Executive summary

On 22 June 2025, the Oman issued Royal Decree No. 56/2025 (Personal Income Tax Law or PIT Law), introducing a 5% income tax for individuals earning more than 42,000 Omani Rial (OMR42k, approximately US$109k) annually, effective from 1 January 2028. The PIT Law was published in the Official Gazette on 30 June 2025.

The PIT Law aims to enhance revenue generation while not affecting the majority of the population. In addition, the imposition of personal income tax is intended to support the funding of social protection initiatives.

The Chairman of the Oman Tax Authority will issue the Executive Regulations for the PIT Law within one year from the date of its publication in the Official Gazette and will also issue the decisions necessary to implement the Executive Regulations' provisions.

Detailed discussion

Background

Oman is set to implement a new income tax regime, marking a significant fiscal reform — the first of its kind in the Gulf Cooperation Council (GCC) region. This initiative aligns with the country's long-term economic diversification goals under Oman Vision 2040, which seeks to reduce reliance on oil revenues.

The PIT Law specifically provides that it shall not prejudice international agreements and treaties to which Oman is a party.

The Executive Regulations, detailing procedures, timelines, tax return forms and other specific matters for PIT Law implementation are expected to be issued within one year of the PIT Law's publication in the Official Gazette (by 30 June 2026).

Key provisions of the PIT Law

Definitions

The definitions pertaining to personal income tax include:

• Person: The natural person subject to personal income tax, including tax residents and non-tax residents
• Tax resident: Any person who is present in Oman for more than 183 days, either consecutively or intermittently, during a tax year
• Tax nonresident: Any person who is not classified as a tax resident
• Tax year: Follows the Gregorian calendar, beginning on 1 January and ending on 31 December
• Gross income: All cash amounts and in-kind benefits received by a person during the tax year
• Net income: The amount of gross income exceeding OMR42k
• Taxable income: Net income after deducting the exemptions, expenses and losses, as well as exemptions granted under international agreements
• Employer: Any entity with which a person is employed, including individuals, units of the State's Administrative Apparatus, public legal persons, institutions, establishments, private sector companies, and civil society units operating in Oman, whether Omani or foreign, as well as regional and international organizations

Pension funds are recognized as employers for pensioners. Additionally, entities such as the State Council, the Shura Council, Municipal Councils (elected or appointed), public authorities, public institutions and similar units within the State's Administrative Apparatuses, along with companies, associations and public benefit entities, are considered employers concerning allowances and other payments made to their members or boards of directors.

• In-kind benefits: All non-cash benefits received by the person during the tax year, whether from the employer or from other sources

Applicability and tax rate

Income tax at the rate of 5% shall be levied on a person's net income during a tax year as outlined below:

• For tax residents, the tax applies to income earned in Oman and abroad.
• For tax nonresidents, the tax applies to income earned in Oman.

Sources of income

According to the PIT Law, gross income may originate from one or more of the following sources: (1) salaries and wages; (2) self-employment; (3) leasing; (4) royalties; (5) interest; (6) profits from shares, equity interest, sukuk and proceeds from their disposal; (7) proceeds from disposal of real estate assets; (8) retirement pensions and end-of-service gratuities; (9) prizes; (10) grants and gifts; and (11) board members remuneration. The PIT Law provides a description of each source of gross income.

Deductions

The PIT Law allows deductions for expenses related to certain income sources, namely, (1) self-employment, (2) leasing, (3) profits from shares, equity interest, sukuk and proceeds from their disposal and (4) proceeds from disposal of real estate assets. The PIT Law specifies the allowable deductions that may be claimed for these sources of income.

Exemptions

The PIT Law lists the following income sources under the article on "Exemptions" and outlines the specific criteria applicable to each exemption: (1) diplomatic salaries; (2) allowances for Omani residents abroad; (3) income earned abroad; (4) salaries from foreign employment; (5) retirement contributions; (6) education expenses; (7) health care expenses; (8) primary residence sale; (9) secondary residence sale; (10) zakat and donations; (11) sukuk income; (12) interest from government securities; (13) compensation payments; (14) inheritance and gifts; (15) interest on loans for primary residence; and (16) industrial property rights.

Losses

The PIT Law allows losses from each tax year to be carried forward for a period of five years for the following sources of income: (1) self-employment; (2) leasing; (3) disposal of real estate assets; and (4) disposal of shares, equity interests, sukuk and bonds.

If a loss is incurred from a particular source of income during a tax year, that loss may be deducted from income generated by the same source. Losses incurred in multiple tax years must be deducted in chronological order, starting with the earliest loss.

Calculation of tax

The taxable income for each source of income during a tax year shall be separately computed, by deducting the deductible losses, tax exemptions and available losses.

Additionally, a person is entitled to deduct foreign tax paid from the tax due (subject to procedures to be stipulated in the Executive Regulations), provided that the deduction does not exceed the actual amount of tax.

Persons registered for value-added tax (VAT) purposes, who incur VAT on the purchase of taxable goods and services in the course of their taxable activity and are entitled to recover this VAT amount from the tax authority as an input VAT credit, are not eligible to deduct the same amount of VAT they have already claimed from the tax authority as a deduction or cost in their personal income calculation.

Tax shall be calculated in OMR. If income is earned in a foreign currency, the exchange rate as per the Central Bank of Oman will be used for conversion.

Tax compliance/return filing

Any person with a gross income exceeding OMR42k must submit a tax return to the tax authority. The tax return must be completed using the designated form and submitted electronically within six months from the end of the tax year (by 30 June of the following year), along with the applicable tax payment. Tax returns must be submitted annually thereafter unless the gross income falls below OMR42k for a tax year.

If the individual has no income sources other than salaries, wages, board membership allowances or retirement pensions from a single employer, the employer may submit the annual tax return on the individual's behalf upon request.

The specific forms and procedures required for this compliance will be detailed in the Executive Regulations.

Tax returns should include the following information: (1) gross income, (2) net income, (3) taxable income and (4) amount of tax due and payable.

Tax returns can be revised up to three years within 30 days of discovering an error, provided the tax authority has not initiated tax audit proceedings.

Individuals whose residency in Oman ceases must submit a tax return at least 60 days prior to the cessation date. If the cessation is due to a sudden and involuntary reason, the individual must submit the return before departure, regardless of the 60-day requirement, following the procedures to be specified in the Executive Regulations.

Tax assessments

The submission of the tax return is considered the assessment of tax, subject to relevant provisions of the PIT Law.

The tax authority can amend tax assessments based on information included in the returns, other data/documents, or audits conducted. If a tax return or supporting documents are not submitted to the tax authority, estimated tax assessments can be made.

Amendments to tax assessments cannot occur after three years from the tax return submission, unless fraud is proven, extending the period to five years. Estimated assessments cannot be made after three years from the end of the tax year for which the return was required to be submitted.

Tax payments and refunds

Tax payment obligations: Tax is due on the specified date for submitting the tax returns. If the tax assessment is amended or estimated by the tax authority, payment is due upon notification of the amendment or assessment.

Employer responsibilities: Employers must withhold and pay tax on salaries, wages, retirement pensions, end-of-service gratuities and board membership allowances. These amounts must be remitted to the tax authority periodically as per the procedures to be specified in the Executive Regulations.

Organization's responsibilities: Public and private organizations must withhold tax from other sources of gross income for a tax resident (excluding salaries, wages, pensions, end-of-service gratuities and board membership) for each source separately at a rate of 20% of tax due if income exceeds OMR20k. These amounts must be remitted to the tax authority within prescribed deadlines as per the Executive Regulations. If the person is a non-tax resident, the full amount of tax due shall be deducted by the withholding entity (further details shall be specified in the Executive Regulations).

Additional tax for delayed payments: An additional tax of 1% per month is imposed on unpaid amounts from the due date until payment.

Tax refunds: Refunds of excess tax paid can be claimed within five years from the payment date. The tax authority must refund these amounts within 30 days of a complete refund request being submitted. Additional procedures will be specified in the Executive Regulations.

Tax audits, objection, appeals and litigation

Taxpayers must retain relevant records for five years from their tax return submission. The tax authority may examine annually a sample of returns.

Taxpayers can file objections to revised or estimated assessments within 45 days of notification, and the tax authority must issue the objection decision within 90 days; failure to issue the objection decision is considered a rejection of objection. The filing of an objection does not automatically result in the suspension of the payment of tax; however, taxpayers who have filed an objection may request a postponement of tax payment within 30 days from the date of filing the objection.

Taxpayers can also file grievances against the objection decision, and further appellate process by filing a tax lawsuit, following the procedures as prescribed in the Income Tax Law.

Penalties

The PIT Law establishes several prohibitions and penalties to ensure compliance and prevent fraudulent activities. The Executive Regulations will specify administrative penalties for violations, with fines not exceeding OMR5k. More serious violations, including submitting false tax returns or forging documents, can lead to imprisonment from one to three years, and fines between OMR10k and OMR20k.

Implications

Individuals should evaluate whether the PIT Law applies to them and prepare to comply with their tax obligation from 1 January 2028. It is important to properly calculate taxable income after deductions, evaluate eligible exemptions, claim allowable foreign tax credits, if any, and file the relevant tax returns within the stated deadline. Individuals should also consider the application of any applicable double tax treaty as well as claim refunds for excess tax paid within five years. Noncompliance may lead to penalties, estimated assessments, and an additional tax of 1% per month on overdue payments.

Organizations should withhold and remit taxes on salaries, pensions, end-of-service benefits and board remunerations in line with the expected Executive Regulations. If these are the sole income sources for employees, organizations may need to file tax returns on behalf of their employees upon request. Organizations should also withhold a percentage of tax on other payments to residents and the full amount of tax on other payments made to nonresidents. Organizations assigning employees to Oman may expect increased assignment tax expenses and greater compliance requirements. It is essential to assess readiness for payroll management and compliance with the PIT Law.