Overview
Oman, located in the Arabian peninsula, has a rich history of entrepreneurship and overseas trading that dates back many centuries. Its maritime trade routes once reached the shores of Africa, Europe, and China.
Prior to the discovery of oil and gas, Oman's economy was primarily based on agriculture and fisheries, with a predominantly rural and agrarian society. However, with the commercial discovery of oil in 1964, Oman underwent a significant transformation, shifting from an agrarian economy to one that was heavily reliant on oil production and export. This shift in focus had a profound impact on the country's government exchequer, with oil revenues dominating its finances.
In 1970, Sultan Qaboos Bin Said assumed leadership of Oman and remained in power until his passing in 2020. Under his visionary guidance, Oman experienced rapid socio-economic development while preserving its cultural heritage. Sultan Qaboos' leadership also served as a constant source of inspiration for foreign investors, encouraging them to engage in business activities within Oman.
Despite the substantial boost to Oman's economy from its oil and gas reserves, Sultan Qaboos actively pursued a forward-thinking economic development plan. This plan aimed to diversify and industrialize the country's economy, reducing its reliance on oil and gas. Additionally, it sought to attract foreign investors to establish companies in Oman, further promoting economic growth and stability.
Benefits of Company Formation in Oman
Oman presents numerous investment prospects across various industries like tourism, mining, fisheries, logistics, and manufacturing. The government actively promotes foreign direct investment by providing incentives and establishing free zones to create a conducive business environment, attracting foreign entrepreneurs to engage in business activities in Oman.
Oman provides a wide range of investment opportunities for foreign investors looking to establish long-term partnerships and venture into company formation in the country.
Friendly Taxation Policy
Oman benefits from a zero income tax rate on personal income, reduced income tax on companies, and tax exemptions on effective double taxation treaties with over 35 countries.
Import Exemptions
There will be no imposition of import duty on raw materials, plant, and machinery for a period of five years commencing from the initiation of manufacturing operations.
Capital & Profit Repatriation
There are no limitations on profit, capital repatriation, and dividend transfers.
Foreign Ownership
In Oman, foreign investors are permitted to have full ownership in Free Zones and up to 70% ownership in other regions.
Strategic Location
Oman provides access to a wide customer base in North American, European, African, and Asian markets, serving as a gateway to these regions.
Political & Economic Stability
Oman is well-known for its history of political stability, along with managed inflation rates, a steady exchange rate, trade surplus, and ample foreign currency reserves.
Diversification
Oman's industrial diversification enables smooth business operations thanks to a strong supply chain network.
Infrastructure
Oman boasts excellent infrastructure facilities, including well-maintained roads, state-of-the-art airports, and efficient ports, all supported by robust communication networks.
Transparent Legal System
Oman provides a business-friendly environment with a transparent and welcoming legal system.
International Presence
Oman is connected to various global economic organizations, including being a member of the WTO, GAFTA, and GCC. Additionally, Oman has established free trade agreements with countries like the USA, Iceland, Singapore, Norway, Switzerland, and several others.
Natural Resources
Oman possesses substantial reserves of petroleum, gas, asbestos, copper, chromium, and gypsum.
Land Availability
The government offers discounted leases on land with excellent amenities.
Language
English is commonly utilized in the fields of business and trade.
Business Climate in Oman
With the exception of a limited number of trades and services, there are no restrictions placed on company establishment in Oman and conducting business within its borders. The new Foreign Capital Investment Law (FCIL) RD 50/2019, introduced in January 2020, now permits 100% foreign ownership of Omani companies.
A list of 37 commercial activities that do not allow for 100% foreign ownership includes:
- Translation and Photocopying
- Tailoring
- Vehicle and Automotive Repairs
- Sale of Drinking water
- Hairdressing and Salon Services
- Fishing
- Rehabilitation Centres
- Taxi Services
Although these restricted services make up a small portion of the Omani economy, the new law will unlock opportunities for 100% foreign investment in promising sectors, encouraging overseas companies to engage in business activities in Oman.
The Ministry of Commerce and Industry (MOCI) in Oman has introduced significant modernization efforts through the new FCIL regulation to enhance and support investor-friendly environments. The recent changes in the law have eliminated the requirement for a minimum share capital, which could potentially revolutionize the foreign investment landscape in the country. Previously, companies with foreign shareholders were mandated to have a starting share capital of OMR 150,000, but this has now been relaxed by MOCI. However, it is important to note that the new regulation may require individual confirmation from MOCI on a case-by-case basis.
The implementation of the new FCIL law marks a significant milestone in Oman's journey towards globalization and modernization, opening up a wide array of opportunities for foreign businesses.
Types of Companies in Oman And Applicable Requirements
Two primary methods of conducting business in Oman can be further categorized according to the type of company and regulatory obligations.
Business setup with a Local company
Various types of business entities can be established by a locally incorporated company, including:
- Sole Proprietorship
- Limited Liability Company
- Free Zone Company
- Joint Stock Company
- Holding Company
- Limited Partnership
- General Partnership
- Joint Ventures
Business setup with a foreign entity
There are three methods available for conducting business with a foreign entity:
1. Establishment of a branch office
2. Utilization of commercial agencies
3. Setting up a representative office
The majority of companies in Oman are limited liability companies (LLCs) that attract foreign investors for business opportunities. A minimum of two and a maximum of forty founding members are required for LLCs.
Foreign companies can own up to 70% of shares in an Omani company, with the possibility of a higher percentage if there is a free trade agreement in place with the foreign national's country.
Currently, the minimum share capital for a foreign-owned LLC is OMR 150,000, unless owned entirely by Omani citizens, GCC nationals, or FTA nationals, in which case the requirement is OMR 20,000.
For joint stock and holding companies, the initial minimum capital is OMR 500,000 and OMR 2 million, respectively. Banks, financial services, and insurance companies typically have higher initial capital requirements.
Partnership Companies
The characteristics of Omani Partnership companies include:
- Established by two or more stakeholders
- Requires registration within one month of executing the partnership agreement in the Commercial Register
- Requires the approval of all partners before transferring individual interests
- The partnership name must clearly indicate that it is a partnership
- Any issues with one partner can lead to the dissolution of the partnership unless all other partners agree to continue.
Proprietorship
Typically, sole Proprietorship companies in Oman are restricted to Omani citizens, although GCC nationals may establish one under specific circumstances and for particular activities.
Foreign Company Branches
Foreign entities are permitted to establish representative offices, albeit with restricted authority. It is advisable for a foreign corporation to establish a branch solely if it has obtained a Government project contract, and such authorization is solely applicable for the duration of the contract.
Proprietorship
A joint venture is established by two or more entities entering into a joint venture agreement to undertake a specific project. It is important to note that a joint venture does not possess any legal status and is not required to be registered. In the case of an Omani partner, they must hold a minimum of 51% ownership stake.
Process of Registèring a Company in Oman
The procedure for registering a company in Oman is fairly uncomplicated and clear-cut. Once the initial capital has been paid, the primary steps of the process are as follows.
1. Reserving a Company Name
You are required to submit an application to the Ministry of Commerce and Industry (MOCI) with a distinct name for your company that effectively showcases and promotes your products or services.
2. Submitting Incorporation documents
Once the company name has been approved, shareholders documents, company constitution, bank certificate, and authorized signatory form must be submitted to MOCI for company registration in Oman.
3. Registering with Oman Chamber of Commerce and Industries (OCCI)
After completing the MOCI registration process, it is necessary to proceed with the registration of your company with OCCI. This step is crucial in order to ensure compliance with the commercial rules and regulations that are applicable to your company.
4. Designing a Company Seal
The LLC's registered authorized signatory is responsible for designing and issuing the company seal.
5. Obtaining approvals from Government Authorities
In order to register a company in Oman, it is essential to acquire a series of approvals from the relevant authorities, taking into consideration the company's type, size, and nature of business. These approvals include:
- Tax Registration
- Oman Police Registration
- Registration with the Ministry of Manpower
- Obtaining necessary industrial, environmental, and other permits and licenses
- Municipality License
- Registration with Oman Police
- Import Export License, if applicable
- Registration with the Public Authority of Social Insurance
By obtaining these approvals, your company will be compliant with the necessary regulations and requirements for operating in Oman.
6. Post Registration Process
After the completion of the company registration process, it is necessary to acquire all the documents specified under point 4.
Documents Required for Registration of Company in Oman
To register a company in Oman, you must provide the necessary documents as listed below:
1. Memorandum and Articles of Association
2. Tax Registration Certificate
3. Shareholders' Visas and Passports
4. Chamber of Commerce and Industry affiliation certificate
5. Certificate of Initial Deposit
6. Identity Cards of Shareholders
7. Completed Company Registration Form.
Please ensure that you have all these essential documents ready for a smooth registration process.
Tax Laws in Oman
All taxable entities in Oman are required to register with the Secretariat General of the Ministry of Finance. Within three months of the applicable accounting period, a provisional return of income tax must be filed. Regardless of nationality and size, all companies are subject to a uniform 12% tax rate, with profits up to OMR 30,000 being exempt from tax. The final tax return must be filed within six months of the applicable accounting period.
Tax Exemptions
The income tax exemption in Oman applies to the following:
- Dividends received from a company based in Oman
- Profits made from selling securities listed on the Muscat Stock Exchange
- Omani maritime companies
- International airlines
- Investment funds
- Foreign companies involved in gas and oil exploration
- Foreign companies contracted for government projects.
Withholding Tax
Cross border payments in Oman are subject to a flat rate of 10% withholding tax on the gross payment for the following categories:
- Royalties
- Management Fees
- Provision of Services
- Consideration for R&D
- Consideration for Computer Software.
Indirect Tax
- Oman currently does not enforce any VAT, Sales Tax, or Property tax. However, there are plans to introduce VAT starting from April 2021, with a rate of 5%. Real estate transactions in Oman are subject to a stamp duty of 3%. Additionally, like other GCC countries, Oman imposes a 5% import duty on goods entering the country.
Personal Tax
- Oman does not impose personal income tax.
Free Zones in Oman
There are a total of three free zones and two special economic zones established in the country to attract foreign investment. Each zone offers its unique range of incentives, such as Tax Holidays, exemptions on Import Duty, Waiver on initial capital requirements, and the opportunity for 100% foreign ownership.
Free Zones
- Salalah free zone
- Shohar free zone
- Al Mazunah free zone
In addition, there are eight Industrial Estates available, including Rusayl, Sohar, Raysut, Sur, Nizwa Al Buraimi, Sumail, and Al Muzanah. These estates provide exceptionally appealing land rents, tax holidays, as well as exemptions on machinery and equipment.
Special Economic Zones (SEZ)
- Duqm Special Economic Zone
- Muscat Knowledge Oasis
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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