Oman to Be First Gulf Nation to Introduce Personal Income Tax

In a move that might have your tax software blinking in disbelief, Oman just announced it will introduce a personal income tax—yes, an actual income tax—in 2028. That’s right, the land of oil wealth, tax-free expat gigs, and gold-plated shopping malls is finally dipping a toe into the world of taxing salaries. But before you start feeling bad for Omanis, let’s be real: this tax hits only the top 1% of earners, and you’ll need to be pulling in more than 42,000 rials (about $109,000) per year to even flinch. This bold move makes Oman the first country in the Gulf Cooperation Council (GCC) ever to take such a step. The six-member club—Saudi Arabia, UAE, Qatar, Bahrain, Kuwait, and Oman—has long relied on oil money to fund everything from free schooling to generous subsidies. But with oil prices riding a rollercoaster and the future of fossil fuels looking shakier than a camel on a pogo stick, Oman has decided it’s time to hedge its bets.

Mo Money, Mo Problems

Let’s cut to the chase: the 5% tax will only affect Omani residents making over $109,000 annually. That’s a very slim slice of the population—just 1%, according to Oman’s Tax Authority. The rest? You’re still riding tax-free. There’s also a softer side to the policy: deductions for healthcare spending and charitable donations are baked in. So, if you’re a wealthy Omani who gives back and takes care of your health, Uncle Sam—err, Uncle Sultan-is giving you a break. Minister of Economy Said bin Mohammed Al-Saqri says this move is all about “diversifying revenue sources” and “mitigating risks associated with oil reliance.” Sounds like the fiscal version of not putting all your eggs in one camel’s basket.

The “Gulf Dream” Just Got a Pinch of Reality

For decades, the GCC has been a magnet for expats and global businesses, drawn by the sunny skies, glitzy lifestyles, and—you guessed it—zero income tax. It’s been a sweet deal that turned cities like Dubai and Doha into expat utopias. But Oman’s shift may be the canary in the coal mine. Sure, this tax only hits high earners, and it’s still three years away. But in a region where even discussing personal taxation was once as taboo as criticizing your grandmother’s hummus, this move is huge. Economists like Monica Malik of Abu Dhabi Commercial Bank call it “a significant fiscal development in the region.” And make no mistake—other Gulf countries are watching closely. Saudi Arabia flirted with the idea of taxing foreign workers in the past. Tax on remittances has also made the gossip rounds. Oman just put a ring on it.

Oil’s Still King

Let’s look at the bigger picture. In 2023, oil accounted for up to 85% of Oman’s public income, with exports totaling $29.3 billion, mostly to China. That’s a fat paycheck, but it’s also a big vulnerability. Oil prices yo-yo based on global events, and with energy markets facing long-term uncertainty, Oman is trying to get ahead of the storm. This income tax isn’t happening in a vacuum. It’s part of Oman’s larger Vision 2040 plan, which aims to transform the sultanate into a tech-driven, diversified economy. The plan has already seen privatizations and IPOs, like the $2 billion listing of the national energy company’s E&P unit last year. And for a country with the lowest GDP per capita in the Gulf ($22,000 in 2023, per World Bank), a more sustainable revenue model isn’t just smart—it’s survival.

Will the Rest of the Gulf Blink?

It’s too early to tell whether Saudi Arabia, UAE, Qatar, and the rest will follow suit. But the International Monetary Fund (IMF) has long hinted that Gulf countries will eventually need new revenue streams to make up for declining fossil fuel demand. And let’s not forget the 1.8 million foreign workers in Oman who might now weigh whether neighboring countries offer a sweeter tax deal. As one Dubai-based tax adviser put it, “It’s not that 5% is too high—but for some people, any dirham or penny is too high.” Classic. So, will the region stay tax-free forever? Unlikely. Oman might just be the first domino, toppling slowly but surely toward a future where Gulf governments stop living large on oil alone.

When Change Comes in Quiet Sandals

Change in the Gulf usually doesn’t arrive with a bang; it tiptoes in wearing designer sandals. Oman’s income tax may seem small, delayed, and limited, but don’t underestimate it. It signals a shift, not just in policy, but in mindset. In a region where the words “personal income tax” were once whispered like a horror story, Oman just said them out loud—and made it law. And that, dear accountants, tax planners, and finance pros, is something worth keeping your calculators close for. Oman sets 2028 start for its first income tax on top earners. See why this move could shake up Gulf tax norms. Read on MYCPE ONE Insights!