In the context of tax, truly transformative developments – those capable of reshaping how a country or jurisdiction is viewed by investors and the public used to be rare, but now becoming increasingly common. Recently we’ve entered a period that can be best described as tax turbulence. This evolving landscape has prioritized the way in which tax is considered in investor decision-making. And today, tax strategy can become the determining factor in whether a project moves forward or doesn’t. At an international level, the Organisation for Economic Co-operation and Development (OECD) has led the global push for Pillar 2, commonly referred to as the global minimum tax. This has prompted significant change among large corporates (public and private) as they adapt to this new paradigm, despite ongoing policy uncertainty. In another area of international fiscal policy, the United States have been driving significant disruption in the world of tariffs.
Historically, the Gulf has not been associated with major tax reform, let alone ground-breaking shifts. However, recent developments suggest that this approach is evolving, and the region is increasingly positioning itself as a dynamic environment for tax policy innovation. Notable examples include the introduction of a federal Corporate Tax regime in the United Arab Emirates, ongoing income tax reforms in Saudi Arabia, and Oman’s recent announcement of a Personal Income Tax regime.
In this article, our focus will be the most recent tax innovation in the Gulf brought by the Sultanate of Oman, the enactment of Royal Decree 56/2025 promulgating Oman’s Personal Income Tax Law, on 22 June 2025.
The harbingers of tax overhaul or single player in the PIT game?
The Gulf’s long-standing reputation as a tax-free haven for individuals is poised to enter a new era. As of 1 January 2028, the region will see Personal Income Tax (“PIT”) in force in Oman with the potential to trigger structural recalibration across Gulf economies. While some may view this as a minor development in a Gulf state that seeks to diversify away from oil resources, Oman’s move is likely to reverberate more broadly – impacting its own economy, and reshaping regional and international investor perceptions around risk, returns, and the trajectory of future policy change across the GCC.
For decades, the GCC attracted (and continues to attract) expatriate professionals and (ultra) high-net-worth individuals (HNWIs), offering a compelling trade-off: a stable geopolitical climate paired with zero personal income tax. However, Oman’s decision to implement a PIT based on a worldwide income base, and levied at an initial rate of 5%, represents a noteworthy deviation from this model and raises further questions about whether other Gulf states may eventually follow suit. Oman’s action denotes an important signal to the region: the unwritten contract between Oman and their residents is being rewritten. Investors and advisors must now factor in a new kind of uncertainty – fiscal transition.
Nevertheless, it is reasonable to acknowledge that Oman faces a different economic outlook to that of its fellow GCC countries (like the United Arab Emirates and Saudi Arabia). This divergence may partly explain its decision to implement a PIT system as part of eOorts to enhance its economic resilience vis-à-vis the oil sector. In addition, Oman’s distinctive position may also place it at the forefront of regional tax reform – serving as a potential “canary in the coal mine” for wider PIT acceptance and paving the way for policy precedent.
This is not to suggest that it is expected that other GCC countries, particularly the United Arab Emirates and Saudi Arabia, will also introduce a PIT system in the very near future. While a carefully designed and reasonably applied PIT could align with long-term economic diversification eOorts, the reputational implications may prove harder to manage than the fiscal ones. The region’s identity as a zero-PIT zone has always served as a competitive advantage. Undermining that perception, even incrementally, introduces new risk premiums into investment and mobility decisions.
While the future trajectory of PIT across the GCC remains uncertain, it is now clear that a precedent has been set. With Oman’s decision to introduce a PIT regime, the region has entered uncharted territory. Whether this development proves to be an isolated adjustment or the beginning of a broader policy shift will become clearer over the next five to ten years. Against this backdrop, investors and high-net-worth individuals (HNWIs) are likely to approach the region with increased attentiveness, incorporating Oman’s forthcoming PIT into their long-term planning and strategic considerations.
Oman PIT – international standard with a regional twist
Shifting focus from the broader policy and regional outlook, it is important to examine the Oman PIT Law itself, what it introduces and its potential impact. Although some of its specifics will only be apparent with the publication of the Executive Regulations (set to be published within the year), and other implementing decisions, the general framework of the PIT system has already been established.
Focusing on the fundamentals, the Oman PIT Law answers the key questions that investors, HNWIs and the general public are keen to understand:
- Basis of taxation: worldwide income for resident taxpayers and Oman-sourced income for non-resident taxpayers.
- Tax residency: single criteria of 183 days of presence
- Tax rate: 5% over net income (i.e., income in excess of OMR 42,000 or ~USD 109,240)
- Calculation: special criteria for self-employment and rental income, either 15% cost presumption or actual costs.
- Deductions: contributions to retirement and end-of-service schemes, family education and healthcare expenses (limited), zakat and donations (limited), interest from loan for the first acquisition of primary residence
- Exemptions: multiple exemptions, including income from industrial property rights (limited), inheritance/grants/donations from spouses or first-degree relatives, foreign employment income, own residence (limited for primary and once for secondary)
- Losses: 5-year carry forward
- Compliance: tax return and payment (if any) by 30 June of the following year
- Withholding Tax: 5% periodically on salaries, pensions, board allowances / 1% for other types of income if in excess of OMR 20,000 (~USD 52,000) / 5% for non-residents
The mechanics and nuances for each of these elements will be further detailed in the coming year, and beyond, with the executive and implementing regulations. As always, a comprehensive understanding of the detailed rules and their interplay will be essential for individuals and businesses navigating the new regime.
