Will Other GCC Countries Follow Oman's Lead in Introducing Personal Income Tax?

Oman is anticipated to introduce personal income tax, making it the first country in the GCC to do so, sometime next year.

This follows the kingdom’s Shura Council advancing the draft law to the State Council. Since the bill is nearing the end of its legislative approvals, it is likely to be introduced in 2025.

The initial bill was drafted back in 2020. Analysts expect other Gulf Cooperation Council (GCC) countries to also introduce personal income tax; however, not in the near future. Oman could serve as a template for launching the tax in other GCC countries.

Global financial institutions have been encouraging the UAE and other GCC countries to introduce new taxes to expand their revenues, away from the petrodollars. The UAE recently introduced a 9 per cent tax on corporate incomes to boost its revenues.

Most expatriates and nationals in Oman will not be impacted by this new tax regime. Quoting reports, Emirates NBD Research said that foreign nationals will be liable to personal income tax of 5 per cent to 9 per cent on income from Oman over $100,000.

For Omani citizens, the threshold will be orders of magnitude higher at net global income over $1 million, which would be taxed at 5 per cent. “Initially, at least the new PIT will not impact the majority of people in Oman, whether expatriate workers or citizens,” Emirates NBD Research said in its latest report on the UAE’s neighbouring country.

“The new personal income tax could be introduced as early as 2025, which would put the country back in the vanguard of widening the tax base in the GCC. Oman has long had a corporate income tax, even in a limited capacity.

It was introduced in 2009 and raised from 12 per cent to 15 per cent in 2017, with the tax only now introduced in the UAE. However, Oman subsequently lagged behind the UAE and Saudi Arabia in introducing VAT,” it added.

There are 2.2 million expatriates in Oman, making up 42.3 per cent of the total population of 5.2 million. Within this 2.2 million, the majority (1.4 million) have an educational attainment level of less than a general diploma.

“While it is not a perfect indicator of income, only 214,503 expatriate workers have a bachelor’s degree or higher diploma, so the number of foreign workers on the kind of $100,000-plus salary that would be liable to personal income tax is likely lower still than this – so fewer than 4.2 per cent of the population at large.

The number of Omani citizens meeting the $1 million annual income threshold is likely to be similarly small,” the report said.

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