Key Amendments to Oman’s Personal Income Tax Draft Law Approved – (January 2025)

On Tuesday, January 28 2025, the State Council and Majlis A’Shura approved modifications to the draft Personal Income Tax Law during a joint session, while also proposing further amendments to some provisions.

Key amendments have been made to the new draft Personal Income Tax Law, including raising the tax exemption threshold and lowering proposed tax rates. However, the implementation timeline remains uncertain.

The revised draft, which was delayed last year, has now been approved by the State Council and Majlis A’Shura and will be presented to Sultan Haitham bin Tarik for final approval.

---

New Tax Rates and Key Amendments

• Increased Tax Exemption Threshold: Income tax will apply to foreign workers earning more than OMR 50,000 ($130,000) annually, up from the previous OMR 38,500 ($100,000) threshold.
• Reduced Tax Rate: The maximum tax rate has been lowered from 15% to 5%, significantly reducing the tax burden on the middle class.
• Equal Tax Treatment for Omanis and Foreigners: This tax rate matches the 5% tax on global income exceeding $1 million for Omani citizens.
• Exemption for End-of-Service Benefits: Gratuity and other end-of-service perks will be exempt from taxation, a change that will positively impact foreign workers.

---

Tax Implementation Context and Regional Outlook

📌 This initial approval comes as Gulf countries explore new revenue sources in their efforts to implement fiscal reforms and reduce reliance on oil and gas.

📌 While Oman moves forward with tax reforms, the UAE has ruled out personal income tax, with its Minister of Economy stating at the World Economic Forum in Davos that such a tax is not on the agenda.

---

Economic Considerations and Potential Impact on Growth

• Uncertainty in Implementation Timeline: Lawmakers in the State Council and Majlis A’Shura have suggested delaying implementation to allow for further analysis of its economic impact.
• Changing Economic Conditions: Some experts believe that the draft law is based on 2019-2020 studies, which may not fully reflect the current economic landscape.
• IMF Pressure: Oman is under pressure from the International Monetary Fund (IMF) to diversify revenue sources and reduce dependence on oil and gas, which account for 72% of national revenue.

---

Summary

✅ Implementation of the Personal Income Tax in Oman may be delayed until 2026.
✅ Foreign workers earning more than OMR 50,000 will be subject to a 5% tax.
✅ The maximum tax rate has been reduced from 15% to 5%, and end-of-service benefits will be tax-exempt.
✅ Implementation depends on economic conditions and Sultan Haitham’s final decision.
✅ If enforced, Oman will become the first Gulf country to introduce personal income tax.