Oman's Personal Income Tax Law Explained

Oman’s Personal Income Tax Law was promulgated under Royal Decree 56/2025, establishing new regulations for personal taxation in the Sultanate. The law is scheduled to come into effect on January 1, 2028, marking a significant change in the country's fiscal landscape. Separately, Mohammed Ibrahim Law Firm, a key entity in Oman's legal sector, was established on December 14, 2006.

Defining Tax Residency

Mohammed Ibrahim Law Firm, which operates offices in Muscat and Sohar, clarified the criteria for tax residency under the new law. Dr. Mohammed Ibrahim Al Zadjali, Chairman of Mohammed Ibrahim Law Firm, stated that "a tax resident is a person whose presence in Oman exceeds 183 days, whether continuously or intermittently, during a tax year." He added that "a non-tax resident is anyone who does not meet this condition." Under the new regulations, a tax resident is subject to taxation on income earned both within and outside Oman. Conversely, a non-tax resident is only taxed on income realized inside Oman. Dr. Al Zadjali further explained that "in both cases, tax is imposed at a rate of 5% of taxable income."

Calculating Taxable Income

Tax is imposed at a rate of 5% of taxable income for both tax residents and non-tax residents. Dr. Mohammed Ibrahim Al Zadjali, Chairman of Mohammed Ibrahim Law Firm, clarified that "a person’s gross income includes sources such as salaries and wages, self-employment, leasing, royalties, interest, and returns from and disposal gains on stocks, shares and bonds, pensions and end-of-service gratuities, among others." He added that "the first OMR 42,000 of gross income is excluded in determining net income, while applicable exemptions, costs and losses are then deducted to determine taxable income, which is taxed at 5%."

According to Dr. Al Zadjali, "a person whose gross income exceeds OMR 42,000 must file an electronic tax return within six months from the end of the tax year, subject to certain exceptions under the Law." Taxable income is determined after deducting applicable exemptions, costs, and losses from net income. Where the recipient is a tax resident and income from a source exceeds OMR 20,000, 20% of the tax due must be withheld. If the recipient is a non-tax resident, an amount equivalent to the full value of the tax due shall be withheld.

Obligations and Penalties

Individuals with gross income exceeding OMR 42,000 are required to file an electronic tax return within six months from the end of the tax year, with certain exceptions stipulated in the law. Dr. Mohammed Ibrahim Al Zadjali, Chairman of Mohammed Ibrahim Law Firm, stated that "employers shall pay amounts required to be withheld for tax on salaries and wages, pensions, end-of-service gratuities and membership bonuses which they are required to pay, and shall transfer them to the Authority periodically under the regulation. Other entities, such as government bodies, companies and establishments, must also withhold tax on payments from other income sources. Where the recipient is a tax resident and income from such source exceeds OMR 20,000, 20% of the tax due must be withheld. Where the recipient is a non-tax resident, an amount equivalent to the full value of the tax due shall be withheld in accordance with the controls specified by the regulation." He added that "Deliberately failing to file, withhold, or pay withheld tax can result in fines. Serious offences such as knowingly providing false data, or deliberately destroying, concealing, or disposing of records before the retention period ends, may carry fines or imprisonment. Understanding who must pay, and when, is essential for both individuals and businesses well ahead of the law coming into effect."