization stage, leaving room for potential adjustments before implementation.

Oman’s proposed tax percentages are as follows,

For Omani citizens: The threshold is a whopping $1 million on global income. Omanis above the threshold will see a flat 5% rate.

For Expats: Foreigners may have to fork out a tax rate of 5-9%, on Oman-sourced income above $100,000.

Also read: Bahrain is set to implement Corporate Income Tax

Timeline and Implementation

The initial draft bill, introduced in 2022, proposed a tax framework aimed at high earners, setting the stage for this development.

The PIT (Personal Income Tax) is expected to be outlined in 2024 and introduced in January 2025.

Comparative Tax Structures Across GCC 

Gulf states have been diversifying their revenue streams by introducing various tax measures, aiming to finance development projects and reduce their reliance on oil and gas income.

Corporate Tax:

The UAE: In 2023, the Gulf state made a significant move by implementing its first federal Corporate Tax on business profits. The country set a competitive rate of 9% to maintain its business-friendly image.

Saudi Arabia: In comparison Saudi Arabia imposes a 20% Corporate Income Tax.

Qatar: Its rate stands at 10%.

Value Added Tax (VAT)

VAT has become a common feature in the region.

• UAE: 5%
• Oman: 5%
• Saudi Arabia: Initially a 5% VAT was levied until Saudi Arabia increased it to 15% in 2020, in response to revenue challenges brought on by the Covid-19 pandemic.
• Bahrain: The standard VAT rate in Bahrain for 2024 is 10%. This rate increase took effect on January 1, 2022. Previously it was 5%.
• Kuwait and Qatar have yet to adopt a VAT system.

Also read: Why this Big 4 tax director embraced new career horizons in Saudi Arabia

Looking Ahead

This finalization of this decision can mark a monumental shift in a region traditionally known for its no-income-tax policy. This has historically attracted expatriates and fueled economic growth.

Oman’s bold step highlights the nation’s commitment to long-term economic sustainability.

The country’s decision to forge ahead with a personal income tax framework could serve as a model for other GCC countries, encouraging them to consider similar tax reforms.