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.
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 .
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
- 1. Limited Liability Company
- 4. Partnership
- 2. Closed Joint Stock Company
- 5. Joint venture
- 3. Public Joint Stock Company
- 6. 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.
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.
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.
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.
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.
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.
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.
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).