Sultanate of Oman

Oman’s tax system is primarily corporate-focused, with companies subject to corporate income tax on business profits. Employers are not required to deduct income tax from employees’ salaries, as the country does not currently impose personal income tax (PIT) on individuals. Employers are, however, required to comply with statutory obligations such as social security contributions for Omani employees and adherence to labour and immigration laws, but this will change under Royal Decree 56/2025, published on 30 June 2025. From 1 January 2028 PIT will apply at 5% to taxable income exceeding the annual OMR 42,000 allowance, after allowable deductions and exemptions. These include qualifying education and healthcare expenses, housing loan interest and charitable contributions.
Residents (individuals present in Oman for more than 183 days in a tax year) will be taxed on their worldwide income, while non-residents will be taxed on Oman-sourced income only. This makes Oman the first Gulf Cooperation Council nation to tax personal income, targeting high-income earners.

Payroll taxes are limited, as there is currently no PIT in effect. However, employers are required to make statutory contributions on behalf of Omani employees to the Social Protection Fund (SPF). Currently, this includes a total contribution of 22.5% of the employee’s gross salary, with employers contributing 14.5% and employees 8%. These contributions fund benefits including pensions, disability, unemployment insurance, work injury protection and family-related leave. The employer’s statutory contribution incorporates funding for pension, work injury insurance and other social protection benefits introduced under the Social Protection Law, including maternity, sickness and parental leave schemes that have been phased in since 2024. Contributions are generally calculated on the employee’s insured wage as defined by the SPF, which in many cases is based primarily on basic salary rather than total remuneration. Expatriate employees are typically exempt from SPF contributions, except for mandatory insurance elements such as work injury coverage.

Since Oman does not currently have a PIT system, employers are required to comply with corporate tax and social security obligations, including filing corporate income tax returns within four months after the end of the financial year (typically by 30 April), with payment due at the time of filing. Social security contributions for Omani employees, managed by the SPF, are submitted monthly, with payments due by the 15th of the following month. Penalties may apply for late payments or non-compliance, with applicable rates defined by the relevant authorities. Employers should prepare for the upcoming PIT regime taking effect on 1 January 2028 under Royal Decree 56/2025, which will require withholding and remittance of PIT for affected taxpayers, with annual returns due by 30 June following the end of the tax year.

Payroll providers and employers must maintain comprehensive documentation and records to ensure compliance with tax, labour and social security regulations. This includes accurate payroll records, employment contracts and employee data, wage payment confirmations, working hours, leave balances, social security contributions, employee health and safety measures, disciplinary records and end-of-service benefits. These records must be retained for extended periods in line with applicable legal and regulatory requirements, often several years, and must be readily available for inspection by the relevant authorities, including the Ministry of Labour. Non-compliance may result in administrative penalties, fines, restrictions on government services, licence related sanctions or other enforcement measures, depending on the nature of the breach.