Oman's Bold Income Tax Move

Income Tax on the Horizon? Oman's Example Could Inspire Gulf States

For decades, the Persian Gulf countries have been operating their economies relying on oil revenues, which allowed them to avoid taxing their citizens' incomes. Now, however, changes may be on the horizon. Starting in 2028, Oman will introduce personal income tax, setting a precedent for other Gulf Cooperation Council (GCC) member states, which are also seeking ways to diversify tax revenues.

Oman: A Pioneer in the Field of Income Tax

From January 2028, Oman will introduce a 5 percent personal income tax on residents earning at least 42,000 Omani rials annually (approximately 400,000 dirhams). This affects the wealthiest 1 percent of the country and serves as a first step in expanding the fiscal system. While the current form will have a moderate revenue impact, the decision is symbolically significant as it is the first such tax in the GCC region.

Experts suggest that Oman's move could guide other Gulf countries facing similar challenges, such as reducing dependency on fossil energy sources or maintaining budgetary stability.

What Incomes Will Be Subject to Tax?

The exact details have not been disclosed yet, but various types of income taxation may arise. Nevertheless, the system will allow for several exemptions and deductions, which may include:

- Educational and health expenses,

- Zakat and charitable donations,

- Income earned abroad (temporarily exempted),

- Inherited or gifted wealth,

- Income from the sale of a secondary residence.

These allowances and one-time exemptions can aid tax planning and reduce the burden on the population.

Could Neighboring States Follow Suit?

Although no other Gulf state has officially announced the introduction of personal income tax, economic analysts believe the issue may resurface in the coming years, especially if Oman’s system works well and doesn't cause social tensions.

The GCC countries have already carried out indirect tax reforms—such as the introduction of VAT in the UAE and Saudi Arabia—so personal income tax could be the next step. The goal is clear: to develop a sustainable, oil-independent economy capable of ensuring fiscal balance in the long term.

What Can We Expect in the Future?

Oman's decision might not trigger an immediate avalanche, but it's certainly worth watching the consequences. If the implemented system enjoys social acceptance and provides a stable revenue source for the state, other countries—including the UAE or Qatar—might examine the possibility of introducing it.

(Source of the article: Oman announcement.)