Oman Tax 2025 Guide: Income Tax, Payroll Contributions & Future Changes
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Oman continues to maintain one of the most competitive personal tax environments in the GCC. In 2025, individuals earning employment income are not subject to personal income tax. However, payroll compliance still requires attention to social protection contributions, employer cost structures, and VAT regulations.
This guide explains the 2025 Oman tax framework, the compliance structure used to build the payroll calculator, and expected developments in the coming years.
1. Personal Income Tax in Oman (2025)
As of 2025:
There is 0% personal income tax on employment income.
No progressive tax brackets apply.
No withholding mechanism is required on salaries.
Applies to both Omani nationals and expatriates.
Personal Income Tax Summary – 2025
| Component | Status in 2025 |
|---|---|
| Income Tax Rate | 0% |
| Tax Threshold | Not applicable |
| Withholding Requirement | None |
| Progressive Slabs | No |
For payroll calculations in 2025:
Income Tax = 0% × Gross Salary
This is why any 2025 Oman salary calculator should reflect zero income tax deduction.
2. Social Protection & Payroll Contributions (2025)
Although there is no income tax, social insurance contributions apply to eligible employees.
A. Omani Nationals
Based on current Social Protection Fund regulations:
Employee Contributions
| Contribution Type | Rate |
|---|---|
| Social Security | 7% |
| Job Security Fund | 1% |
| Total Employee Contribution | 8% |
Employer Contributions
| Contribution Type | Rate |
|---|---|
| Social Security | 10.5% |
| Occupational Injury | 1% |
| Job Security Fund | 1% |
| Total Employer Contribution | 12.5% |
These contribution rates were used in building the payroll calculator structure.
B. Expatriate Employees
Social protection contributions generally do not apply in the same manner as Omani nationals.
Employer obligations may vary depending on employment contract and statutory requirements.
For payroll accuracy, nationality must be clearly identified.
3. VAT in Oman (2025)
Oman applies a 5% Value Added Tax (VAT) introduced in 2021.
Key VAT Points
Standard VAT rate: 5%
Applies to most goods and services
Businesses exceeding the registration threshold must register
Operates under the Output VAT – Input VAT mechanism
VAT does not affect salary calculations directly, but it is relevant for:
Businesses issuing taxable invoices
Freelancers and consultants
Companies calculating net payable tax
For this reason, a payroll tool may include optional VAT calculations for completeness.
4. Compliance Framework Used to Curate the Calculator
The calculator was structured using the following compliance logic:
Payroll Structure
Supports monthly and annual salary input
Separates:
Gross salary
Employee deductions
Net salary
Employer total cost
Tax Assumptions (2025)
| Compliance Area | Treatment in Calculator |
|---|---|
| Personal Income Tax | 0% |
| Employee Social Contribution | 8% (Omani nationals) |
| Employer Contribution | 12.5% |
| VAT | Optional 5% |
The objective was to reflect actual payroll burden rather than only headline tax rate.
5. Employer Cost Illustration (2025 Example)
Assume:
Gross Monthly Salary = 1,000 OMR
Employee is Omani national
Calculation Breakdown
| Component | Amount (OMR) |
|---|---|
| Gross Salary | 1,000 |
| Employee Deduction (8%) | 80 |
| Net Salary | 920 |
| Employer Contribution (12.5%) | 125 |
| Total Employer Cost | 1,125 |
This demonstrates that while income tax is zero, employer payroll cost increases by 12.5%.
Future Outlook: Oman Tax Developments
Oman’s fiscal strategy includes gradual structural reforms. The most significant upcoming development relates to personal income taxation.
1. Personal Income Tax from 2028
A new Personal Income Tax Law (Royal Decree No. 56/2025) introduces:
5% tax rate
Applicable on annual income exceeding OMR 42,000
Effective from 1 January 2028
Expected Payroll Impact
Payroll systems must introduce income thresholds.
Withholding mechanisms will become necessary.
High-income earners will see deductions applied.
Employer reporting requirements will increase.
Organizations should ensure systems are adaptable before 2028.
2. Possible Expansion of Social Protection Framework
Future developments may include:
Adjustments to contribution percentages
Broader coverage rules
Centralized unified pension structures
Enhanced digital compliance reporting
Monitoring Social Protection Fund updates is recommended.
3. VAT Enforcement & Digitalization
Expected developments include:
Greater digital reporting requirements
Increased audit scrutiny
Stronger enforcement of registration thresholds
Potential e-invoicing frameworks
Businesses should maintain strong documentation and automated accounting systems.
Final Conclusion: Oman Tax 2025
Oman’s tax system in 2025 can be summarized as follows:
| Area | Status |
|---|---|
| Personal Income Tax | 0% |
| Social Contributions (Omani Nationals) | 8% employee / 12.5% employer |
| VAT | 5% |
| Withholding Tax on Salary | None |
The calculator is accurate for 2025 under current regulations. However, forward planning is essential due to the 5% personal income tax implementation scheduled for 2028.