Oman Becomes First Gulf Nation to Impose Income Tax
In a historic policy shift for the Gulf region, Oman has announced it will implement a personal income tax starting January 2028, becoming the first Gulf Cooperation Council (GCC) country to do so. The tax, set at 5%, will apply only to individuals earning more than 42,000 Omani rials annually (approximately $109,000), targeting the top 1% of income earners in the country.
This move is part of Oman’s broader fiscal and economic reform strategy under Vision 2040, which aims to diversify revenue sources away from hydrocarbons and ensure long-term financial sustainability. The government emphasized that 99% of residents will not be affected by the new tax, which is being framed as a progressive measure focused on fairness and fiscal responsibility.
Key Features of the Tax Plan
The new tax regime includes several carve-outs designed to protect essential spending and social equity. Exemptions will be provided for costs related to healthcare, housing, education, inheritance, zakat (Islamic charitable giving), and other forms of verified donations. Authorities have stated that revenue generated will be used to strengthen social protection programs and reduce reliance on oil revenues.
Oman has traditionally relied on oil and gas for up to 85% of its government income. However, fluctuating global energy markets and growing economic pressures have accelerated the push toward diversification. This income tax is a cornerstone of the government’s fiscal roadmap introduced in 2020 and complements earlier reforms such as the introduction of value-added tax (VAT) and cuts in public subsidies.
Regional Significance
Oman’s bold fiscal move is likely to set a precedent across the Gulf, where tax-free personal income has long been a key feature of the economic model. As other GCC nations face similar financial challenges amid global energy transitions and increasing budgetary demands, Oman’s decision could prompt a wider re-evaluation of tax policies in the region.
The announcement has sparked cautious interest across financial circles and regional policy forums. While the measure may face resistance from some quarters, analysts see it as a necessary step toward fiscal modernization and economic resilience.
