Muscat: The Official Gazette (Issue No. 1602) released on Monday has outlined key details of the new Individual Income Tax Law under Royal Decree No. 56/2025. While the law itself will come into effect on January 1, 2028, attention is now shifting to the practical implications — particularly the 11 sources of income that will be subject to taxation under the new framework.
These categories, as defined in the law, form the basis for determining a person’s gross income, with net earnings exceeding OMR 42,000 annually being taxable. Here's a breakdown of the income streams covered:
11 Taxable Sources of Income Under the Law
1. Salaries and Wages
Includes basic pay, allowances, bonuses, in-kind benefits, and compensation for loss of income. Pensions are excluded.
2. Self-Employment
Covers income from freelance or independent work. A 15% deduction applies for related expenses.
3. Leasing
Earnings from renting real estate, equipment, or other assets. Also eligible for a 15% cost deduction.
4. Royalties
Income from licensing or exploiting intellectual property, technical knowledge, or industrial equipment.
5. Interest
Income from bank deposits, savings accounts, loans, and investment certificates.
6. Dividends and Capital Gains
Includes profits from shares, bonds, sukuk, and disposal of these financial instruments.
7. Real Estate Asset Disposal
Profits from selling properties are taxable, with exemptions for primary and secondary residences if declared to the Tax Authority. Transfers through inheritance, wills, or between spouses and first-degree relatives are not taxed.
8. Retirement Pensions and End-of-Service Benefits
Includes all such payouts received by individuals, unless already excluded by a specific provision.
9. Awards and Prizes
Monetary or in-kind winnings from licensed competitions, draws, or promotions.
10. Grants and Donations
Any non-employment-related financial or in-kind gifts received from individuals or institutions.
11. Membership Rewards
Payments for serving on boards or councils, including State Council, Shura Council, municipal councils, or boards of companies and associations.
The law also provides specific exemptions and deductions for education, healthcare expenses, housing loans, and certain donations, allowing for a more balanced tax burden.
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