Tax reforms to drive Oman’s revenue growth

MUSCAT, JAN 18

Tax revenues are projected to rise to RO 2.531 billion in 2030, up from RO 1.990 billion estimated for 2026, reflecting both the Omani government’s drive to diversify its revenue base and the impact of ongoing tax reforms and administrative modernisation.

Several of these reforms have drawn praise from the International Monetary Fund (IMF). In its 2025 Article IV Consultation, the Fund welcomed steps to restructure the Oman Tax Authority (OTA), introduce advanced compliance risk management tools, and prepare for the introduction of Personal Income Tax (PIT) on high-income earners from 2028.

Noting recent progress, the IMF reported: “Tax revenues rose by 3 per cent in Q3 2025, driven by expanded registrant numbers and improved compliance. Key initiatives include establishing a comprehensive taxpayer registry, implementing risk-based compliance measures and upgrading IT systems to close collection gaps. E-invoicing is set to be completed by end-2026, while interim measures on human capital and process improvements align with IMF recommendations”.

Oman is now in the third year of a four-year Tax Administration Modernisation Programme, which includes plans to establish a dedicated Compliance Risk Management Unit within the restructured OTA.

At the same time, the IMF has emphasised that sustaining revenue gains will require faster progress in strengthening OTA staffing, modernising IT systems, completing the taxpayer registry, enhancing performance monitoring and fully operationalising risk-based compliance. The Fund also underscored that timely rollout of VAT e-invoicing in 2026, alongside expansion of the digital tax stamp, will be critical to improving compliance and collections.

A central plank of Oman’s evolving tax framework is the new Personal Income Tax (PIT) law, due to take effect in 2028. The IMF estimates PIT revenues at around 0.3 per cent of non-hydrocarbon GDP in the early years of implementation and describes the reform as a “milestone in revenue diversification and fiscal sustainability” under Oman Vision 2040.

The PIT applies a 5 per cent rate on net annual income above RO 42,000 (about $109,000), targeting roughly the top 1 per cent of earners. It covers income from employment, self-employment, investments and capital gains (excluding the primary residence), while allowing deductions for housing, education, healthcare, charitable contributions and work-related expenses. Residents are taxed on worldwide income; non-residents on Oman-sourced income.

The IMF noted that by focusing on high earners and incorporating socially oriented deductions, the PIT strengthens progressivity, improves perceptions of fairness and reduces fiscal vulnerability to oil price swings.

Also significant is Oman’s adoption of Pillar Two-aligned rules from 2025, including a Qualified Domestic Minimum Top-up Tax (QDMTT) and an Income Inclusion Rule (IIR). These measures apply to large multinational enterprises (typically those with global revenues above €750 million) and seek to ensure an effective minimum tax rate of 15 per cent in each jurisdiction.

Under the QDMTT, if a multinational’s effective tax rate in Oman falls below 15 per cent, the OTA can levy a domestic “top-up” tax. The IIR allows Oman to tax an Omani parent company on profits earned by low-taxed foreign subsidiaries.

A dedicated Tax Policy Unit is also envisaged within the Ministry of Finance to better align tax policy with broader fiscal objectives, while maintaining interim coordination with the Oman Tax Authority (OTA) to steer ongoing tax reforms.