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Oman Has Passed Its First Personal Income Tax Law

For decades, salaries in Oman were tax free, and that changes on 1 January 2028. On 22 June 2025, His Majesty issued Royal Decree 56/2025, which issues the Personal Income Tax Law. The decree was published in Official Gazette 1602 on 30 June 2025, and Article 4 sets the start date as 1 January 2028.

The law has 76 articles in 16 chapters and applies a single rate of 5 percent, only to income above OMR 42,000 a year. According to the Oman News Agency, the Tax Authority's impact study found that around 99 percent of people in Oman will fall below the threshold and pay nothing. This guide to Oman income tax explains who is caught, how the sum works, what is exempt, and what employers must prepare for.

Who Counts as a Tax Resident

Article 1 of the law defines a tax resident as a person whose presence in Oman exceeds 183 days in the tax year, which is the calendar year. The days can be in one block or spread across the year. Nationality does not matter: the Tax Authority's FAQ confirms that an Omani and a foreigner are treated the same once they pass 183 days.

Residents are taxed on worldwide income. Article 6 covers income a resident earns inside or outside Oman, with one carve-out for Omanis covered under exemptions below.

Non-residents are taxed only on Omani income. A person who spends 183 days or fewer in Oman is a non-resident, and only income earned in Oman is taxable for them. If you hold a residence permit in Oman but spend most of the year abroad, your tax status may differ from what your visa suggests, so count your days.

How Oman Income Tax Is Calculated

The law uses three defined terms, and they explain how the OMR 42,000 threshold works. Gross income is every cash amount and in-kind benefit a person receives in the tax year, and net income is the part of gross income above OMR 42,000. Taxable income is net income after deducting exemptions, costs and losses, and Article 8 applies 5 percent to that figure.

So the first OMR 42,000 is never taxed. A resident with a gross income of OMR 60,000 has a net income of OMR 18,000, and before any exemptions the tax is 5 percent of that, which is OMR 900. Deductible items such as pension contributions reduce the figure further, and someone earning OMR 3,500 a month, or OMR 42,000 a year, pays nothing at all.

The threshold is high by design. Oman income tax is aimed at high earners, and the Tax Authority told ONA that the rate was kept low for social reasons. The law taxes people only, while companies stay under the separate Income Tax Law.

Which Types of Income Are Taxed

Article 7 lists the income sources in scope, and each has its own rules in later articles.

Salaries and wages. This includes allowances and bonuses, and pensions and end of service gratuities are also included under Article 21.

Self-employment and freelance work. Article 10 covers income from a profession or trade carried on by an individual, with costs deductible as explained below.

Rent. Article 12 taxes rental income, and the FAQ notes that residential rent is exempt from VAT but not from personal income tax.

Investment income. Royalties, interest on deposits and loans, and dividends and gains on shares and sukuk are all in scope under Articles 14 to 16.

Property gains. Article 18 covers gains on disposing of real estate. If you are buying property in Oman as a foreigner, keep records of the price, fees and improvement costs. Article 19 allows these to be deducted on sale.

Other receipts. Prizes, gifts from anyone other than an employer, and board fees complete the list under Articles 22 to 24.

The 16 Exemptions and the Main Deductions

Article 25 lists 16 exempt categories, and the ones most people will use are below.

Foreign salaries of Omani residents. Item 4 exempts salaries that Omani tax residents earn from work outside Oman.

Returning residents. Item 3 exempts income earned abroad for 18 months after a person stops being a non-resident, once in a lifetime.

Pension contributions. Item 5 exempts contributions to pension and post-service schemes, mandatory or voluntary, for up to two schemes.

Education and healthcare. Items 6 and 7 exempt spending on the person, spouse, close relatives and dependent siblings, within limits the regulations will set.

Homes. Item 8 exempts the gain on a primary residence sold more than 2 years after the owner notified the Tax Authority of its selection. Item 9 exempts one secondary residence sale per lifetime. Item 15 exempts interest, or Islamic financing cost, on a loan for building or buying the primary home, once in a lifetime.

Zakat, donations and government paper. Item 10 exempts zakat and donations, including waqf, to approved bodies, capped at 5 percent of gross income. Items 11 and 12 exempt returns and gains on Government of Oman sukuk, bills and bonds.

Family transfers. Item 14 exempts inheritance, bequests and gifts between spouses or first-degree relatives. Item 16 exempts income from registered patents, designs and trademarks for 5 years.

On costs, the self-employed and landlords can deduct a flat 15 percent of gross income, or actual expenses with documents. Article 29 lets them change that choice once every three years. Losses from freelance work, rent, property and shares can be carried forward for up to 5 years. Article 32 gives a credit for foreign tax paid on income that is taxable in Oman.

What Employers and Payers Must Do

Most of the collection happens at source. Article 43 requires employers to withhold the tax due on salaries, wages, pensions, end of service benefits and membership fees, and remit it to the Tax Authority periodically. The Tax Authority's PIT FAQ states that every sector must withhold, including government units, private companies and foreign companies operating in Oman, once pay passes OMR 42,000 in the year.

Other payers withhold 20 percent of the tax. Under Article 44, government units and legal persons in Oman that pay other kinds of income, such as rent or fees, must withhold 20 percent of the tax due when the income exceeds OMR 20,000, with each income source treated separately.

Non-residents have the full tax withheld. For a non-resident, the payer deducts the full amount of tax due, and the FAQ gives an example: a non-resident consultant paid by a government body now falls under the 5 percent personal rate, not the 10 percent withholding in the Income Tax Law 28/2009, because Royal Decree 56/2025 repealed clause 1 of Article 18 bis of that law.

Companies that bring staff to Oman on an employment visa will need payroll systems that track annual pay against the threshold. Under Article 30, an employer may deduct only the exemptions that form part of the salary.

Filing, Payment and Record Keeping

Who files. Article 33 requires anyone whose gross income exceeds OMR 42,000 to file an annual return electronically within 6 months after the end of the tax year. For the first tax year, 2028, that means by the end of June 2029. If your only income is salary, membership fees or a pension from one employer, you can ask that employer to file for you.

Stopping. Under Article 34, a resident who has filed before may stop filing if gross income falls below OMR 42,000 for a tax year, after notifying the Tax Authority with the return for that year.

Payment. Article 42 makes tax payable by the filing deadline, while tax on an amended or estimated assessment is due from the date of notification.

Special deadlines. A person whose residence in Oman is ending must file at least 60 days before leaving under Article 37. If a taxpayer dies, the estate trustee files within 180 days of death under Article 36.

Corrections and records. An error in a return must be corrected within 30 days of discovery, and records must be kept for 5 years. The Tax Authority can amend an assessment within 3 years, or 5 years in cases of fraud. An objection must be lodged within 45 days of the notice, and the Authority has 90 days to decide.

Penalties

Article 63 lets the executive regulations set administrative fines of up to OMR 5,000. Article 65 sets a fine of OMR 1,000 to OMR 5,000 for deliberately failing to file on time, to produce records, to withhold tax, or to remit withheld tax.

Article 66 goes further for fraud: knowingly entering false data in a return, attaching forged documents, or destroying records before the retention period ends carries 1 to 3 years in prison, a fine of OMR 10,000 to OMR 20,000, or both. A company can be fined up to twice the maximum under Article 67, and repeat offences double the penalty under Article 69.

What to Do Before 2028

Article 2 of the decree requires the Head of the Tax Authority to issue executive regulations within one year of publication. Those regulations set the forms, deadlines and the limits on education, healthcare and housing exemptions. The Tax Authority told ONA that guidance manuals for individuals and employers will follow. Check the Tax Authority's personal income tax page for the current documents.

For individuals, work out your likely gross income for 2028 across all sources, not just salary, and keep receipts for education, healthcare, property costs and donations. If you own a home, consider notifying the Tax Authority of your primary residence once the procedure opens, since the 2 year clock for the exemption starts then. For employers, payroll and HR contracts should be reviewed well before January 2028, and our post company formation services in Oman can support the registration and compliance side.

Frequently Asked Questions

When does the Oman income tax start?

Oman income tax starts on 1 January 2028 under Article 4 of Royal Decree 56/2025, and the first returns are due within 6 months after the end of 2028.

Is the 5 percent charged on my whole salary?

No, tax applies only to the part of gross income above OMR 42,000, after exemptions and costs, so income at or below OMR 42,000 is not taxed.

Do expatriates pay the same as Omanis?

Yes, once they are tax resident by spending more than 183 days in Oman, with one difference: Omani residents' salaries from work outside Oman are exempt under Article 25, item 4.

Will my employer deduct the tax automatically?

Yes, Article 43 requires employers to withhold tax on salaries, pensions and end of service benefits and remit it to the Tax Authority. You still file a return if your gross income passes OMR 42,000, unless you ask your sole employer to file for you.

Are dividends and bank interest taxed?

Yes, under Articles 15 and 16, unless they come from Government of Oman sukuk, bills or bonds, which Article 25 exempts.

City Squares is an authorised agent of the Ministry of Commerce, Industry and Investment Promotion, based in Muscat. We help companies and their staff with registration, payroll-related government filings and ongoing compliance. Thresholds, exemptions and deadlines will be shaped by the executive regulations and later decisions, so confirm the current figures with the Tax Authority before you commit.