The wide-ranging reform of Oman’s public financial management system came into force on 12 June 2025 through the promulgation of the Financial Law (Royal Decree 37/2025) (the Financial Law), by repealing and replacing the previous Financial Law (Royal Decree 47/1998). The Financial Law establishes a comprehensive legal framework governing the financial oversight of government entities, public revenues and expenditures, state-owned assets, and financial accountability. The Financial Law aims to modernise and strengthen fiscal governance across the public sector, increase transparency, and promote efficiency and discipline in the use of public funds.
This article provides an overview of some of the key components of the Financial Law that will affect public entities, regulators, and private sector participants dealing with public finance in Oman.
Scope of Application and Ministry Oversight
The Financial Law applies to all Concerned Entities (defined as any unit of the State’s Administrative Apparatus and other public legal persons), unless explicitly exempted by law or by the Royal Decree establishing or regulating them (Article 2). Before initiating any legal or administrative action that involves financial consequences or obligations on the state treasury, these Concerned Entities must obtain the prior approval of the Ministry of Finance (the Ministry) (Article 4).
The Ministry is vested with the authority to oversee financial proposals and to access reports from the State Financial and Administrative Audit Institution relating to financial and accounting (including tax) matters (Article 5). It may also assign its financial officers to work with Concerned Entities to directly oversee financial and accounting responsibilities (Article 6).
Strengthened Powers of the Ministry
Article 8 of the Financial Law grants the Ministry broad responsibilities in the administration and oversight of public finances, which include:
- issuing instructions on budget preparation and following up with entities that fail to submit estimates on time,
- approving requests to amend the maximum limits of public expenditure or development allocations,
- regulating internal audit functions within all Concerned Entities,
- taking measures for the investment and control of state-owned assets,
- developing unified accounting systems and documentation templates for financial management,
- monitoring compliance with budget classifications, insurance of public assets, and financial record keeping,
- defining procedures for debt write-offs and repayments by instalment, and
- coordinating with the relevant authorities on the approval of contract templates and public procurement procedures.
Procedure for Preparation of Public Budget
The Financial Law establishes detailed procedures for the preparation, review, and approval of the annual general budget. Concerned Entities are required to submit their budget proposals at least six months before the start of the fiscal year (Article 27), which runs from January 1 to December 31 (Article 3). The Ministry compiles these submissions into the draft of the state’s public budget, which is submitted to the Council of Ministers and reviewed by both the State and Shura Councils before being finalised and ratified by Royal Decree (Articles 28–30).
If the state’s public budget is not ratified by Royal Decree in time for the beginning of the fiscal year, public spending may continue at previous fiscal year levels until the new public budget comes into force (Article 30).
Tax and Fee Reform
The Financial Law introduces a more structured and centralised framework for the imposition, amendment, and exemption of taxes and fees in Oman. These provisions aim to ensure policy coherence and transparency in how public revenues are generated and managed across all Concerned Entities.
Ministerial Approval for Tax Measures
Article 12 of the Financial Law expressly prohibits any entity from initiating procedures to impose, amend, or abolish a tax without first obtaining the approval of the Minister of Finance. This applies to all forms of taxes, with the exception of customs duties governed under the Unified Customs Law of the GCC States. The Minister’s decision must include key elements such as:
- The tax category and rate,
- The tax base (i.e., what is subject to taxation),
- The conditions and timing for the tax to become due, and
- The collection mechanism and related procedures.
Only after these conditions are satisfied can the matter be referred to the Council of Ministers for final approval.
Council of Ministers’ Approval for Specific Fees
Article 13 introduces an additional level of scrutiny for certain types of service-related fees, mandating prior approval from the Council of Ministers before they can be introduced, changed, or abolished. This requirement applies specifically to:
- Fees imposed for work permits issued to non-Omanis, pursuant to the Labour Law.
- Transit and departure fees.
- Fees for educational and healthcare services.
- Utility tariffs including electricity, water, sanitation, environmental services, and waste management.
- Any other fees or charges that the Ministry deems necessary to present to the Council of Ministers for review.
Tax Exemptions and Waivers
Under Article 14, Concerned Entities are exempt from all taxes unless a specific legal provision states otherwise. However, tax exemptions for private individuals or entities are subject to strict limitations under Article 15. Exemptions from taxes, fees, or other amounts due to the state are only permitted when explicitly authorised by a law, Royal Decree, or executive regulation, within the limits, conditions, and restrictions stated in the same.
All such exemptions must be granted by a formal decision issued by the Minister of Finance or a delegated official, based on a request from the head of the concerned entity and following procedures set out in the executive regulation.
Protection and Management of State-Owned Assets
In order to safeguard state-owned assets, the Financial Law affirms the state’s right to take immediate administrative and legal measures against encroachments or infringements of public property without compensation and, if necessary, by force.
State-owned assets may only be disposed of or leased once the public-use status is lifted, and even then, such disposal or leasing is required to follow public auction procedures—subject to limited exceptions which will be specified in the corresponding executive regulation (Articles 18–23).
Financial Violations and Penalties
Article 38 addresses the financial misconduct of Concerned Entities, specifically noting that the following shall constitute financial violations:
- non-compliance with applicable financial laws, regulations, and procedures,
- spending beyond approved budget allocations or authorising unapproved commitments,
- failure to follow procedures for administrative execution when a debtor fails to make payments within specified deadlines,
- failure to submit budget proposals or final accounts within prescribed deadlines,
- neglecting to recover public debts or improperly waiving liabilities,
- opening bank accounts without proper authorisation,
- withholding financial data requested by the Ministry, and
- administrative negligence resulting in loss of public funds or exposure to financial risk.
Concerned Entities are required to initiate internal disciplinary proceedings against personnel found to have committed such violations and must report the outcomes to the Ministry (Article 39).
Statute of Limitations for Financial Claims
Article 40 of the Financial Law introduces clear limitation periods for financial claims:
- Claims by natural persons and private legal persons against Concerned Entities expire after five years.
- Claims by Concerned Entities against natural persons and private legal persons expire after seven years.
Limitation periods begin when the debt becomes due.
Conclusion
The Financial Law sets out provisions on budget planning, tax policy, asset management, and financial oversight, with the aim being to enhance transparency, promote prudent fiscal practices, and reinforce the state’s control over public finances in Oman. The emphasis on proactive enforcement and coordination with oversight bodies, particularly in cases that may require administrative or criminal proceedings, also demonstrates the consequences of non-compliance.
All entities and persons which are subject to the Financial Law should conduct a thorough review of their financial policies, internal controls, and operational procedures to ensure alignment with the new legal framework.
For further guidance or compliance support on how the Financial Law may impact your financial practices and procedures, please contact our expert legal team for tailored advice.
This article was prepared with the assistance of Ahmed Al Wahaibi, trainee lawyer in CMS Oman.
