Oman’s Personal Income Tax Law: Key Rules on Tax Liability

Oman is set to implement its Personal Income Tax Law under Royal Decree 56/2025, with the legislation taking effect on January 1, 2028. This new law establishes a clear legal framework for personal income tax liability, defining who will be subject to taxation within the Sultanate.

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a tax resident is a person whose presence in Oman exceeds 183 days, whether continuously or intermittently, during a tax year. A non-tax resident is anyone who does not meet this condition. A tax resident pays tax on income realised both inside and outside Oman, while a non-tax resident pays tax only on income realised inside Oman. In both cases, tax is imposed at a rate of 5% of taxable income.

Dr. Mohammed Ibrahim Al Zadjali, Chairman of Mohammed Ibrahim Law Firm, explained that tax residency is determined by a person's presence in Oman exceeding 183 days within a tax year, whether continuous or intermittent. Tax residents are liable for a 5% tax on income earned both domestically and internationally. Conversely, non-tax residents are taxed at the same 5% rate, but only on income generated within Oman.

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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. 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%. 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.

The law specifies that gross income encompasses various sources, including salaries, self-employment, royalties, interest, and gains from stocks and bonds. A crucial aspect is the deduction of the first OMR 42,000 of gross income when calculating net income, followed by applicable exemptions, costs, and losses to determine taxable income. Individuals whose gross income surpasses OMR 42,000 must file an electronic tax return within six months of the tax year's end, barring specific legal exceptions.

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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.

Employers and other entities are mandated to withhold taxes on salaries, pensions, and other payments. The withholding rate varies: 20% of the tax due for tax residents when income from a source exceeds OMR 20,000, and the full tax due for non-tax residents. Penalties for non-compliance, such as failure to file, withhold, or pay taxes, range from fines to imprisonment for serious offenses like knowingly providing false data or destroying records. Understanding these obligations is vital for both individuals and businesses well before the law's effective date.

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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.