Oman pushes forward with personal income tax framework

In a significant development for Oman’s fiscal policy, the country’s Shura Council has recently advanced the draft law on Personal Income Tax (PIT) to the State Council, reported Oman News Agency. This move is a critical step in finalising the legislative process for the introduction of PIT in Oman, targeting high-income individuals.

Details of the proposed taxation regime

The concept of a personal income tax in Oman has been under consideration for several years. The initial draft bill was first introduced in 2022, proposing a tax framework aimed at high earners. 

According to the 2022 draft, the tax rates were suggested to be between 5 per cent and 9 per cent.

The tax would apply differently to residents and non-residents:

• Foreign nationals: Subject to the tax on Oman-sourced income above a threshold of $100,000.
• Omani citizens: Taxed on any net income exceeding $1,000,000.

This progressive tax structure aligns with Oman’s broader economic goals, as outlined in its Medium-Term Fiscal Plan (2020-2024), which includes diversifying revenue sources beyond oil and gas.

Current tax framework in Oman

Oman’s existing tax regime primarily focuses on corporate income and certain payments made to non-residents. 

Governed by the Income Tax Law No. 28/2009, which came into effect on January 1, 2010, and subsequently amended, the law does not currently impose taxes on personal income for individuals. 

Key elements of the existing tax system include:

• Business Income Tax: Applicable to corporate entities operating within Oman.
• Withholding Tax: A 10 per cent tax on specified payments to non-residents, applicable on a gross basis unless tied to permanent establishments in Oman.

The draft PIT law’s progression marks a continuation of the the country’s efforts to diversify its economic policies. 

Since its inclusion in the Medium-Term Fiscal Plan, the introduction of personal income tax has been seen as a crucial element in achieving fiscal sustainability and reducing dependency on oil revenues.

The Shura Council’s decision to move the draft to the State Council suggests legislative momentum towards implementing this tax. If passed, the new tax could significantly impact both high-earning expatriates and wealthy Omani citizens, as well as mark a first for the GCC region known for personal income tax-free economies. 

Legislative discussions

The Shura Council session also addressed other economic and social topics, including promotion of vocational and technical education, establishment of a wholesale market in Sohar and VAT recovery for first residential property to provide financial relief through VAT adjustments for new homeowners.

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