Oman’s Law for Individual Income Tax on High-Income Earners

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Oman's Shura Council has recently approved a draft law imposing individual income tax on high-income earners and referred it to the State Council for further approval. This landmark decision is set to reshape the fiscal landscape of Oman and could also influence similar reforms across the GCC region.

In this write-up, we analyze the draft law as well as the possible implications in the GCC region. 

Proposed Tax

The draft law proposes a tax on high-income earners, with rates ranging from 5% to 9%. The tax would apply to both Omani nationals and foreign nationals under different as follows:

• Foreign Nationals: The tax applies to those with an annual income exceeding USD 100,000; and 
• Omani Nationals: The tax applies to those with a net income exceeding USD 1,000,000.

The proposed tax targets high-income earners, both foreign and domestic. Foreign nationals will be taxed on income sourced from Oman exceeding USD 100,000, while Omani nationals will face a flat rate of 5% on net global income exceeding USD 1,000,000.

Further details on the personal income tax law are awaited. 

Background 

The initial draft of the income tax law was introduced in 2022 as part of Oman's broader Vision 2040 initiative, aimed at diversifying revenue streams and reducing dependency on oil. This move is in line with international recommendations, such as those from the International Monetary Fund (IMF), which has long advocated for fiscal reforms in Oman.

Oman has already taken steps to diversify its revenue base, including the introduction of VAT and efforts to enhance returns from state-owned enterprises. The imposition of personal income tax is seen as a natural progression in these efforts.

Potential Impact on the GCC Region

Oman's decision to introduce personal income tax is a first in the GCC region and could set a precedent for other member countries. While countries like the UAE and Saudi Arabia have not indicated immediate plans to implement personal income tax, Oman's move might prompt reconsideration of tax policies in the future.

Economic Competitiveness 

To maintain its appeal as a business destination, Oman is expected to keep tax rates relatively low. Unlike the UAE and Saudi Arabia, which attract significant foreign investment, Oman aims to boost its economy by generating state funds through personal income tax.

Conclusion

The approval of the draft law by the Shura Council is a significant milestone in Oman's fiscal policy. If enacted, the law will diversify Oman's revenue streams and reduce its reliance on oil. While there are concerns about its impact on economic competitiveness and expatriate attraction, the move aligns with Oman's Vision 2040 and long-term economic stability goals. This development could also influence tax reforms across the GCC, setting a new standard for fiscal policy in the region.

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