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Here is a Step-by-Step Guide that will Help You Explore the Possibilities of Setting up a New Business in Oman
  • Article, Oman

Here is a Step-by-Step Guide that will Help You Explore the Possibilities of Setting up a New Business in Oman

Overview

Oman is the third-largest country in the Arabian peninsula having entrepreneurship and overseas trading long been existing in Oman for many centuries and its maritime trade used to touch the shores of Africa, Europe and China.

Before the discovery of oil and gas, Oman was predominantly a rural and agrarian economy based on fisheries and agriculture. Once the oil was discovered in commercial quantities during 1964, Oman gradually moved from agrarian to an oil-based economy and production, and export of oil started dominating the government exchequer in Oman.

Sultan Qaboos Bin Said took the reign of Oman in 1970 and ruled the country till his death in 2020. Under his visionary leadership, Oman has undergone a rapid socio-economic development while upholding its cultural heritage and was a constant source of motivation to foreign investors for doing business in Oman.

Though oil and gas, reserves have rapidly boosted Oman’s economy, led by Sultan Qaboos the country actively implemented a forward-looking economic development plan focused on diversification and industrialization to reduce its dependence on oil and gas and invite foreign players for company formation in Oman.

Benefits of Company Formation in Oman

Oman has many untapped investments and business potential in many industries such as tourism, mining, fisheries, logistics and manufacturing and the government always encourages foreign direct investment and offers various incentives and free zones to promote a business-friendly economic environment and lure foreign entrepreneurs for doing business in Oman.

Oman offers many opportunities for foreign investors to become a long term business and investment partner and invest in company formation in Oman.

Friendly Taxation Policy

Nil income tax on personal income, lower income tax on companies, tax relief on effective double taxation treaties Oman enjoys with more than 35 countries.

Import Exemptions

No import duty levied on Raw materials. plant and machinery for five years from the start of manufacturing activities.

Capital & Profit Repatriation

No restriction on profit and capital repatriation and dividend transfers.

Foreign Ownership

Oman allows 100% Foreign ownership in Free Zones and 70% in other regions.

Strategic Location

Oman is the gateway to North American, European, African and Asian markets offering access to a large customer base.

Political & Economic Stability

Oman has a long reputation for political stability with controlled inflation and stable exchange rate, trade surplus and foreign currency reserves.

Diversification

Oman is well-diversified industrially which facilitates business activities through a robust supply chain.

Infrastructure

Oman has good infrastructure facilities like good roads, airports, ports with good communication networks.

Transparent Legal System

Oman has a transparent and friendly legal system offering a conducive business environment.

International Presence

Oman has ties with world economic bodies such as membership with WTO, GAFTA, GCC with free trade agreements with USA, Iceland, Singapore, Norway, Switzerland and many other countries.

Natural Resources

Oman has good reserves of Petroleum, Gas, Asbestos, Copper, Chromium and Gypsum.

Land Availability

Government leases the land with good amenities at discount.

Language

English is widely used in business and commerce.

Business Climate in Oman

Barring a few numbers of trades and services, no restrictions are imposed on company formation in Oman and doing business on its soil. 100% foreign ownership of Omani companies would now be allowed under the new Foreign Capital Investment Law (FCIL) RD 50/2019 proposed in January 2020.

A few of the 37 commercial activities not allowed for 100% Foreign ownership are mentioned as under.

  • Translation and Photocopying
  • Tailoring
  • Vehicle and Automotive Repairs
  • Sale of Drinking water
  • Hairdressing and Salon Services
  • Fishing
  • Rehabilitation Centres
  • Taxi Services

The restricted services, however, contribute to a small portion of Oman Economy and the new law would open up promising new sectors for 100% foreign investment and enthuse overseas companies for doing business in Oman.

The Ministry of Commerce and Industry ( MOCI) has embraced significant modernizing initiatives under the new FCIL regulation to facilitate and promote investor-friendly regimes in the Sultanate of Oman.

The new FCIL law doesn’t also stipulate the minimum share capital requirement which can transform the foreign investment landscape in Oman. The existing practice requiring a company with one or more foreign shareholders to have a minimum starting share capital of OMR 150,000 which is approximately $390,000 has now been relaxed by MOCI. However, being a new regulation it needs reconfirmation from MOCI on a case to case basis.

The new FCIL law is a revolutionary step towards globalization and modernization of Oman and will invariably bring a plethora of opportunities to the foreign business communities.

Types of Companies in Oman And Applicable Requirements

There are two most common ways of doing business in Oman and can further be classified based on company type and regulatory requirements

Business setup with a Local company

A locally incorporated company can take several forms

  • Proprietorship Company
  • Limited Liability Company
  • Free Zone Company
  • Joint Stock Company
  • Holding Company
  • Limited Partnership Company
  • General Partnership Company
  • Joint Ventures

Business setup with a foreign entity

There are three ways one can do business with a foreign entity

  • Branch office
  • Commercial Agencies
  • Representative office

Most of the Omani Companies are LLCs or limited liability companies that foreigners are willing to invest and do business with. The number of founding members should be minimum two and maximum forty.

A foreign company is permitted to own a maximum of 70% of shares of an Omani company. If there is a free trade agreement with the country of foreign national, a higher %age of shares can be allowed.

The current minimum share capital requirement for a foreign-owned LLC is OMR 150,000 unless wholly owned by Oman citizens or GCC or FTA nationals for whom the initial capital investment requirement is OMR 20,000.

For joint stock and holding companies, the initial minimum capital requirement is OMR 500,000 and OMR 2 million respectively. Initial capital requirements are usually much higher for banks, financial services and insurance companies.

Partnership Companies

The features of Omani Partnership companies are

  • Formed by two or more stakeholders
  • Needs registration within a month of execution of partnership agreement in the Commercial Register
  • Needs approval of all partners before transferring the individual interest
  • Name of the partnership must spell that it is a partnership
  • Any mishaps with one partner dissolve the partnership unless all other partners agree to continue

Proprietorship

Usually, only the Oman citizens are allowed for single Proprietorship companies, GCC nationals can start a Proprietorship company under certain conditions and for specific activities.

Foreign Company Branches

Foreign entities are allowed to open representative offices however, with limited scope. A foreign company is only recommended to operate a branch that has secured a Government project contract and is only valid during the tenure of the contract.

Proprietorship

A joint venture is formed through a joint venture agreement and by two or more entities performing a particular project. A JV has no legal status and is not registered. The Omani partner must own a minimum of 51% share.

Process of Registèring a Company in Oman

The process of company registration in Oman is relatively simple and straightforward and the main process steps once the initial capital is paid, are as follows

1. Reserving a Company Name

An application needs to be submitted to the Ministry of Commerce and Industry (MOCI) with a uniquely chosen name for your company highlighting and branding your products or services as you feel appropriate.

2. Submitting Incorporation documents

On approval of company name, shareholders documents and company constitution along with the bank certificate and authorized signatory form needs to be submitted to MOCI for company registration in Oman.

3. Registering with Oman Chamber of Commerce and Industries (OCCI)

Once MOCI registration is completed, you need to get your company registered with OCCI for complying with the commercial rules and regulations required for your company.

4. Designing a Company Seal

A company seal needs to be designed and issued from the registered authorized signatory of the LLC.

5. Obtaining approvals from Government Authorities

Based on company type, size and nature of business; you need to obtain a set of approvals from the appropriate authorities for company registration in Oman and include

  • Tax Registration
  • Oman police registration
  • Registration with the Ministry of Manpower
  • Industrial, environmental and other permits and licenses
  • Municipality License
  • Registration with Oman Police
  • Import Export License as appropriate
  • Registration with Public Authority of Social Insurance

6. Post Registration Process

Once the company registration is over, all documents mentioned against point 4 needs to be obtained

Documents Required for Registration of Company in Oman

Company registration in Oman requires the following essential documents

  • Memorandum and Articles of Association
  • Tax Registration Certificate
  • Shareholders’ Visas and Passports
  • Chamber of Commerce and Industry affiliation certificate
  • Certificate of Initial Deposit
  • Identity Cards of Shareholders
  • Filled Company Registration Form

Tax Laws in Oman

Various aspects of Taxation in Oman are

  • Registration with the Secretariat General of the Ministry of Finance is mandatory for all taxable entities
  • A provisional return of income tax must be filed within 3 months of the applicable accounting period
  • A uniform 12% tax rate is applicable for all companies irrespective of nationality and size, and profit up to OMR 30,000 is exempt from tax
  • The final tax return must be filed within 6 months of the applicable accounting period

Tax Exemptions

The following are exempt from income tax in Oman

  • Dividends received from an Omani company
  • Gains on the disposal of Securities listed in Muscat Stock market
  • Omani marine companies
  • Foreign Airlines
  • Investment funds
  • Foreign companies engaged in the exploration of gas and oil
  • Foreign companies working for government projects

Withholding Tax

Cross border payments subjected to withholding tax and at a flat rate of 10% on the gross payment in Oman are

  • Royalties
  • Management Fees
  • Provision of Services
  • Consideration for R&D
  • Consideration for Computer Software

Indirect Tax

  • Oman doesn’t impose any VAT or Sales Tax or Property tax; plans to implement VAT from April 2021 at a rate of 5%
  • Stamp duty of 3% is levied in real estate transactions
  • 5% Import duty as in other GCC countries on goods entering Oman

Personal Tax

  • No personal income tax in Oman

Free Zones in Oman

There are three free zones and two special economic zones for attracting foreign investment in the country. Each zone has it’s own sets of incentives including Tax Holidays, Import Duty exemptions, Waiver on initial capital requirements and 100% foreign ownership.

Free Zones

  • Salalah free zone
  • Shohar free zone
  • Al Mazunah free zone

Besides, there are eight Industrial Estates such as Rusayl, Sohar, Raysut, Sur, Nizwa Al Buraimi, Sumail, Al Muzanah offering highly attractive land rents, tax holidays, exemptions on machinery and equipment.

Special Economic Zones (SEZ)

  • Duqm SEZ
  • Knowledge Oasis Muscat

Accounting and Tax

Type Limited Liability Company (WLL)
Under Oman law, foreigners can own 70%
Share Capital OMR 20,000
Memorandum & Articles of Association Yes
Shareholders Minimum Two
Can the entity hire expatriate staff in Oman Yes
Tax Registration Certificate Required Yes
Saudi Resident Secretary Required Yes

Timeframe for Incorporation3 weeks

Type Limited Liability Company (WLL)
Statutory Audit Required Yes
How Long to open corporate Bank Account? 3 weeks
Annual Return Must be Filed
Annual Tax Must be Filed
Access to Oman double tax treaties Yes

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10 Investment Complexes In 4 Industrial Cities: Madayn Unveils Huge Business Opportunities in Oman
  • Newsletter, Oman

10 Investment Complexes In 4 Industrial Cities: Madayn Unveils Huge Business Opportunities in Oman

The Public Establishment for Industrial Estates (Madayn) unveiled development opportunities in Industrial Cities by launching the ‘Madayn Investment Complexes’ Project to woo foreign and local investors for doing business in Oman. This investment complex project will provide an ideal opportunity for local and foreign companies to invest in the industrial and other associated sectors. 

‘Madayn Investment Complexes’ project shall provide companies with the opportunities to develop specialised investment complexes through their real estate plans once the designs are approved by Madayn. The CEO of Madayn, Hilal bin Hamad al Hasani, commented.

“The developing companies will then promote the industrial and investment units with the facilities for the local and foreign companies to buy or rent these units for immediate operation, following the installation of production lines of the tenant or owner,” Hasani said in a statement on 18th December 2021 Saturday.

The new project will announce the development opportunities for ten investment complexes in four industrial cities namely Suhar, Al Buraimi, Samail, and Sur industrial in various sectors. The project activities of the investment complexes will represent a variety of industries such as food, plastic, and logistics etc.

The CEO of Madayn highlighted saying, “These investment complexes shall support the industrial integration between small and large factories and contribute to encouraging local and foreign investments towards the complementary industries. This project shall also offer an opportunity for SMEs to enter the industrial sector through these investment complexes. The SMEs will be able to buy or lease real estate units with small areas that are compatible with their operational and production capacity.” 

New Industrial Cities

Hasani, the CEO of Madayn described in detail the execution status of new industrial cities announced earlier. He highlighted that the project of establishing Thumrait Industrial City is in the final stage of infrastructure designing and the process of identifying available investment opportunities for the private sector and updating the economic analysis is ongoing. Madayn informed that a professional and specialized consultant conducted an environmental study and the necessary environmental clearance has already been obtained from the relevant regulatory body.

Mining industries primarily associated with gypsum and limestone industries will be the main focus in Thumrait industrial city. This city shall be a business destination for light industries as well, especially those involved in building materials business like cement products. Besides, this industrial city will accommodate various support services including a fuel station, truck weighing facilities, vehicle maintenance workshops, cold and dry storage facilities etc.

On the executive status of Ibri Industrial City, Hasani remarked that the infrastructure works of Phase 1 are currently being undertaken by Madayn for developing an area of about 3 million sqm at a cost of almost RO 9 million. He also added that the final delivery of the infrastructure project would be by the middle of 2023 and a tender is being floated for developing a one-stop shopping facility and comprising a fuel station, hotel, public amenities, restaurants, and auto care services.

On Mahas Industrial City, the CEO noted that the administrative work has already begun in early October this year for offering services to the local factories. Awarding the contract for road and infrastructure development is in the final stage and for an area of 1 million sqm at an approximate cost of RO6 million.

A tender for consultancy services has already been floated for Al Mudhaibi Industrial City for detailed designing of two areas, 14million sqm and 2million sqm respectively, Madayn CEO added, planning of multiple warehouses and identifying 15 potentially viable investment opportunities based on available natural resources. Identification and allocation of sectors such as industrial, commercial, food, tourism, construction etc. are also in the scope of the tender.

Madayn has been actively contributing to the economic development of Oman for many years and the current investment complexes project aims at attracting more investment to the industrial cities through company formation in Oman.

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USD 30 Billion Deal Between Saudi Arabia and Oman Mark a New Era of Economic Cooperation Within the GCC
  • Newsletter, Oman, Saudi Arabia

USD 30 Billion Deal Between Saudi Arabia and Oman Mark a New Era of Economic Cooperation Within the GCC

In a bid to boost bilateral economic cooperation and further diversify the non-oil economy, Saudi Arabia and Oman signed deals worth 30 billion USD on 7th December 2021. The MOU signed between the two countries signals a new era of economic and investment cooperation within the GCC.

As per Saudi Press Agency (SPA), the agreements were reached during the tour of Saudi Crown Prince Mohammed bin Salman covering the Gulf states including the United Arab Emirates (UAE), Bahrain, Kuwait and Qatar. The ‘around the GCC’ tour would bode well for future foreign investment and new company formation in Saudi Arabia.

A visit to Doha, for the first time in four years, was also included just ahead of the Gulf Cooperation Council (GCC) summit scheduled to be held on December 14 in Riyadh in light of the solidarity deal signed earlier on January 5, 2021 between Saudi Arabia and Qatar to bring back Doha within the GCC.

Saudi and Omani companies “signed 13 memoranda of understanding worth $30 billion”, SPA reported. The agreements between the two neighbouring countries included diverse business sectors ranging from energy and tourism to finance and technology.

Renewable Energy, Petrochemicals and Green Hydrogen were some areas where deals were struck with Aramco, Sabic and ACWA Power. Dry dock and Logistic Services also witnessed the signing of deals.

The two countries also agreed to identify and evaluate future exploration opportunities in the mining sector. An MOU was signed for developing a tourism project in Oman’s Yiti area on the outskirts of Muscat which has a spectacular coastline and could potentially attract many foreign investors for doing business in Oman.

Other deals made were in the communications, IT, fisheries and financial securities sectors. An agreement was reached between Muscat Stock Exchange (MSX) and Tadawul Stock Exchange.

“They manifest the two countries’ leaders’ vision aimed to meet the aspirations of their peoples,” highlighted Oman News Agency (ONA).

Saudi Arabia and Oman also agreed for joint investment in key sectors earlier and several agreements were reached in August 2021 at the Omani Saudi investment forum convened in Muscat.

Saudi Vision 2030 and Oman Vision 2040 are almost in line and share identical views on economic development and the private sector enterprises of both countries are hopeful and looking towards future economic integration.

The GCC nations have already started making huge investments in sports, entertainment and tourism sectors to reduce their economic dependence on oil.

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Sohar Port & Economic Free Zone offers Multiple Benefits and Abundant Opportunities to Indian Investors
  • Newsletter, Oman

Sohar Port & Economic Free Zone offers Multiple Benefits and Abundant Opportunities to Indian Investors

SOHAR Port and Freezone in Oman is a deep-sea Port and Freezone administered by SOHAR Industrial Port Company, the SIPC. The port is located in the middle of Dubai and Muscat and was inaugurated in 2004 with the first vessel. The Freezone was added later, during 2010 and 2018. The port is capable of handling more than one million metric tons of sea cargo every week. It is one of the fastest-growing ports and free zones in the world today and lies at the centre of global trade routes between Asia and Europe.

Initially built as three industrial clusters for metals, petrochemicals, and logistics, it has recently added a new food zone cluster for manufacturing, packaging, and logistics of food products. Foreign investments above USD 27 billion poured in this port and free zone that witnessed an increase of exports by 3.8% despite the economic crisis caused by the covid pandemic. Many foreign investors made a choice for company formation in Oman and selected Sohar as their preferred business destination. The port also achieved an almost 1% increase in the number of containers as well as a doubling of Ship-to-Ship cargos due to the port’s unmatched turnaround time and quick service.

In a recently released 2021 first-quarter result, the port and free zone reported cargo handling growth in all categories compared to the same quarter the previous year. Both the throughput and dry bulk volume witnessed sizable growth over last year registering a 21% & 23.6% increase respectively. Breakbulk and liquid bulk handling also grew significantly. 

“Since the start of the pandemic in the first quarter of 2020, one of the key challenges faced by businesses around the globe has been securing supply chains and ensuring their business continuity. At SOHAR Port, we put in place precautionary measures and identified solutions to best serve our clients and the various markets.  A testament to our proactive approach, we were able to continue contributing to the Sultanate’s GDP, supporting the objectives of the Government of Oman in its diversification plans,” told the CEO of Sohar Port Mark Geilenkirchen.

Sohar Port and Freezone in an attempt to explore the Indian market has entered into a collaboration with the Federation of Indian Chambers of Commerce & Industry (FICCI) and launched a five-part online webinar series titled ” Accessing Industrial and Logistics Solution to Maximize your Market Reach”. The webinars will also highlight opportunities on how Indian businesses can capitalise on the strategic location and world-class infrastructure of this port and free zone to gain enhanced access to the GCC, the US and African markets.

The first webinar held on July 13 mainly highlighted the opportunities available at SOHAR Port and Freezone with presentations and success stories from Omar Al Mahrizi, CEO-SOHAR Freezone; Emmee Haun, FTA Advisor; Sameer Gupta, Head of Production Planning, Shipping & Logistics, Jindal Shadeed Iron & Steel LLC; Malvika Pankaj Khimji, Director- Khimji Ramdas. The first webinar session was attended by 70 Indian business houses.

The first session provided knowledge and insights on multiple benefits offered by the port and free zone including value addition through cost-competitive utility prices, unhindered supply of raw materials and lucrative incentives. The Free Trade Agreement reached with the US also allowed duty-free access to qualifying products.

The next four webinars will be conducted over the coming months which will focus on key industries such as food, automotive, plastics and metals and the agenda will be released before each session.

Omar Al Mahrizi emphasized saying, “Oman and India have enjoyed decades of bilateral trading, linked by history, culture and warm and cordial relations. As a well-connected integrated hub with established clusters, our close geographical location, coupled with prime waterfront access, leasable land options and excellent infrastructure are all key ingredients to provide Indian investors with unique business opportunities. This webinar series provides the ideal platform for us to highlight these prospects to FICCI’s vast network, paving the way for future business development and closer relations.”

The webinar series also focuses on the huge opportunity for promoting mutually beneficial business partnerships between India and Oman in the Sohar Port and Freezone which has already attracted investments from Indian top business entities including Jindal, Larsen and Toubro (L&T), and Moon Iron and Steel Company (MISCO). Many new infrastructure projects and investments are also underway providing considerable growth prospects.

The Sohar Port and Free Zone have also made huge investments in innovative sustainability projects such as renewable energy, a rapidly growing sector in India. Indian companies aspiring for doing business in Oman can also benefit from several incentives announced by Sohar port and free zone. The company incorporation process is also easy and simple and can offer global market access to Africa, Asia and the Middle East.

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Why and How to Set up a Business in Oman 2021
  • Article, Oman

Why and How to Set up a Business in Oman 2021?

For centuries, Oman has been engaged in overseas trading with its marine business vessels navigating across African, European and Asian shores. It is the third-largest country in the Arabian Peninsula and used to be mainly an agriculture-based economy before the discovery of oil and gas in 1964.

Oman started focusing on industrialization and economic diversification into non-oil sectors during the early 70s of the last century under the able and visionary leadership of Sultan Qaboos Bin Said who had undertaken many economic and social reforms to attract foreign investors for doing business in Oman.

 

Why set up a Business in Oman?

Many present-day economists and financial analysts say across the globe consider Oman as an ideal country for long-term business and investment opportunities because of its

  • Strategic location.
  • Diversified Economy.
  • 100% foreign ownership in free zones and 70% in most sectors .
  • Low corporate tax rates for companies with double taxation avoidance agreements with many countries .
  • Membership with international agencies e.g. WTO, GCC, GAFTA.
  • Foreign Trade Agreements with USA, Singapore, Iceland, Norway, Switzerland.
  • Political and economic stability.
  • Low Tax with zero personal income tax rate.
  • No restriction on capital or profit repatriation, currency exchanges or dividend transfers.
  • Tax exemptions on import of plant and machinery as well as raw materials for 5 years from the commencement of operation.
  • Modern infrastructure with good roads, airports, seaports and communications.
  • Investor-friendly business regulations .
 
 

 

What Corporate structures are available in Oman?

The Omani government does not put any restrictions on foreign investment and company formation in Oman. However, businesses in certain sectors including banking and finance, insurance, tourism, telecommunication, industrial factories, mining, food and beverages, schools, hospitals and employment agencies need specific permits to operate.

The company structures that are available to the foreign investors in Oman include

  • Limited Liability Company
  • Partnership
  • Closed Joint Stock Company
  •  Joint venture
  • Public Joint Stock Company
  • Branch of a foreign company
 
 

Foreigners are allowed a maximum of 70% ownership in a company registered in Oman. Citizens of countries enjoying free trade agreement (FTA) with Oman can have higher % age of ownership.

The minimum share capital requirement for a foreign-owned LLC is OMR 150,000 whereas an LLC with 100% ownership of Omanis or GCC or FTA nationals, the minimum capital requirement is much lower, OMR 20,000.

The minimum share capital requirements for public and closed joint-stock companies is OMR 500,000 and OMR 2 million respectively.

Minimum capital requirements are substantially higher for banks, insurance companies including lending and financial companies.

 

How to set up a fully Foreign Owned LLC Company in Oman?

The most common type of locally incorporated company in Oman is an LLC and its formation involves the following chronological process steps

  • Reserving a company name.
  • Registering with Oman Chamber of Commerce and Industry (OCCI).
  • Applying for Municipal License.
  • Registering with a local PRO.
  • Leasing arrangement for office space and warehouse.
  • Registering with the Ministry of Commerce and Industry (MOCI) for Commercial Registration (CR).
  • Preparing the documents.
  • Registering with the Ministry of Finance (MOF).
  • Registering with Customs.
  • Registering with the Ministry of Manpower (MOM).
  • Designing a company seal.
 

 

What documents are needed for setting up a 100% foreign-owned LLC in Oman?

The following documents are needed for an LLC in Oman

  • The board of resolution of foreign shareholders.
  • Memorandum and Articles of Association of foreign shareholders.
  • Duly audited accounts as proof of a minimum of three years of operation.
  • Tax registration certificate.
  • Copies of Passport / Identity card of shareholders and authorized signatories.
  • Receipt of initial deposit.

 

What is a foreign branch and How to incorporate a branch Office in Oman?

A foreign-owned company once entered into a contract with the Omani government or quasi-government establishment gets entitled to register and operate in Oman as a foreign branch. It doesn’t have a separate legal entity and is not a permanent structure. A branch office in Oman needs a local agent as a sponsor for managing visas and licenses. A minimum of 12% tax is the rate applicable to a foreign branch office. The same process steps need to be followed as in an LLC for setting up a foreign branch except paying a bank guarantee for obtaining an operational license.

 

Why prefer Free Zones in Oman for setting up a company?

Oman has three free zones and two special economic zones that provide incentives including tax holidays, import duty waiver, exemption on initial share capital requirements and 100% foreign ownership.

 

How foreign business entities are taxed in Oman?

Oman follows a uniform income tax rate for all types of business establishments irrespective of being either a corporate entity or a registered entity or unregistered.

Apart from Sole proprietorship businesses, the income tax rate is 15% for all taxpayers and LLCs that fulfill the conditions of SMEs.

Omani proprietorships and LLCs that meet some specified requirements are taxed at 3 %.

Income generated from the sale of petroleum products comes under the purview of petroleum tax and at a 55% rate.

There are no regional or local income taxes in Oman.

VAT has recently been introduced in Oman during April 2021 at a flat 5% rate as per Oman VAT Executive Regulation.

 

Are there any tax incentives announced by Oman to counter the effect of the pandemic?

A five-year tax exemption was proposed as an economic stimulus plan on 9th March 2021 for new businesses in manufacturing, agriculture, fishing, mining, tourism, and logistics and services that can bring economic diversification to the country and the tax exemption would be effective from the date of registration in the commercial registration certificate.

Some other tax measures have also been announced including

  • Exempting hotel establishments from tax during assessment years 2020 and 2021.
  • Permitting tax payment in installment during 2021 without any penalty.
  • Suspending withholding tax on dividends and interest for an additional period of five years, from the tax year 2020.
  • Permitting unlimited carry forward of losses for tax losses incurred for the assessment year 2020.
  • Reducing tax rate to 12% (from 15%) for small and medium-sized enterprises (SMEs) for the tax years 2020 and 2021.
  • Exempting tourism businesses from both tourism and municipal tax levy until the end of 2021.
  • A grant of a preliminary license for a certain type of business (subject to certain terms and conditions) sufficient to allow them to conduct commercial and investment activities without waiting for the issuance of the final license.
  • Granting permit for ready hiring of three expatriates on the issuance of commercial registration.

 

Conclusion

Even though the e-commerce market in Oman is in infancy, it was valued at more than USD 2 billion in 2020 and projected to touch USD 6 billion by 2026 growing at a CAGR of more than 20%.

The construction and logistics sectors though severely impacted by the pandemic are expected to witness a K shaped recovery as the Sultanate is undertaking many new initiatives.

Oman also stood committed to the international business fraternity as it signed the OECD tax treaty to prevent Base Erosion and Profit Shifting (BEPS).

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Oman Becomes the Fourth GCC Country to Implement VAT
  • Newsletter, Oman

Oman Becomes the Fourth GCC Country to Implement VAT

The Value Added Tax (VAT), a consumption tax system has been enforced in Oman on Friday, the 16th April 2021 and the Sultanate has become the fourth country to join the other three GCC member states including the UAE, Saudi Arabia, and Bahrain to introduce this tax.

VAT was originally planned by Oman Tax Authority (OTA) in October 2020 vide Ministerial Decision 53/2021 and Official Gazette no.1383 publishing the regulations with implementation requirements and provided almost six months to the Omanis to be prepared for this tax. The country also plans to enact income tax in the foreseeable future to become the first Gulf nation to do so.

Oman has levied a 5 per cent VAT in line with the ‘Oman Vision 2040’ to diversify its oil-based economy to non-oil sectors e.g. manufacturing, travels and tourism and logistics and also to address its Fiscal Balance Plan for the future.

Both UAE and Saudi Arabia introduced this tax system on 1st January 2018 followed by Bahrain which implemented VAT after one year on 1st January 2019. The Kingdom of Saudi Arabia has already increased its VAT rate by 3 times taking it to 15 per cent since July 2020 to support its healthcare system including relief works and preventive measures for the pandemic.

An OMR400 million (USD 1.04 billion) has been estimated to be raised from this consumption tax this year that comes around 1.5 per cent of the country’s GDP and would help bring down its fiscal deficit.

A Common VAT Agreement was signed by the six GCC countries in June 2016 and the 5% VAT rate announced by Oman is consistent with this GCC Unified Agreement. There are also provisions made in Oman VAT law for zero-rating and exemptions. It is to be noted that the 5 per cent tax rate is one of the lowest rates as per the prevailing global standard.

While Qatar has planned to implement the VAT system in the second or third quarter of 2021 almost streamlining its tax administration system, Dhareeba; the Kuwait government is yet to confirm the VAT implementation schedule. Kuwait parliament deferred the implementation date many times in the past however as reported by the International Monetary Fund (IMF), the country is likely to enact its VAT law by 2022.

The below-mentioned supplies are treated as zero-rated as per the Oman VAT Law and don’t attract VAT due to social necessity.

  • Supply of certain food products
  • Supply of some specified medicines and medical equipment
  • Investment in gold, silver, and platinum.
  • Supplies related to the transport of goods or passengers made internationally or within the GCC countries including services in connection with transport
  • Cargo and passengers related to international trade
  • Supplies related to oil, oil derivatives and natural gas
  • Some specific supplies made outside GCC countries under certain conditions
  • All goods and services exempt from VAT in Oman and supplied to non-GCC countries


As per conditions outlined in the Oman VAT Executive-Regulation, the following essential services are exempt from VAT as per the Oman VAT Law.

  • Financial services
  • Healthcare services
  • Goods and Services related to health care
  • Goods and services related to education
  • Resale of residential properties
  • Transport of local passengers
  • Renting of properties meant for residential purposes


Certain imported goods also enjoy the VAT- exempt status under Oman VAT law including returned goods, personal luggage, etc.

Excluding the above-mentioned supplies, all other goods and services in Oman attract VAT at the standard rate of 5% and as mentioned in the Oman VAT Law.

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Oman VAT Executive Regulation – Important Highlights
  • Newsletter, Oman

Oman VAT Executive Regulation – Important Highlights

On 14th March 2021, the much-awaited Executive Regulations of Value Added Tax (VAT) was issued by the Head of Oman Tax Authority (OTA), His Excellency Saud bin Nasser Al Shukaili vide Ministerial Decision 53/2021. Oman’s Official Gazette no. 1383 published the regulations with guidelines for implementation. The VAT system in Oman will come into force on 6th April 2021 and the Sultanate is going to join the other three GCC member states viz the UAE, Saudi Arabia, and Bahrain to introduce the levy.

VAT is being introduced in Oman keeping in perspective of the county’s ‘Oman Vision 2040’ initiative that stipulates the roadmap to diversify the oil-based economy to non-oil sectors including logistics, manufacturing, and tourism.


Online Registration for VAT

Only those holding a “commercial registration number” (CRN) can register for VAT through the online portal of OTA. The necessary forms and guidelines for registration were provided after OTA decided to implement a staggered registration schedule for those requiring VAT registration.

The schedule is staggered based on the income and businesses with an annual turnover of more than OMR 1 million can apply for VAT registration till the time it goes live. The upcoming registration schedule for income exceeding OMR 500,000 is likely to commence on 1st April and last till 31st May 2021.


Important Highlights of VAT Executive Regulations

The Executive Regulations provide ample clarity on most of the significant areas that were debated, discussed, and exhaustively studied over a long period considering social and economic impacts and clarify the applicability, rules, and procedures of the VAT Law including supplies, supply provisions, administrative matters, and penalties, tax points during transactions, VAT for online services, value assessment of supplies, exemption, and tax adjustments, totally exempted supplies, applicability in special economic zones, customs duty waiver, registration, de-registration, requirements of documentation, tax filing and invoicing, VAT returns, etc.

It is important for businesses to clearly understand the regulations that provide guidelines on the scope and extent of VAT exemptions and zero-rating. Businesses operating in areas that are exempted or zero-rated must be aware of the proper scope and applicability of such exemptions and zero-rating for their business activities and benefit from it.

Companies qualifying for VAT must also know other aspects of how VAT will affect their businesses and accordingly formulate appropriate plans and strategies for VAT compliance from the very first day. Some of the vital regulations are listed below:


Scope and Applicability of VAT


1. VAT Exempt Categories

The Sultanate of Oman has planned to levy VAT at the standard rate of 5 percent on most goods and services. The country, however, has announced some exceptions for essential food items, medical care, education, and financial services which will be exempt from VAT. According to OTA some 94 food items have been kept away from the VAT list including milk, meat, fish, poultry, fresh eggs, vegetables and fruits, coffee and tea, olive oil, sugar, nutritional products for children, bread, bottled drinking water, and salt to name a few.


2. VAT-Zero-Rated Categories

A zero-rated good doesn’t attract VAT owing to its social importance as a necessity. The sale of zero-rated goods is not taxed and credits are given on VAT paid on inputs. Any company engaged in dealing in zero-rated supplies is not included in the mandatory requirement of VAT registration.

Zero-rate or no VAT is imposed in Oman on essential commodities such as education and healthcare.

Businesses related to oil and gas; certain food items; cargo and passengers in global trade, some precious metals like gold, platinum, and silver; some life-saving medicines, medical equipment, and import and export of items can qualify for zero-rated VAT in Oman.


3.VAT-Other Categories

Besides the VAT exempt and zero-rated categories, some other categories classed as essential services also enjoy VAT exemption including financial services, reselling and renting of residential buildings, healthcare services and related goods and services, educational services, local passenger transportation services, import of goods to countries where there is no VAT and any return of imported items, goods, and services for military forces, supplies for no profit and charitable organizations, etc.

Commodities given free of charge such as any sample for business promotions will only attract VAT if the value exceeds either OMR 50 per person or OMR 1,000 in a year collectively and beyond these values, the commodities will be treated as deemed supplies and VAT will be levied on those.


Pre-Registration Input Claim of VAT

Per Executive Regulation Article 73, any input tax incurred before the registration can be claimed within 3 years maximum and article 74 says that the input tax incurred before registration for supplies of services can be claimed within 6 months maximum.

OTA must be informed within 30 days of registration for submitting a claim. For a tax claim valuing more than OMR 50,000 for goods stored as stocks, the audited stock list must be submitted to OTA for a claim.


Compliance of VAT

The Executive Regulations are mandated by the Omani Government stipulating certain compliance requirements which need to be compulsorily adhered to by an individual or company qualifying for VAT as per the regulations. Not complying with the stated compliance requirements may attract penalties as specified under the Executive Regulations.


Tax Invoicing of VAT

The executive regulations mandate the preparation and issuance of proper tax invoices for every single taxable supply including a deemed supply and against receipt of advance. The tax invoice should have all information prescribed by the OTA such as serial no, date of supply and receipt of payments, description and quantity of goods, details of customers and sellers, etc.

There is also a provision for a simplified tax invoice with less information than that in a complete tax invoice and is subject to prior conditional approval of the OTA that is usually received within 15 days from the date of application. A simplified Tax Invoice Format is mentioned in article 147 of the Executive Regulation with mandatory inclusion of the phrase “Simplified Tax Invoice” on it.


Tax Period and Return Filing of VAT

The taxpayers will need to file their returns every quarter starting from 1st January to 31st December of any calendar year. The VAT returns need to be filed online through a government portal and in the format specified by the OTA. The tax return along with the payment of the VAT must be done within 30 days from the end of a specific quarter.


Claim and Refund of VAT

The Executive Regulations demand all VAT claims to be submitted in a prescribed claim application format designed by OTA with specific information of VAT refund claimed, the reason for the refund including the tax period for which the VAT claim applies. All claims of refund must be submitted to the area authority within a maximum of five years from the end of the tax period for which it is due.

The VAT return can be claimed under the following conditions.

  • If an extra VAT amount is paid then the due amount
  • If VAT is paid by a non-resident of Oman
  • If the VAT is paid by a foreign government or military or diplomatic officials
  • If VAT is paid by foreign travelers while purchasing personal goods in Oman and not in commercial quantity and for carrying with them
  • Refunds arising out of changes in the regulations and as announced by the OTA through Executive decisions from time to time

Services under the Reverse Charge Mechanism (RCM) of VAT

As per article 151 of Executive Regulation concerning imported goods or services, the taxpayer is responsible for recording the RCM. Unlike forward charging, a Tax invoice must be issued to self with RCM VAT in his favor if the supplier is a foreign resident and not registered with the OTA for paying the VAT.


Maintaining Records of VAT

The Executive Regulations specify the records to be maintained by the taxpayers including but not limited to the following.

  • Details of day to day transactions in chronological order.
  • Details of Inventory with inventory levels, items name, and types on a regular periodic basis.
  • Details of supplies of imported and exported goods and services.
  • Details of supplies of goods and services from GCC countries.
  • Details of all Customs related transactions.
  • All tax invoices including supporting documents issued by the taxpayers.
  • All tax invoices and supporting documents received by the taxpayers.
  • Records of information for validation of appropriateness of individual tax treatment.


Appeals for Tax Treatment of VAT

The Executive Regulations describe the method for putting an appeal before the OTA and in connection with the tax assessment or adjustment or any decision for VAT registration by the OTA. All appeals to the OTA need to be submitted in the Arabic language.


Penalties for Non-Compliance of VAT Regulations

Penalties amounting to OMR 500 to 5,000 are imposed for certain non-compliance such as

  • Delay in submitting compulsory VAT returns
  • The VAT registration certificate is not displayed properly and not visible to everybody
  • Record keeping, accounting records and books, and necessary documentation are not maintained as per the specified requirements.

Some non-compliance can attract higher penalties and maybe as high as OMR 10,000 which are

  • Inappropriate refund claims not supported by authentic records and documents.
  • Non-submission of registration cancellation request when compulsory by the regulations.
  • Incorrect recovery of VAT and knowingly.
  • Inappropriate processing of VAT inclusive goods and services.

Residential Areas Inclusive of VAT

Article 83 of Executive Regulations stipulates that hotel apartments, ungrounded structures, any place providing bed and breakfast, any tourist complex don’t come under the purview of residential buildings and are subject to usual VAT rates under rules of taxable supplies.


Agent of a Company

Article 19 of Executive Regulation makes it mandatory for any company acting as an agent and working in the name and representing the principal, the agent company must notify the Tax Authority about such arrangement by submitting a power of attorney and including this in its regular scope of activity. The details of principal and beneficiary must also be documented on all the records such as invoices and contracts. The agent must mention a disclaimer on all documents that he is performing all activities on behalf of the principal.

Though enough clarifications are provided in the VAT Executive Regulations, there are still areas needing further clarity. However, the articles specified in the Executive Regulations make it clear that the Tax Authority will be strict and vigilant on the actions of the taxable person. Adherence to these regulations is the key essence as evident in each article.

The introduction of VAT will surely help the country in generating an extra revenue stream though businesses dealing with capital goods may find the market and demand slightly subdued initially. As essential items are mostly kept out of the domain of VAT, it will not put much burden on common Omani citizens.

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Oman Amends Foreigners’ Residence Rule by Abolishing No Objection Certificate (NOC) Requirement for Foreign Workers
  • Newsletter, Oman

Oman Amends Foreigners’ Residence Rule by Abolishing No Objection Certificate (NOC) Requirement for Foreign Workers

The recent amendment in Oman’s labor laws can be seen as a Government effort to reduce the rights gap between expatriates and locals and this amendment of Foreigners’ Residence Law now enables expatriate workers to transfer jobs without seeking prior approval from their employer; reported a local daily Times of Oman in its press briefing.

The amendment abolished the “No Objection Certificate” (NOC) requirement which, as per the Oman Human Rights Commission, will increase competitiveness between Omani and expatriate workers. This amendment at the same time will also offer protection to low-income families.

The requirement for expatriate workers to obtain a NOC from their current employers to join another company was in force since 2014 under the law of residence for foreigners in Oman. The law required that if a foreigner didn’t secure the NOC from the current employer, the employee was banned from working for any other employee for two years.

The new decision will now enable the foreign employees to switch over to new jobs depending entirely on the lapse of existing work contracts.

The commission added that the decision was also expected to reduce the number of foreign workers leaving the country, who do so because they fail to get NOCs. “The decision will also contribute to reducing the cases of non-Omani labor absconding, especially those who are denied a NOC, thus forcing the worker to stay outside the country after the expiry of his contract,” the commission said in its annual report.

As highlighted by the Times of Oman, the recent amendment is also expected to reduce the gap in wages between local and foreign workers.

“All these legislative and legal amendments, which came in response to the current circumstances, will undoubtedly have a more positive impact on protecting the rights of citizens and residents,” the Oman Human Rights Commission reported.

The policy on Labor Reform was also initiated by Saudi Arabia in November last year mentioning the exceptional situations under which foreign workers were allowed to move to a new job without the prior consent of their present employer.

The scrapping of NOC requirements in Oman can be considered as a significant development in labor laws as this will have a profound impact on the Omani labor market providing much-needed flexibility in changing jobs within the country and foreign workers will find Oman to be more attractive in absence of restrictions.

As Oman continues to attract more foreign talents, many foreign investors are likely to be lured for investments and new company formation in Oman.

Besides labor reforms, digital transformation is also fast happening in Oman and across several ministries and Oman’s fiscal plan announced in November last year also included a number of reforms signalling that business setup in Oman will continue to be easier in post-pandemic time.

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Oman Introduces New Foreign Capital Investment Law (FCIL) Listing 70 Prohibited Activities
  • Article, Oman

Oman Introduces New Foreign Capital Investment Law (FCIL) Listing 70 Prohibited Activities

The Omanis Ministry of Commerce and Industry, (MOCI) issued the Executive Regulations of the new FCIL in June 2020 which specified provisions relating registration of the foreign investment projects including benefits available to specified projects and land allocation for investment and business purposes and, an inspection of the projects by the Omani regulatory authorities.

The Minister of Commerce, Industry and Investment Promotion formerly known as MOCI issued Ministerial Decision (MD) No. 209/2020 during December 2029 and finally decided on the list of activities that foreign investors are prohibited from participating and conferring the activities to Omani investors for safeguarding the national products and entrepreneurship projects.

In accordance with the latest MD, an Omani investor can make investments in all activities and if desires can enter a partnership with a foreign investor. Any exception to the prohibited list can only be granted with express written permission of the Minister of Commerce, Industry and Investment Promotion.

The Sultanate of Oman vide MD 209/2020 has issued a list of prohibited activities that cannot be undertaken under the new FCIL.

The full list of the activities prohibiting foreign investors is enumerated in detail however most of the activities are most unlikely to be of any great interest to major international investors.

Importantly prohibition of retail sales of fuel would limit future liberalisation of the retail fuel market anymore unless and until the Ministry considers granting an exception and permits foreign investment in such activities.

The conditions and procedures for granting exceptional approval have not been mentioned in the MD and likely to be considered on a case by case basis.

Additionally, any restriction on shipping and unloading of goods are not very clearly spelt out and may have broader interpretation. It will remain to be seen how these are interpreted by the Ministry in practice without any further clarification in between.

The reservation of drinking water to Omani investors generally considered as an attractive business will support local investors as foreign investors will no longer be able to participate in this business.

The new Foreign Capital Investment Law published in July 2019 came into force from January 2020 and made great relaxation to the rules and regulations of foreign investment. It also simplified and streamlined the registration and business licensing procedures keeping in mind the interests of rights and incentives of foreign investors matching those of the local Omani investors.

The most important of the changes in the new FCIL was the permission of 100% foreign ownership in many business sectors in Oman.

Bottom line

The list of prohibited activities mostly contains activities that are less lucrative to international investors, and Oman, with its continued effort to promote FDI by improving ease of doing business, is expected to maintain and increase FDI inflow in the country as well as help generate local employment.

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Oman Mobilized Foreign Direct Investment Exceeding OMR 15 Billion
  • Newsletter, Oman

Oman Mobilized Foreign Direct Investment Exceeding OMR 15 Billion

Foreign direct investment in Oman for the first quarter of 2020 crossed OMR 15 billion, an increase of 5.9 per cent compared to the same quarter in 2019.

For the first three months of 2020, FDI inflow amounted to OMR 15.064 billion compared to OMR14.213 billion for the same quarter in 2019, according to the National Centre for Statistics and Information (NCSI).

The United Kingdom topped the list of FDI in Oman at the end of the first quarter of 2020, reaching OMR 7.54 billion, up from OMR 7.396 billion during the same period of 2019.

The FDI from the UK was followed by that from the USA, with an amount of OMR 1.794 billion, up from RO 1.758 billion in the same period of 2019; and then by the UAE, with an amount of OMR 1.208 billion, compared to OMR 1.164 billion at the end of the same three months period in 2019.

Another member of the Gulf Cooperation Council, Kuwait came fourth in Omani FDI accounting OMR 916.8 million for the first quarter of 2020, in comparison to OMR 835.3 million for the same duration in 2019.

FDI from the Kingdom of Bahrain in Oman stood at OMR 402,300 million at the end of the first quarter of 2020, an increase from OMR 389,900 million compared to the same quarter last year while the FDI from the state of Qatar reached OMR 372,800 million, up from OMR 344,400 million.

China also invested heavily in Oman and the FDI values for the first three months of 2020 were OMR 760 million, up from OMR 75 million for the same period in 2019.

Foreign direct investments from India rose to OMR 323.1 million, up from OMR 320.7 million of 2019 first-quarter figure. Then came the Netherlands who invested OMR 304.7 million in comparison with OMR 298.5 million.

The Republic of Switzerland also participated and invested OMR 260,400, up from OMR 251,100 million during the corresponding period in 2019.

However the investments from other countries around the globe declined marginally and Oman received, till the end of the first quarter of 2020 an investment of OMR 1.176 billion against OMR 1.378 billion during the same tenure of 2019.

The NCSI data revealed that the maximum FDI went into oil and gas extraction activities in Oman amounting OMR 9.69 billion, up from OMR 9.5 billion in the corresponding period of 2019, while the FDI in the manufacturing sector stood second at the end of the first quarter of 2020 registering OMR 1.695 billion, up from RO 1.635 billion during the first three months of 2019.

The financial sector of the Sultanate of Oman also witnessed OMR1.362 billion in investment, the same amount of investment received in this field for the same period in 2019. The considerable upside in FDI also seen in the Real estate sector totalling an investment of OMR 1.14 billion, up from OMR 724.7 million for the first quarter of 2019.

Other economic activities in Oman saw a total investment of OMR1.302 billion, up from OMR 990.9 million for the first three months of 2019.

The World Trade Organisation (WTO) praised Oman for mobilizing increased FDI inflow into the country and interestingly the Ministry of Commerce, Industry and Investment Promotion of Oman also recently celebrated the 20th anniversary of its inclusion in the WTO.

WTO’s Deputy Director-General, Alan Wolff, described the Sultanate as a reliable and supportive partner for WTO and also appreciated its role in implementing transparent and clean business practices.

“We are fortunate that the Sultanate is a member of the WTO for various reasons, in particular its long history in the global trade,” he added.

The Sultanate has also enacted some anti-dumping regulations with Gulf Cooperation Council (GCC) countries against the produce of some countries who encouraged and have adopted harmful trade and business practices for doing–business-in–Oman.

Over the past twenty years, the data point showed that the Sultanate’s GDP has gone up by four times from $20 billion to $80 billion and Oman has been successful in achieving economic diversification and fixed trade surplus that the Sultanate can boast of.

The Sultanate is an ideal example of an open country believing in competitive advantage and transparent business systems and luring many global investors for their company-formation–in–Oman.

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