Oman's first-ever personal income tax -- not yet in force
Oman currently has no personal income tax. That changes under Royal Decree No. 56/2025, issued 22
June 2025, which enacts a flat 5% tax on individual income, but only for those with gross or net annual
income above roughly OMR 42,000 (about USD 109,000) -- targeting high earners rather than the general
workforce, with the law's stated design intended to leave the large majority of resident workers,
including most salaried NRIs, entirely untaxed at the individual level. The law takes effect 1 January
2028, making Oman the first GCC state to introduce a broad-based personal income tax as part of its
Vision 2040 fiscal diversification plan aimed at reducing reliance on hydrocarbon revenue. Implementing
Executive Regulations, which are expected to clarify definitions of taxable income, allowable
deductions, and filing mechanics, are due by mid-2026; NRIs earning above the threshold -- particularly
senior executives, business owners, and high-income professionals -- should watch for these regulations
as the effective date approaches rather than assume today's zero-tax position continues indefinitely.
The India-Oman DTAA and its 2025 update
India and Oman's original tax treaty dates to 1997. A Protocol signed 27 January 2025 entered into
force 28 May 2025 and takes effect in India from the 2026-27 financial year (1 April 2026 onward),
cutting withholding on royalties and technical-service fees from 15% to 10%, adding a Principal Purpose
Test-based anti-abuse rule consistent with the OECD's BEPS minimum standards, and adding a new
mutual-assistance-in-tax-collection article that strengthens cross-border enforcement cooperation
between the two tax administrations. NRIs relying on the treaty for withholding relief on India-source
royalty or technical-fee income should confirm which version of the treaty applies to their specific
filing year, since applying the wrong version's withholding rate can lead to under- or over-deduction
at source.
Corporate tax and VAT
Oman's standard corporate income tax rate is 15% of net taxable income, with a reduced 3% rate
available for qualifying small and medium enterprises meeting specified capital and revenue thresholds,
and a 10% withholding tax on payments to non-residents for services, interest and royalties, which NRI
business owners receiving such payments from Oman should factor into their pricing and cash-flow
planning. Oman implemented VAT on 16 April 2021 at a standard rate of 5% -- among the lowest standard
VAT rates in the GCC -- with certain foodstuffs, medicines, exports and international transport
zero-rated, and financial services, healthcare, education and residential rentals exempt. Businesses
exceeding Oman's mandatory VAT registration threshold must register with the Oman Tax Authority and file
periodic VAT returns, with penalties applying for late registration or non-compliance.
