Oman Set to Implement Income Tax, Impacting Over 600,000 Indians Working in the Country

Income tax has been a hot topic among Indians, particularly the 'Middle Class,' ever since the Union Budget was unveiled in July.

However, the impact of income tax may soon extend beyond India’s borders, as reports suggest that Gulf Cooperation Council (GCC) countries could begin implementing income taxes, with Oman potentially leading the charge.

Oman may become the first GCC country -- encompassing Saudi Arabia, Kuwait, the United Arab Emirates, Qatar and Bahrain -- to impose income tax on its residents.

The Omani government is expected to levy a tax rate of 5 to 9 per cent on individuals earning more than Rs84 lakh annually.
This new tax policy could affect approximately 600,000 Indians living and working in Oman, many of whom send substantial remittances back to India, reportedly amounting to Rs27,000 crore.

This development comes as other Gulf nations, including Kuwait, are also considering ending their zero-income tax policies. Meanwhile, Saudi Arabia and the UAE remain committed to maintaining their tax-free systems.

Changing Dynamics

The broader Indian diaspora across the Gulf region could face significant impacts if these tax changes take effect. According to Indian government data, 8.9 million Indians work in the GCC nations.

Historically, these petro-monarchies, bolstered by the oil boom, have operated welfare-oriented systems funded by state revenues, with minimal taxation.

However, the landscape is shifting. With dwindling oil reserves and reduced reliance on petroleum products—partly due to the global push for green energy—Gulf nations are increasingly seeking alternative revenue sources to sustain their economies.

In addition to expanding business and tourism sectors, taxing goods has emerged as a strategy to keep their economies afloat.
Saudi Arabia currently imposes a 15 per cent Value Added Tax (VAT) on most goods, a trend that could extend to further taxation measures, potentially impacting the Indian immigrant workforce in the region.

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