Oman on Monday announced the introduction of five-percent VAT on goods and services, to offset a slump in oil prices and an economic downturn exacerbated by coronavirus.
The new tax, announced in a royal decree by leader Sultan Haitham bin Tariq, begins after 180 days in April 2021, state television said.
Certain products and services will be exempt, including rent, basic foodstuffs, school fees and public transport.
Oman recorded an average annual growth of nearly five percent between 2008 and 2016.
But growth then dropped sharply -- to 0.3 percent in 2017, 1.8 percent in 2018 and 0.5 percent in 2019 -- amid struggling oil production.
Oman, which is to cut oil production under Organization of Petroleum Exporting Countries (OPEC) agreements, is the fourth country in the Gulf Cooperation Council (GCC), a traditional tax-free haven, to introduce Value Added Tax.
Saudi Arabia and the United Arab Emirates were the first to introduce five-percent VAT in 2018, with Bahrain following in 2019.
Riyadh hiked VAT rates to 15 percent in May 2020, in an austerity programme designed to generate extra revenue and control public spending.
Oman has recorded 106,575 cases of Covid-19, including 1,046 deaths.