5% tax on high earners aims to boost fiscal diversification
Oman has issued a royal decree to become the first Gulf nation to implement a personal income tax, its tax authority announced on Sunday. The move is part of a broader fiscal reform aimed at reducing the country’s reliance on oil revenues and stabilizing its public finances.
Starting in 2028, individuals earning over 42,000 Omani rials annually (about $109,091) will be subject to a 5% income tax. According to the decree, the tax will affect only the top 1% of earners in the country.
Part of long-term fiscal strategy
Oman, one of the smaller oil producers in the Gulf, launched a medium-term fiscal balance program in 2020. The strategy focuses on reducing public debt, expanding revenue sources, and supporting long-term economic growth. Improved budget performance in recent years has laid the groundwork for more ambitious reforms like this tax.
The personal income tax will include a range of social exemptions and deductions. Eligible individuals can subtract costs related to:
- Education
- Healthcare
- Primary housing
- Zakat and donations
- Inheritance
These measures are designed to cushion the social impact of the tax and align with Oman’s values and welfare priorities.
Regional significance
With this decree, Oman breaks new ground in the Gulf Cooperation Council (GCC), where oil wealth has traditionally allowed governments to avoid taxing personal incomes. The decision could serve as a bellwether for other resource-dependent Gulf states seeking alternative revenue streams amid volatile energy markets and increasing global fiscal scrutiny.