Doing Business In Oman
The Sultanate of Oman was formed in 1970 upon the accession of Sultan Qaboos bin Said, who has rules ever since. The current estimated population is 4.1 million, of which almost 46 percent are expatriates employed in a range of industries. As an oil rich state, Oman has sought to diversify its economy, particularly in tourism, logistics, and industrial manufacturing. Located in the south- eastern quarter of the Arabian Peninsula, Oman is the only member of the GCC situated outside the gulf. Arabic is the first language, with English widely spoken and used in business. Oman is the second largest country after Saudi Arabia in the Arabian Peninsula.
- Political stability
- Liberal foreign ownership in companies permitted
- Oman is rich in oil and gas
- Capital and profits of a business entity is fully repatriable
- No personal income-tax.All the individuals can fully repatriate their savings.
- Committed to privatization, industrialization, economic diversification and development.
- Low income tax rate structure for companies
- Double taxation relief treaties available with many countries.
- Income tax holiday period of five years renewable for further period of five years
- Geographically ideally located, proximity to Gulf, Asian and African markets.
- Well-regulated stock exchange
- Government leased land available at a concessional rate with good utilities.
- Modern infrastructure with good roads, airports, sea ports, and telecom
- English is used widely in day to day business commerce.
IMC is a cross border advisory firm focusing on the AMEA (Asia, Middle East & Africa) markets. We specialize in corporate advisory services, global mobility services, private client and family advisory, international tax, corporate finance, mergers and acquisitions, investment advisory and business support and outsourcing solutions.
At IMC, we pride in our team comprising of highly qualified professionals, possessing in-depth knowledge and practical experience, enabling us to understand specific client requirements and respond accordingly. Our team shares our philosophy of working in an environment of trust and integrity with highest regard for work ethics to provide our clients with world-class services.
Oman is oil and gas based economy with production of about 757,000 barrels per day, accounting for about 75% of government revenues and contributing about 50% to the Gross Domestic Product (GDP). Fluctuations in the global oil prices result in wide variations in gross revenues and GDP. The GDP has increased from RO.6, 011 million in 1999 to RO.23,296 million in 2008 according to statistics published by the Ministry of National Economy. The ambitious Oman LNG Project was founded to exploit the country’s proven gas reserves and is expected to become a major non-oil revenue source, besides giving encouragement for development of gas-intensive industries.
The legal system in Oman is based on both civil code principles and on Islamic Sharia Law. The Commercial Court has jurisdiction over commercial disputes. As Oman is a civil law jurisdiction, judges have freedom to interpret agreements in a way in which, in their opinion, the original intentions of the parties are reflected. This could extend to amending a contract if the judge feels the amendment would more accurately reflect the parties’ original intentions. A dispute between employers and employees in the private sector is primarily dealt by the Labour department of the Ministry of Social Affairs and Labour and Vocational Training and unresolved disputes are referred to the Commercial Court. Tax disputes are dealt and settled by the Commercial Courts. The Sharia Law which is based on the Holy Quran deals with family law and inheritance.
Foreign companies and individuals are generally required to have an Omani partner with minimum 30% shareholding in order to form LLC. The minimum share capital of OMR 150,000 ($ 390,000) is required to register LLC with foreign participation. GCC companies that are 100%owned by GCC nationals, or GCC nationals themselves, may establish LLC without local partner for approved activities. LLC is required to have atleast two shareholders.Pursuant to free trade agreement (FTA) conclude between the US and Oman, US companies may form a subsidiary in Oman without local partner, provided that all ultimate shareholders of the US entity are also US persons. The minimum share capital for LLCs with local or GCC ownership or for those qualifying under the US FTA is OMR 20,000 ($52,000).
Joint stock companies that do not offer their shares for public subscription are known as privately held joint stock companies (SAOC). The minimum share capital required for an SAOC is OMR 500,000 ($ 1.3 M).
Alternatively, joint stock companies that offer their shares to the public are called publically held joint stock companies (SAOG). The minimum share capital required for an SAPG is OMR 2M ($5.2 m). The 30% local Omani shareholding requirement must also be observed in establishing a joint stock company.Ownership of stock in SAOGs is through Muscat Securities Market (MSM) trading and regulated by the Capital Market Authority. Foreign investment in Banks and other types of financial institutions is governed by the central bank of Oman (CBO).
A foreign company may register a branch in Oman only to execute a contract with the government or quasi government body. The branch registration is limited to the duration of the underlying contract. Special dispensation may be given to allow a foreign company to register a branch without a government or semi government contract if the activity is deemed by the council of ministers to be of national importance.
Foreign companies without commercial registration in Oman may do business through commercial agents. Agency agreements are formally registered with the Ministry of Commerce and Industry (MOCI) under the Commercial Agency Law.
A foreign firm may open a commercial representative office in Oman solely for the purpose of marketing and promotion of its products or services. A representative office is not allowed to sell products or services or to engage in other forms of commercial activity. However, it may sponsor and hire employees.
It takes approximately four to six weeks to incorporate an entity. Recently an e-portal has been set up which permits the immediate online registration of a new company, allowing for the submission of establishment documents post- registration.
The capital of a Limited Liability Company (LLC) must be fully paid up at the time of its registration.Deposit the legally required initial capital in a Bank.
Register with the Commercial Registry of the Ministry of Commerce and Industry (MOCI).
To register with the Oman Chamber of Commerce and Industry, the applicant submits a completed application form, along with the company statutes and pays the relevant fees depending on the grade of the company.
As per the Notification of the Tax Department of the Finance Ministry, a company must register at the Tax Department under the Income Tax Law. Registration includes submitting a completed Declaration of Business Particulars form.
Once an employee is recruited, a copy of the contract must be submitted to the Public Authority for Social Insurance for the employee’s social security registration purposes. The Social Security Law of Oman requires the LLC to abide by the specified employee retirement benefits contributions to the Authority.
The instructions to make the company seal or stamp are issued by the registered authorized signatory of the LLC. When issued to the supplier of the stamp or seal, such instructions should be accompanied by an attested signature specimen confirming the requesting persons’ authority to obtain the stamp or seal.
- FZ companies may be 100% foreign owned
- There are no minimum share capital requirements for free zone business
- There are no corporate taxes on free zone companies for ten years
- No duties are imposed on goods imported and exported from free zone
- Oman free trade zone companies are allowed to trade within Oman with a custom duty of 5%
Full exemption from customs duties on goods imported into the free zone. Businesses may be 100% foreign owned and tax exemptions are allowed for up to 25 years for companies established in this free zone. Located close to port of Sohar and Sohar industrial estate, this free zone is aimed at attracting investment in the metal and steel, food and logistics sectors.
Located in the south of the country near to Oman’s second city, Salalah, this free zone offers competitive labour and infrastructure costs compared to other regions in order to attract investors in the chemical and material processing, manufacturing, assembly and logistics sectors. Income tax exemptions are available for up to 30 years. Full foreign ownership is permitted and customs exemptions are available. There is no minimum capital required to set up a company located in this free zone and there are relaxed omanization rates applicable to such companies.
This free zone is located in the Dhofar region, in the south west of Oman, to attract investors in the trading, light industry and assistant services sectors. Income tax exemptions are available for up to 30 years. Full foreign ownership is permitted and customs exemptions are available. There is no minimum capital required to set up a company located in this free zone and there are relaxed Omanization rate applicable to such companies. Additionally, Yemeni nationals are permitted to work in the zone without visas to work permits.
Duqm special economic zone, 1777 sq.km. Area bordered by an 80 Km. Arabian sea coastline, the DESZ is strategically place as a gateway to and key hub for the Middle East, North and East Africa and South Asia.The zone is made up of several areas, namely: port and the dry dock, fishing and fisheries industries, industrial and logistics areas, tourism and educational areas, filters and petrochemicals complex, new Duqm town and Duqm airport. Incentives offered to investors in the special economic zone include competitive land lease rates, a 30 year income tax exemption and full customs exemptions. 100% foreign ownership of business is also permitted.
Free Trade Zone Knowledge Oasis Muscat (KOM) offers foreign technology oriented companies’ full foreign ownership of their branch in Oman. KOM hosts several bluechip companies such as Oracle, Hewlett Packard, Motorola, Microsoft, NCR, Huawei and several other dynamic hi tech start up.KOM is located 30 kilometers west of Muscat and10 minutes’ drive from Muscat international airport.KOM is close to Rusayl Industries Estate – the Oman’s largest industrial park- and the Sultan Qaboos University.KOM is building on 20,000 square meters of office and business space is also known as the Muscat Technology Park. The area already houses 60 firms. KOM is managed by the Public Establishment for Industrial Estates (PEIE) a government institute.
Free Trade Agreement (FTA) between the Governments of Sultanate of Oman and the United States of America (USA) has been entered on 2nd December 2008 whereby American businesses and establishments who wants to open a branch to provide goods or services in the Sultanate of Oman can do so even before obtaining contracts or agreement with Government of Sultanate of Oman or any of its business or establishment or others having shareholding of government.
All the receipt s, notices, contracts and documents of the company should bear the following:
- Company’s Name
- Form of the company
- Place of Business
- Registration No.
- Place of Registration
Compliance of foreign investment law is mandatory for all companies with Non Omani partners.
Partners of companies are not allowed to do business similar to that of company for third parties or on their own account without prior consent of all the partners (except Joint ventures and shareholders of joint stock companies).
The contribution of partners of a Commercial company may consist of money or contribution in kind or intangible property rights or services of one or more partners subject to special provisions governing each form of company. The value of contribution shall be stated in MOA and AOA in terms of money. In case of disputes, if it is found by the authority that partners’ contribution is overvalued, the partner shall then pay to company in cash the difference between the estimated value and true value at the time of contribution.
The Annual General Meeting shall be held each year within four months of the end of the Company’s financial year. A copy of the balance sheet, the report of the Board of Directors and the report of the auditors shall, likewise, be sent to each shareholder together with the invitation to attend the meeting of the ordinary annual General Meeting. There are rules specified for
AJoint-stock Company shall not be established without authorization from the Directorate General of Commerce.
The Joint-stock Company shall have, at least, one auditor who shall be appointed by the ordinary General Meeting to perform his duties until the next meeting of the ordinary annual General Meeting which may re-appoint such auditor.Auditors shall be persons licensed to practice accountancy and auditing profession in accordance with the provisions of the Law. Auditors shall be independent from the Company, hence, they shall not be promoters or directors or employees of the Company or its affiliates. Such auditors shall not provide, regularly, the Company or its affiliates with technical or administrative or consultative services.
The Joint-stock Company shall not issue “Promoters’ Shares” or any other securities that grant the promoters or any other person a right to a share in the Company’s earnings or profits without having made an appropriate advance contribution to the capital. There are other statutory guidelines issued by the government which need to be followed.
Oman’s income tax law seeks to tax the worldwide income of Omani entities and the Oman-source income of branches and other permanent establishments. The income tax rates are as follows:
- First OMR 30,000 of taxable income at 0%
- Above OMR 30,000:12%
- The tax rate for companies engaged in petroleum exploration is 55% on income derived from the sale of petroleum products.
Under Oman tax law, a permanent establishment (PE) is defined as a fixed place of business through which a business is wholly or partly carried out in Oman by a foreign person. This includes places of sales, places of management, branches, offices, factories, workshops, mines, quarries and buildings sites, places of construction or assembly projects. However, the use of storage or display facilities, maintenance of a stock of goods, purchase of goods or collection of information for the business, and/or other activities of a preparatory or auxiliary nature will not create a PE in Oman.
Corporate income tax is charged on all sources of income (including capital gains) of a company or an establishment earned or realised in Oman.Omani companies are also liable to tax on their overseas income. Credit is given for taxes suffered overseas irrespective of whether the country where the activity is carried out has a double tax treaty with Oman. The credit is limited to the Oman taxes applicable to such overseas income.
A 10% withholding tax is applied at source to payments for the following services to foreign persons that do not have income attributed to a permanent establishment in Oman:
- Management fees
- Consideration for research and development
- Consideration for the use of or right to use computer software.
VAT has been recently introduced along with other GCC countries.
Currently there are no separate stamp duties levied in Oman.
Oman is part of the GCC Customs Union, which was established in 2003 to remove customs and trade barriers among the GCC member states. The implementation of the GCC Customs Union is still in progress.The GCC member states apply a Common Customs Law and a Unified Customs Tariff with a standard customs duty rate of 5% of goods’ cost, insurance and freight value, with a few exceptions, such as tobacco and alcoholic goods being subject to a customs duty rate of 100%.The GCC Customs Law does not levy export customs duties.Goods imported into Oman’s free zones and special economic zones may be exempt from customs duty.
Financial statements must be prepared in accordance with International Financial Reporting Standards. The first accounting period of an entity begins on the date of its registration and may cover any length of time up to eighteen months, after which a fixed twelve-month period must be chosen. If an entity wishes to change its accounting period subsequently, it must first obtain approval from the Secretary General for Taxation at the Ministry of Finance.
Accounting records maintained by entities must be recorded in OMR (Omani Rials), although an entity may be permitted to use another currency if it requests and receives permission to do so from the Ministry of Finance. It is standard for accounts to be recorded in English; no Arabic translation is required. Accounting records must be preserved for a period of ten years.
Whilst there are no personal income tax obligations in Oman, it is important to comply with all labour law requirements together with certain mandatory requirements such as the Wages Protection System (WPS).The WPS applies to employees registered with the Oman’s Ministry of Manpower. A key requirement under the WPS is to pay employees’ wages in the local currency, by way of bank transfer into their local bank accounts. Employers non-compliant with the WPS could face financial penalties and problems with renewing or processing new visas for their workforce.