Vijay Valecha, Chief Investment Officer, Century Financial on personal Income Tax Implementation in Oman and will the model serve as a template for rest of the GCC nations :
In a landmark and much-watched move, Oman announced a new personal income tax targeting high-income earners today. Starting from January 2028, a tax rate of 5 % will be levied on all people residing in the country (citizens and residents) whose annual income exceeds 42,000 OMR annually. For reference purposes, this would amount to only 1 % of the Omani population, which would come under this bracket. The average annual salary in Oman is under the OMR 19,000 – OMR 20,000 range.
Other Key Highlights
- Exemptions and deductions allowed for significant costs, including zakat, education, healthcare & endowment
- Initial one-time exemption from income earned outside Oman for two years
- One-time exemption for income from the sale of a secondary residence
- Exemption for inherited income and gifts
- Deduction allowed for interest in financing the construction of primary residence (one-time effect only)
- The taxable income thus will be the gross income minus all the exemptions, deductible expenses, and losses. A tax slab of 5 % will apply if net income exceeds 42,000 OMR
Will the Oman Model Serve as A Template?
GCC nations have already enacted indirect taxation reforms. The imposing VAT and corporate tax on big corporations already sees fiscal taxation collection for the Gulf states. UAE has collected nearly $ 45 billion + since the initial VAT implementation date of January 2018 (till 2023 end). Similarly, Saudi Arabia has collected over $ 15 billion since the initial implementation date of January 1, 2018 (till 2023 end). Oman, which is now the first GCC state to implement personal income tax, was the last one to implement VAT.
Looking at the initial guidelines of the proposed taxation rules, the overall structure looks more progressive, with only the top 1% of the working class getting taxed. Furthermore, the provisions for the number of deductions and exemptions provide a proper way of tax planning for the taxpayers. While major institutions, including the IMF and the World Bank, now see GCC indirect tax incorporation as a tectonic shift, most GCC nations have not publicly announced their initial plans for even drafting a personal income tax proposal.
For UAE & Saudi Arabia, Any Planned Incorporation Will Be Gradual, More Flexible, & Announced Well in Advance
Ongoing trends within the GCC suggest a lot of inter-regional migration, and foreign nationals are also seeking jobs and business opportunities here. This has turned out to be one of the anchor support factors for the growth in diversification themes in both these nations. The overall increase in the general residency population and a rise in the new Ultra High Net Worth Population here suggest that any significant incorporation of direct tax or associated taxation policies would be done with much thinking and policy planning. Any direct enactment could also be a double-edged sword for the GCC nations since the allure of 0 % personal income tax is the number one factor driving the growth in the new residency population and business setup here.
