Sultan Haitham, in his National Day address, said government was keen to continue to help low-income Omanis. Saleh Al Shaibany for The National
Sultan Haitham, in his National Day address, said government was keen to continue to help low-income Omanis. Saleh Al Shaibany for The National
Sultan Haitham, in his National Day address, said government was keen to continue to help low-income Omanis. Saleh Al Shaibany for The National
Sultan Haitham, in his National Day address, said government was keen to continue to help low-income Omanis. Saleh Al Shaibany for The National

Oman plans to amend labour laws and introduce new taxation

Foreign minister says Muscat will ensure protection for low-income families

The National

December 05, 2020

  • English
  • Arabic

Oman plans to amend labour laws, introduce new taxation and end some "long-standing" subsidies while ensuring that low-income families are protected, the Gulf Arab state's foreign minister said on Saturday.
Sayyid Badr Al Busaidi told the IISS Manama Dialogue summit in Bahrain that significant changes to labour policy would include abolishing a clause that required expatriate workers to secure permission to be able to work under a new employer, which is known as the no-objection certificate system.

The sultanate is currently in the process of removing the system to give residents more opportunities to change jobs without having to wait two years to change employers, as was the case previously.

But Sultan Haitham bin Tariq said in his National Day speech on November 18 that the government was keen to continue to help low-income Omanis.

The finance ministry said in April that the country spends about 600 million rials ($1.5 billion) a year on subsidising electricity and water for local consumers.

Oman discontinued its fuel subsidy two years ago.

Oman plans to introduce a tax for the highest earners, making it the first country in the Arabian Gulf to introduce income tax.

A five per cent valued added tax will also be introduced in the second quarter of next year, following similar moves by the UAE and Saudi Arabia in recent years.

Low earners are classified as workers who get between a wage of 325 rials ($813) and 500 rials ($1,250) a month.

Low-income earners will still not be affected by the removal of subsidies and they will continue to get free housing.
Analysts praised the decision to put the burden of financing necessities on those who can afford it, while protecting those on a lower income.
"They would not be able to survive if they have to pay higher water and electricity bills or if the government stops giving them free housing. I don't see any problem for high earners to pay tax or for the rest of us to pay VAT. It is time we help the government pay for the deficits," economist Salah Al Jardani said.
Oman has had a chronic budget deficit over the past five years and in the current year the figure stood at 2.8 billion rials ($7 billion).

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Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

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7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

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10. Substance and CbC reporting focus

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Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

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