Oman is increasingly on the radar for international employers looking to hire skilled talent across the Gulf region. The country has a relatively straightforward tax environment today, but significant changes are on the horizon: personal income tax arrives in 2028, a new savings scheme for expatriates launches in 2027, and mandatory performance-based wage increments for Omani nationals take effect in 2026. If you’re hiring in Oman now, getting ahead of these obligations isn’t optional.
This guide covers everything you need to know about employer tax and social insurance obligations in Oman, from current contribution rates to upcoming legislative changes.
Oman’s tax landscape: what employers need to know
Oman currently has no personal income tax (PIT), making it one of the more attractive markets in the region for hiring talent. That changes on January 1, 2028, when PIT takes effect under Royal Decree No. 56/2025.
The incoming tax applies to both citizens and expatriates. Residents will be taxed on global income; non-resident Omani citizens will be taxed on Oman-sourced income only. The rate is 5% on net annual income exceeding OMR 42,000 (approximately USD 109,000). The tax base is net income, calculated as gross income minus allowable deductions. Deductions include education, healthcare, primary housing, charitable contributions, and either a flat 15% deduction of gross income or actual documented expenses, whichever is higher.
Executive regulations are expected by mid-2026 and will clarify how employers should handle withholding and payroll reporting. Don’t wait for these regulations before starting your compliance planning. Payroll systems, employment contracts, and HR workflows will all need updating before the January 2028 effective date.
Social insurance for omani nationals
Oman’s social insurance system for Omani nationals is administered by two bodies: the Public Authority for Social Insurance (PASI) and the Social Protection Fund (SPF). Contributions are split between employer and employee and cover a range of protections.
Employer contributions
Employers hiring Omani nationals are required to contribute to four separate insurance funds. The total employer contribution rate is approximately 13.5% of gross salary.
| Insurance fund | Employer rate |
|---|---|
| Old Age, Disability and Death Insurance (Social Protection) | 11% |
| Occupational Injuries and Diseases Insurance | 1% |
| Employment (Job) Security Insurance | 0.5% |
| Maternity/Paternity Leave Insurance (SPF) | 1% |
| Total | 13.5% |
The Old Age, Disability and Death Insurance is the largest component, providing retirement, disability, and survivor benefits. The Occupational Injuries and Diseases Insurance covers work-related accidents and illnesses. Employment Security Insurance supports workers who lose their jobs through no fault of their own. The Maternity/Paternity Leave Insurance, administered through the SPF, covers paid parental leave entitlements.
Employee contributions
Omani national employees contribute a total of 8% of gross salary to two funds: 7.5% to the Old Age, Disability and Death Insurance and 0.5% to the Employment Security Insurance. Employers are responsible for deducting and remitting these contributions alongside their own.
Social insurance for expatriates
Expatriates in Oman are not covered by the same social insurance regime as Omani nationals, but employers do have contribution obligations for foreign workers.
Current spf contributions (effective july 2024)
Since July 2024, employers must contribute 1% of an expatriate employee’s gross salary to the SPF. This contribution covers sick leave, maternity leave, and paternity leave benefits for expatriate workers. The salary used to calculate this contribution is capped at OMR 3,000 per month. Employers with expatriate staff hired before July 2024 should confirm they’ve updated payroll to reflect this requirement.
Expatriate employees don’t contribute to PASI or SPF under the current rules. Their employee-side contribution rate is 0%.
The 2027 savings scheme for expatriates
A significant change is coming for employers with expatriate staff. From 2027, a new mandatory savings scheme will require employers to contribute 9% of an expatriate employee’s basic wage into a designated savings fund. This scheme replaces the traditional end-of-service gratuity model for expatriates.
Employers should start modelling this cost into their workforce budgets now. For companies with large expatriate headcounts, the shift from gratuity accruals to ongoing monthly contributions represents a meaningful change in cash flow and HR administration. The exact implementation timeline and mechanics are expected to be clarified ahead of the 2027 effective date.
Minimum wage requirements
Oman’s statutory minimum wage applies to Omani nationals only. There’s no statutory minimum wage for expatriate employees, whose compensation is governed by their employment contracts.
Omani nationals
The current minimum wage for Omani nationals is OMR 325 per month, made up of OMR 225 as basic salary and OMR 100 in allowances. For part-time Omani national employees, the minimum is OMR 3 per hour.
Performance-based increment mandate from 2026
From January 1, 2026, employers are required to apply mandatory annual salary increments to Omani national employees based on performance ratings. The required increments are as follows:
| Performance rating | Required increment |
|---|---|
| Excellent | 5% |
| Very Good | 4% |
| Good | 3% |
| Acceptable | 2% |
| Poor | None |
This requirement means employers need a functioning performance appraisal system in place before the end of 2025. Increment obligations apply to all Omani national employees regardless of sector, so review your HR processes to ensure compliance.
Vat obligations
Oman applies a 5% VAT rate on most goods and services. VAT is a business-level obligation, not an employee-level one, but it’s relevant to payroll service providers, benefits administration, and other employment-related costs.
Registration
Businesses with annual taxable supplies exceeding the registration threshold must register for VAT with the Oman Tax Authority. Once registered, you’re required to charge VAT on taxable supplies, maintain proper tax records, and file returns on a regular basis.
Filing and payment
VAT returns are typically filed quarterly, and payment is due alongside the return. Late filing and late payment both attract penalties, so build VAT deadlines into your compliance calendar. Accurate record-keeping is essential, particularly for businesses with mixed taxable and exempt supplies.
Corporate income tax
Corporate income tax in Oman is set at 15% and applies to the net profits of entities operating in the country. This is an entity-level tax rather than an employee-level obligation, but it’s worth noting for employers operating through a local subsidiary or branch. Certain free zone entities and small businesses may qualify for exemptions or reduced rates under specific conditions.
Payroll compliance and filing deadlines
Oman requires employers to pay employees on a monthly cycle, with wages settled within three days of the end of each pay period. Delays in salary payments are a compliance risk and can trigger labour law penalties.
Employment contracts in Oman must be fixed-term and bilingual, written in both Arabic and English. The standard working week runs Sunday to Thursday, with a maximum of 40 hours per week. During Ramadan, the maximum working week is reduced to 30 hours. Overtime, night work, and public holiday work all carry premium pay requirements under the Labour Law.
Social insurance contributions for both Omani national and expatriate employees must be submitted to PASI and the SPF on a monthly basis alongside payroll processing. Late or incorrect submissions attract penalties and can create issues with work permit renewals for expatriate employees.
Consequences of non-compliance
Failing to meet Oman’s payroll, social insurance, and tax obligations carries real consequences. PASI can impose financial penalties for late or missing social insurance contributions, and persistent non-compliance can affect your ability to obtain or renew work permits for expatriate staff. The Oman Tax Authority enforces VAT obligations with fines for late registration, late filing, and underpayment.
As PIT approaches in 2028, withholding and reporting obligations will add another layer of compliance risk for employers who aren’t prepared. Companies that don’t update their payroll infrastructure and employment contracts ahead of the effective date risk penalties from day one.
How an EOR simplifies tax and payroll compliance in oman
For international employers without a legal entity in Oman, using an Employer of Record (EOR) is one of the most effective ways to hire compliantly without setting up a local subsidiary. An EOR becomes the legal employer of your Omani-based team, handling payroll, social insurance contributions to PASI and the SPF, VAT compliance, and employment contract requirements on your behalf.
This is particularly valuable right now, given the overlapping compliance deadlines approaching over the next two to three years. The 2026 performance increment mandate, the 2027 expatriate savings scheme, and the 2028 PIT rollout all require payroll system updates, contract revisions, and process changes that an experienced EOR services provider is already equipped to handle. Instead of building that expertise from scratch, you can rely on infrastructure that’s already in place.
RemotePass supports compliant hiring in Oman for both Omani nationals and expatriates, covering all current social insurance obligations and tracking upcoming legislative changes so you don’t have to.
If you’re hiring in Oman or planning to expand there, book a demo at https://remotepass.com/demo to see how RemotePass can manage your payroll and compliance obligations end to end.
