Muscat, Oman – In a significant move set to reshape the economic landscape of the Gulf Cooperation Council (GCC) region, Oman is poised to introduce a personal income tax (PIT) in 2025. This initiative, making Oman the first country in the GCC to levy such a tax, is nearing the final stages of legislative approval. The draft law, initially proposed in 2020, has been advanced by Oman’s Shura Council to the State Council, signaling its imminent implementation.
Legislative Milestone
The proposed personal income tax represents a strategic shift for Oman, aiming to diversify revenue streams beyond oil dependence. Analysts anticipate that this could serve as a model for other GCC countries contemplating similar fiscal measures, although such changes are not expected in the near future. Last year, Haji Al Khouri, undersecretary of the UAE’s Ministry of Finance, confirmed that the UAE has no plans to introduce personal income tax, despite encouragement from global financial institutions to expand their tax bases.
Taxation Framework
According to Emirates NBD Research, the new tax regime will have minimal impact on most residents in Oman. For expatriates, the tax will apply to income earned in Oman exceeding $100,000, with rates ranging from 5% to 9%. Omani nationals will face a significantly higher threshold, with income over $1 million subject to a 5% tax. This structure ensures that the majority of both expatriates and citizens will not be affected by the new PIT.
Economic Implications
The introduction of PIT aligns with Oman’s broader efforts to expand its tax base. Historically, Oman has had a corporate income tax, introduced in 2009 and increased from 12% to 15% in 2017. The country, however, lagged behind the UAE and Saudi Arabia in implementing VAT. The new PIT is expected to further bolster Oman’s revenue streams.
Demographic Insights
Oman hosts a significant expatriate community, comprising 42.3% of its total population of 5.2 million. Despite this, the impact of the new PIT is expected to be limited. Of the 2.2 million expatriates, only a small fraction (214,503 individuals) hold a bachelor’s degree or higher, suggesting that the number of expatriates earning above the $100,000 threshold is relatively low. Similarly, the number of Omani citizens earning above $1 million annually is expected to be minimal.
Future Outlook
As Oman prepares to introduce the PIT, it reaffirms its position as a leader in economic reform within the GCC. While the immediate impact on the general population is projected to be limited, the long-term implications for revenue diversification and fiscal stability could be substantial. This pioneering move may also influence other GCC countries to consider similar reforms in the future, marking a new era of economic policy in the region.
