Majlis Al-Shura approved a draft law and forwarded it to the State Council Image Credit: AFP

Dubai: Oman is on the brink of becoming the first Gulf nation to implement a personal income tax, aiming to diversify revenue sources beyond oil as part of its Vision 2040 plan.

The Oman Vision 2040 is the national reference for economic and social planning for the period of 2021-2040, and the source of national sector strategies and five-year development plans.

The Majlis Al-Shura, Oman's lower house of parliament, approved a draft law and forwarded it to the State Council, the upper house, for final legislative approval.

This decision marks a significant departure in a region known for its no-income-tax policy, historically used to attract expatriates and spur economic growth. According to Sico Investment Bank, Oman's move may prompt similar actions across the Gulf in the medium term.

The proposed income tax rates in Oman are expected to be moderate, likely ranging between 5 per cent to 9 per cent. This measure aims to address concerns among expatriates and foreign investors. Gulf states have increasingly introduced various tax initiatives to finance development and reduce dependency on oil and gas revenues.

The UAE, known for its appeal to the global wealthy, introduced a federal corporate tax on business profits for the first time last year, set at a low rate of 9 per cent to maintain its business-friendly environment. Saudi Arabia imposes a corporate income tax rate of 20 per cent, while Qatar levies 10 per cent.

The UAE, Saudi Arabia, Oman, and Bahrain have implemented a 5 per cent Value Added Tax rate on goods and services. In response to revenue challenges during the Covid-19 pandemic, Saudi Arabia increased its VAT rate to 15 per cent in 2020. Kuwait and Qatar have yet to adopt a VAT system.