Corporate Structuring
Why should investors consider doing business in Oman?Since 1970, Oman has overseen an extraordinary transformation in its social and economic landscape. Due to its historical significance as a trading hub and its reserves of hydrocarbons, Oman has long been an attractive destination for foreign investment.
The Omani government has made diversification a priority, with particular emphasis on developing the tourism sector as a material source of revenue. This commitment to diversification and foreign investment is exemplified by the development of Sohar, which now boasts an integrated port, freezone, industrial zone and other industrial and economic freezones.
Oman offers several advantages for foreign investors proposing to run businesses in the country, such as its strategic location, its movement towards a diversified economy, ease of doing business, tax incentives and beneficial legal framework.
Oman is located in the south-eastern quarter of the Arabian Peninsula, with access to the Arabian Sea and the Indian Ocean, making it a historical trading nation and a potential logistics hub for the region and beyond. Oman also has a long history of political stability and good relations with its neighbours and other countries.
Oman recently introduced reforms to its company law, foreign investment law, tax law and employment law to create a more business-focused environment and with the aim of supporting foreign investors.
Oman has a favourable tax regime for foreign investors, with a corporate income tax rate of 15%, a value added tax rate of 5%, no personal income tax, no stamp duty on the transfer of ownership in companies and no foreign exchange controls. Oman also has double tax treaties with a large number of countries in respect of double taxation and to provide tax relief for cross-border transactions.
Oman has a legal system based on civil code principles and Islamic Shari'a law, with commercial courts that have jurisdiction over commercial disputes. Oman also recognises arbitration as a method of dispute resolution and recently established the Oman Arbitration Centre to provide businesses with an alternative opportunity to resolve their disputes.
Where is Oman located?
The Sultanate of Oman is a GCC member state and is located on the southeastern coast of the Arabian Peninsula and spans the mouth of the Persian Gulf. Oman shares land borders with Saudi Arabia, the United Arab Emirates and Yemen, while sharing maritime borders with Iran and Pakistan.
What is the approximate population of Oman?Oman population in 2023 is estimated at 4,644,384 people at midyear. Oman’s population is equivalent to 0.06% of the total world population.
What are some major cities in Oman?Some of the major cities in Oman include Muscat, the capital and the largest city, as well as Sohar,and Salalah.
Could you provide a brief historical context of Oman?Portugal took over Muscat in the 16th century and maintained authority until 1650. In the 18th century, the Āl Bū Saʿīd dynasty expelled Persian occupation and established Omani dominance over a significant portion of the Persian Gulf. Despite facing political challenges, the Āl Bū Saʿīd dynasty managed to retain power well into the 21st century, primarily through maintaining strong ties with the United Kingdom. However, the dynasty was hesitant to embrace innovation and modernization. It was only after the coup in 1970, when Qaboos bin Said ascended to power, that Oman began experiencing rapid economic development and embraced significant modernisation efforts.
How would you describe Oman’s current political and economic landscape?Oman is a hereditary monarch where the Sultan is both the head of state and head of government. The Sultan, His Majesty Haitham bin Tarik Al-Said acceded to the position in January 2020, following the death of the former Sultan, His Majesty Sultan Qaboos bin Said Al-Said.
Oman's economy is progressive, and trade represented more than 94% of the country’s GDP in 2021. It mainly exports hydrocarbons and petrochemicals and in recent years has commenced the process of economic diversification, with a growing share of industrial products in total exports.
Arabic is the official language of Oman. However, English is very commonly spoken and the majority of business dealings involving foreign investors are conducted in English.
Briefly explain the legal and regulatory environment.
The legal system in Oman is based on civil code principles and on Islamic Shari’a Law. The sources of law for civil matters include:
The 1996 Basic Statute of the State (‘the Basic Law’)
Islamic Shari’a
Existing laws and regulations remain in force ‘provided that they do not conflict with any of the provisions of this Basic Law’. The main areas that, according to the Basic Law, are governed by Islamic Shari’a are family law and inheritance.
The Commercial Court has jurisdiction over commercial disputes. As Oman is a civil law jurisdiction, judges have discretion to interpret laws and agreements in a way in which, in their opinion, the original intentions of the parties are reflected. and as such, there is no doctrine of binding precedent in the same way as in common law jurisdictions.
Gross Domestic Product (GDP) and Growth Trends:
What is the current GDP of the country, and how has it been trending in recent years?Nominal (current) Gross Domestic Product (GDP) of Oman is $114,667,000,000 (USD) as of 2022. Real GDP (constant, inflation adjusted) of Oman reached $82,934,277,089 in 2022. GDP Growth Rate in 2022 was 4.31%, representing a change of 3,566,616,557 US$ over 2021, when Real GDP was $82,728,063,878.
What are the factors contributing to the country's economic growth or decline?The Omani economy, like all other countries, has faced economic, financial and health challenges, during the past two years, which had a noticeable impact on the course of economic and social development included in the Oman 2040 Vision and its first executive plan - the Tenth Five-Year Plan (2021-2025). These challenges were mainly caused by the outbreak of the Covid-19 pandemic and the accompanying drop in oil prices, especially during the first quarter of 2020, as a result of the significant slowdown in global economic and trade activities.
Which industries or sectors play a significant role in driving the country's economy?Oman focus in the coming years will be on the hydrocarbon, energy (including renewables and alternative energy), manufacturing, agricultural, logistics and tourism sectors, in line with Oman Vision 2040.
Are there any emerging industries or sectors that are becoming increasingly important?Manufacturing & Industries, Transport & Logistics, Tourism, Fisheries, Mining, and Education will play a pivotal role in helping deliver real GDP growth.
How does the government support or promote key industries for economic development?The government of Oman supports and promotes key industries for economic development through various initiatives, such as investments into renewable and alternative forms of energy, creating special economic and free zones, streamlining the registration and licensing procedures for foreign investors, and implementing tax exemptions and incentives for certain businesses.
Oman has been seeking to diversify its economy, particularly in tourism, logistics, mining, fisheries and industrial manufacturing, as part of its efforts to reduce its dependence on hydrocarbon revenues. This implies that the government is supporting or promoting these sectors as key industries for economic development.
There are currently a number of free zones which offer various industrial benefits to investors, such as competitive land lease rates, income tax and customs exemptions, full foreign ownership, and relaxed Omanisation rates. These zones are aimed at attracting investment in specific sectors, such as metal and steel, food and logistics, pharmaceutical manufacturing chemical and material processing, manufacturing, assembly, trading, light industry, and assistant services. Therefore, the government is supporting or promoting these sectors as key industries for economic development through the establishment of these zones.
Furthermore, the government recently introduced a new commercial companies law foreign capital investment law and employment law which make significant amendments and much awaited changes aimed at improving the business environment and diversifying the economy. These laws introduce features such as establishing a single person LLC, the removal of minimum capital requirements for LLCs, , and the streamlining of the registration and licensing procedures for foreign investors. These features are likely to support and promote key industries for economic development by facilitating the entry and operation of foreign businesses in Oman.
Additionally, the tax exemptions are available for industrial activities for a maximum of up to five years, as well as for businesses established in the special economic and free zones. These tax exemptions are likely to support or promote key industries for economic development by reducing the tax burden and enhancing the competitiveness of these activities.
What is the official currency of the country, and how is it currently valued against major international currencies?
The official currency of Oman is the Omani Rial (OMR), which is divided into 1000 baisa. The Omani Rial is pegged to the US dollar at the official rate of 1 OMR to 2.59 USD. This peg ensures stability in international trade and investments.
What is the government system in Oman, and who holds key positions within this system?Oman is a monarchy with a bicameral legislature and a legal system based on civil code and Islamic law. The head of state and government is the Sultan, who appoints the cabinet and has supreme legislative and executive powers. The Sultan also acts as the commander-in-chief of the armed forces, the chairman of the Supreme Judicial Council, and the chairman of the Supreme Council for Planning. The current Sultan of Oman is His Majesty Haitham bin Tariq, who succeeded his cousin His Majesty Sultan Qaboos bin Said Al Said in January 2020.
The bicameral legislature consists of the Council of Oman, which comprises the State Council (Majlis al-Dawla) and the Consultative Council (Majlis al-Shura). The State Council has 86 members appointed by the Sultan for a four-year term, while the Consultative Council has 86 members elected by universal suffrage for a four-year term. The Council of Oman has an advisory role and can propose legislation to the Sultan but cannot enact or veto laws.
The legal system in Oman is based on both civil code principles and Islamic law. The sources of law for civil matters include the Basic Law, which is the constitution of the state, and Islamic law, which governs family law and inheritance. The Basic Law states that Islam is the religion of the state and the Islamic law is the basis of legislation. The Commercial Court has jurisdiction over commercial disputes and judges have freedom to interpret agreements in a way that reflects the original intentions of the parties.
Which government agencies in Oman are relevant to business and trade activities, and what are their specific roles?There are several government agencies in Oman that are relevant to business and trade activities, and each of them has a specific role in regulating, facilitating, or promoting different aspects of the economy. Some of the main agencies are:
The Ministry of Commerce, Industry and Investment Promotion (MOCIIP): This is the primary authority for registering and licensing businesses in Oman, as well as for enforcing the Commercial Companies Law, the Foreign Capital Investment Law and the Commercial Agency Law. The MOCIIP also maintains an online portal for company registration and provides various services and incentives to investors and entrepreneurs.
The Oman Tax Authority: This is the autonomous body responsible for administering and collecting taxes in Oman, including corporate income tax, value added tax, excise tax, withholding tax, and customs duties. The Oman Tax Authority also implements the Common Reporting Standard regime and the Country-by-Country Reporting requirements for multinational groups.
The Royal Oman Police (ROP): This is the law enforcement agency that also oversees the immigration and residency matters for foreign nationals living and working in Oman. The ROP issues visas, work permits, and residency cards for expatriates and their dependents.
The Central Bank of Oman (CBO): This is the monetary authority that regulates the banking and financial sector in Oman, as well as the foreign exchange and payment systems. The CBO also supervises the compliance of financial institutions with anti-money laundering and counter-terrorism financing rules.
The Capital Market Authority (CMA): This is the regulator of the capital market financial and the insurance sector in Oman, as well as the protector of the rights of investors and policyholders. The CMA also oversees the Muscat Stock Exchange,
The Public Authority for Special Economic Zones and Free Zones (OPAZ): This is the entity that manages and develops the special economic zones and free zones in Oman, such as the Duqm Special Economic Zone, the Sohar Free Zone and the Salalah Free Zone. OPAZ also offers various incentives and benefits to investors and businesses operating in these zones, such as tax exemptions, customs exemptions, and relaxed Omanisation rates.
What policies has Oman implemented to encourage foreign investment, and how do these policies impact foreign ownership and incentives for businesses?
Oman has implemented several policies to encourage foreign investment, such as relaxing foreign ownership restrictions, streamlining registration and licensing procedures, and offering tax exemptions and customs benefits in certain zones. These policies impact foreign ownership and incentives for businesses in different ways, depending on the type and location of the business activity.
One of the main policies that Oman has introduced to attract foreign investment is the amendment of the Foreign Capital Investment Law (FCIL), which permits the establishment of wholly foreign owned limited liability companies (LLCs), subject to a limited number of restrictions imposed in the Executive Regulations to the FCIL. This policy relaxes the previous requirement of having at least 30% local Omani shareholding in LLCs and gives foreign investors more flexibility and control over their businesses. However, foreign ownership may still be limited in certain sectors or activities that are deemed strategic or sensitive by the government, such as banking, insurance, and telecommunications.
Another policy that Oman has adopted to facilitate foreign investment is the simplification of the registration and licensing procedures for foreign investors, as well as the procedures for dispute resolution. The new Commercial Companies Law (CCL), issued in April 2019, attempts to create a stronger and more transparent corporate governance regime in Oman, and introduces the concept of a single person LLC, which can be established online through the Ministry of Commerce, Industry and Investment Promotion (MOCIIP)'s e-portal. The amended FCIL and CCL also seek to streamline the registration and licensing procedures for foreign investors, as well as procedures relating to dispute resolution. These policies aim to reduce the regulatory hurdles and costs for foreign investors and to enhance the legal certainty and protection of their rights.
A third policy that Oman has implemented to incentivise foreign investment is the provision of tax exemptions and customs benefits in free zones and special economic zones. These zones offer competitive advantages for foreign investors, such as 100% foreign ownership, income tax exemptions for up to 30 years, full customs exemptions and relaxed rates of Omanisation. These policies serve as incentives for businesses to locate their activities in these zones and enable investors to benefit from the lower tax and customs burden, as well as gaining access to strategic markets and infrastructure.
What existing trade agreements does Oman have with other countries or regional blocs, and how do these agreements impact international trade for businesses?Oman has signed several free trade agreements (FTAs) with other countries or regional blocs, which aim to facilitate international trade by reducing or eliminating tariffs, quotas and other trade barriers. These FTAs may provide preferential treatment for certain goods or services originating from or destined to Oman, depending on the terms and conditions of each agreement. Some of the FTAs that Oman is a party to are:
The GCC Customs Union, which establishes a common external tariff and a customs union among the six member states of the Gulf Cooperation Council (GCC), namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
The GCC-Singapore FTA, which entered into force in 2013 and covers trade in goods, services, investment, government procurement, intellectual property rights and economic cooperation.
The GCC-European Free Trade Association (EFTA) FTA, which entered into force in 2014 and covers trade in goods, services, investment, competition, intellectual property rights and economic cooperation. EFTA comprises Iceland, Liechtenstein, Norway and Switzerland.
The US-Oman FTA, which entered into force in 2009 and covers trade in goods, services, investment, intellectual property rights, labor, environment and government procurement.
These FTAs may impact international trade for businesses in various ways, depending on the nature and scope of their activities. For example, businesses that import or export goods or services between Oman and its FTA partners may benefit from lower or zero customs duties, simplified customs procedures, enhanced market access and reduced non-tariff barriers. However, they may also need to comply with certain rules of origin, standards, regulations and documentation requirements to qualify for the preferential treatment. Businesses that operate in sectors that are covered by the FTAs may also face increased competition from foreign suppliers or investors, as well as opportunities for cooperation and joint ventures. Businesses that are not covered by the FTAs may face disadvantages or challenges in accessing certain markets or sectors that are subject to preferential treatment for FTA partners.
Could you provide information on bilateral investment treaties and their implications for foreign investors looking to invest in our country?Oman has signed bilateral investment treaties (BITs) with several countries to promote and protect foreign investments in the country.
BITs typically grant foreign investors certain rights and guarantees, such as fair and equitable treatment, protection from expropriation, access to international arbitration, and non-discrimination.
However, BITs may also impose certain obligations or restrictions on foreign investors, such as compliance with local laws, respect for environmental and social standards, and avoidance of tax evasion or abuse.
Foreign investors looking to invest in Oman should be aware of the BITs that Oman has with their home countries, and the implications of these treaties for their investments. For example, Oman has a BIT with the United Kingdom, which provides that the parties shall encourage and create favourable conditions for investors of the other party to make investments in their territories and shall admit such investments in accordance with their laws and regulations.
The BIT also provides that the parties shall accord to investments of investors of the other party treatment no less favourable than that accorded to investments of their own investors or investors of any third state, whichever is more favourable. However, the BIT also stipulates that the parties shall not be prevented from taking measures necessary for the protection of their essential security interests, or for the maintenance of public order or the fulfilment of their obligations with respect to the maintenance or restoration of international peace or security. The BIT also states that the parties shall not be obliged to extend to investors of the other party the benefit of any treatment, preference or privilege resulting from any existing or future customs union, economic union, free trade area or regional economic integration agreement to which either of the parties is or may become a party.
Therefore, foreign investors should carefully examine the terms and conditions of the BITs that Oman has with their home countries and assess the potential benefits and risks of investing in Oman under these treaties. They should seek legal advice to ensure that they comply with the relevant laws and regulations of both Oman and their home countries, and that they do not engage in any activities that may jeopardize their rights or obligations under the BITs.
Are there any international partnerships and collaborations that the country is currently involved in, and how can foreign companies explore opportunities to participate in these partnerships?Oman is currently involved in several international partnerships and collaborations that aim to enhance its trade, investment and economic diversification. Foreign companies can explore opportunities to participate in these partnerships by taking advantage of the preferential treatment, tax exemptions and incentives offered by Oman in certain sectors and areas. Some examples from the document are:
Oman is a member of the Gulf Cooperation Council (GCC), which is a regional political and economic bloc that facilitates the free movement of goods, services and people among its six member states. Oman also participates in the GCC-wide Common Excise Tax Agreement and the GCC Unified Agreement on Value Added Tax, which harmonize the taxation of certain goods and services in the region.
Oman has signed double tax treaties with 40 countries, including major trading partners such as China, India, Singapore, the United Kingdom and the United States. These treaties aim to prevent double taxation and promote cross-border investment and trade by reducing the withholding tax rates on dividends, interest, royalties and fees.
Oman has also signed free trade agreements (FTAs) with several countries, such as the United States, Singapore and Switzerland, as well as the European Free Trade Association (EFTA). These FTAs provide preferential access to the markets of the partner countries by eliminating or reducing customs duties and non-tariff barriers on most goods and services. They also include provisions on investment protection, intellectual property rights, government procurement and dispute resolution.
Oman has designated certain areas as special economic zones, free zones and integrated tourism complexes, where foreign companies can enjoy various benefits such as 100% foreign ownership, income tax exemptions, customs exemptions, competitive land lease rates and relaxed Omanisation rates. These areas are strategically located and aim to attract investment in sectors such as tourism, logistics, manufacturing, fisheries and petrochemicals.
There are several bodies that would be relevant for a person wishing to set up a business in Oman, depending on the type and nature of the business. The main bodies are as follows:
The Ministry of Commerce, Industry and Investment Promotion (MOCIIP): This is the body responsible for registering and licensing businesses in Oman, as well as regulating commercial activities and foreign investments. All Omanis and foreign individuals and companies intending to undertake business in Oman must register with Ministry of Commerce, Industry and Investment Promotion (MOCIIP) and submit all the resolutions and records and other documents which are required to be filed with MOCIIP.
The MOCIIP has an e-portal that allows for the online registration of a new company and the submission of establishment documents.
The Tax Authority: This is the body responsible for administering and collecting taxes in Oman, as well as issuing tax rulings and guidelines.
As part of reform initiatives of the Government, a new autonomous Tax Authority was established, marking a significant step towards evolving the tax function in the country in October 2019".
The Royal Oman Police (ROP): This is the body responsible for issuing visas, work permits and residency cards for foreign nationals who wish to live and work in Oman.
The local municipality which is responsible for issuing a licence to trade from the physical location from which a company conducts business.
The freezone authority, which issues a freezone trading licence to companies and businesses that are authorised to trade within or from the relevant freezone.
How to set up a business in Oman
To establish a business in Oman, a foreign investor has to choose one of the main forms of business entities available:
Limited liability company (LLC).
Joint stock company (SAOC)
Branch,
Commercial agency or commercial representative office.
Each form has its own advantages and disadvantages, depending on the nature and scope of the business activity, the level of foreign ownership, the capital requirements, the tax implications and the legal protections.
Can you provide a brief overview of the differences and advise on the minimum share capital requirements?
The entity allows between two and 50 persons to have limited liability.
There is no minimum capital requirement.
However, an LLC is subject to a 15% corporate income tax on its worldwide income and a 10% withholding tax on certain payments to non-residents, such as royalties, management fees and services fees.
Are there any FDI restrictions on LLC’s in Oman? An LLC may face some restrictions on foreign ownership, unless it qualifies for a wholly foreign owned LLC under the Foreign Capital Investment Law, which is subject to certain conditions or limitations.
A SAOC is a commercial company with its capital divided into negotiable shares of equal value, which can be either listed on a public market or privately held.
A joint stock company must consist of at least three natural persons or legal entities.
A SAOC is suitable for certain activities that require a higher level of capital and regulation, such as banking or insurance or when large joint venture projects are being entered into.
A SAOC is also subject to a 15% corporate income tax on its income and a 10% withholding tax on certain payments, but it may benefit from some tax exemptions or incentives if it engages in industrial activities or operates in a special economic zone or a free zone.
What are the FDI restrictions for a SAOCSAOC’s are subject to the same FDI restrictions as LLCs.
What are the share capital requirements A privately held joint stock company (SAOC) requires a minimum share capital of OMR 500,000 ($1.3m) which must be fully paid up.
A publicly held joint stock company (SAOG) requires a minimum share capital of OMR2 ($5.2m) which must be fully paid up.
A branch is another option for a foreign company to establish a business presence in Oman.
What are the FDI restrictions
A foreign company may register a branch in Oman . The branch registration was previously limited to the duration of the underlying contract that the foreign company had with Government. This limitation is no longer present in the law.
A branch is taxed at 15% on its Oman-source income, but it is not subject to withholding tax on remittances to its head office.
A branch does not have a separate legal personality from its parent company, and therefore the parent company is fully liable for the branch's obligations and liabilities.
There is no minimum share capital requirement for a branch
This is a way for a foreign company to promote or distribute its products or services in Oman through a local agent, without having a business presence in the country.
A commercial agency agreement must be in writing and registered with the Ministry of Commerce, Industry and Investment Promotion, and it must include certain essential elements, such as the names of the parties, the products or services, the term and the jurisdiction.
A commercial agency is not subject to corporate income tax or withholding tax on the foreign company in Oman
This is another way for a foreign company to market and promote its products or services in Oman, without engaging in any commercial activity or generating any income in the country. A commercial representative office is not subject to corporate income tax or withholding tax in Oman, but it may sponsor and hire employees. A commercial representative office is also subject to certain registration and licensing procedures with the relevant authorities.
What are some of the requirements an entity would need to fulfil in order to establish a corporate structure?
One of the requirements an entity would need to fulfil in order to establish a corporate structure in Oman is to register with the Ministry of Commerce, Industry and Investment Promotion (MOCIIP). The registration process can be done online through the MOCIIP's e-portal, which allows for immediate registration of a new company and submission of establishment documents post-registration.
Another requirement is to comply with the foreign ownership restrictions, if any, that apply to the chosen form of corporate structure. For example, a limited liability company (LLC) can be wholly foreign owned, subject to conditions or restrictions imposed by the Executive Regulations to the Foreign Capital Investment Law (FCIL), which permits establishment of wholly foreign owned LLCs in certain sectors or activities.
A third requirement is to adhere to the tax and legal obligations that arise from the establishment of a corporate structure, such as filing tax returns, paying corporate income tax and value added tax, maintaining accounting records, obtaining visas and work permits for employees, and registering commercial agency agreements, if any. These obligations may vary depending on the type and location of the corporate structure, as well as the nature and source of its income.
Oman currently boasts a number of industrial and economic free zones - Sohar, Salalah, Al Mazunah Duqm, Khazaen and Knowledge Oasis Muscat. Each of these zones possesses unique characteristics and advantages.
100% foreign ownership
Complete relief from customs duties for items imported into the free zone is granted.
Companies have the flexibility to be fully owned by foreign entities.
Tax exemptions are applicable for a duration of up to 25 years for businesses established within this free zone.
0% import / re-export duties.
More lenient Omanisation requirements.
Positioned in close proximity to the Port of Sohar and the Sohar Industrial Estate, its primary objective is to draw investment within the metal and steel, food, petrochemical, textile and logistics sectors.
0% customs duties on imports and exports
This free zone presents favorable labor and infrastructure expenses in contrast to other areas, with the intention of enticing investors in the chemical and material processing, manufacturing, assembly, and logistics industries.
Businesses can enjoy income tax exemptions of up to 30 years, along with the freedom of complete foreign ownership and the advantage of customs duty exemptions.
Moreover, there is no mandatory minimum capital requirement for establishing a company within this free zone.
This zone offers more flexible Omanisation requirements for such enterprises.
Used primarily to draw investment from the chemical, logistics, manufacturing, food, pharmaceuticals, renewable energy and industrial sectors.
Situated in Oman's Dhofar region, it offers a strategic location in the South West, attracting investors in trading, light industry, and assistant services sectors.
0% customs duties
Income tax exemptions are extended for a duration of up to 30 years, providing substantial financial advantages to businesses.
Investors can enjoy full foreign ownership rights, offering greater control and flexibility in business operations.
Customs exemptions are accessible, reducing import and export costs and facilitating international trade.
There is no mandated minimum capital requirement for establishing a company within this free zone, allowing for businesses of various sizes to thrive.
Companies operating within this free zone benefit from relaxed Omanisation rates, making it more feasible to employ foreign workers.
SEZAD is strategically positioned as a gateway to important regions such as the Middle East, North and East Africa, and South Asia. Its proximity to the Arabian Sea coastline makes it an ideal hub for trade and logistics activities.
The DESZ comprises various zones, including port and dry dock facilities, fishing port and fisheries industries, industrial and logistics areas, tourism and educational areas, filters and petrochemicals complex, new Duqm town, and Duqm airport. This diversity allows businesses to choose the most suitable location based on their industry and operational requirements.
The zone offers a range of incentives to attract investors, such as competitive land lease rates, a 30-year income tax exemption, and full customs exemptions. These incentives can significantly reduce the operating costs for businesses.
One of the key advantages of setting up in the DESZ is the permission for 100% foreign ownership of businesses. This is particularly appealing for international companies looking to establish a presence in Oman.
While 100% foreign ownership is permitted, there may still be Omanisation requirements in place, which means companies may need to employ a certain percentage of Omani citizens in their workforce. This policy is aimed at promoting local employment and skills development.
The DESZ is equipped with modern infrastructure and facilities, including state-of-the-art port facilities, transportation networks, and utilities. This makes it easier for businesses to operate efficiently and access necessary resources.
Due to its strategic location and government support, the DESZ offers excellent growth prospects. It serves as a hub for various industries, including manufacturing, logistics, tourism, and petrochemicals, making it a dynamic business environment.
Oman, in general, is known for its stable political environment and pro-business policies. The government is committed to attracting foreign investment, and the DESZ is a reflection of this commitment.
The presence of Duqm airport and access to road networks ensures good connectivity within the region and facilitates international travel and trade.
The DESZ has shown a commitment to sustainability, including environmental and social responsibility. This can be attractive to companies focused on sustainable practices and corporate social responsibility.
What are the benefits of setting up in Knowledge Oasis Muscat?
What are the benefits of setting up in Khazaen Economic City?
100% foreign ownership.
Located centrally, close to the capital city Muscat.
Key offerings for packaging, assembly, distribution and manufacturing.
Customs bonded dry port with 0& import and re-export duties for up to 25 years.
Customs bonded dry port.
No personal income tax.
0% import and re-export duties.
No foreign exchange controls.
25 years corporate tax holiday.
Designed for technology companies and businesses.
Currently home to light and medium industries, logistics businesses and a dry port.
Legal and Regulatory Environment
What are the recommended market entry modes for foreign businesses, including options like direct investment, franchising, or exporting?The recommended market entry modes for foreign businesses depend on their objectives, resources, and risk appetite. The most common forms of market entry are in the form of an LLC, branch or freezone LLC. Foreign investors that do not envisage establishing a physical presence in Oman are also at liberty to enter into commercial agency/distribution arrangements.
What are the specific requirements and procedures for business registration and licensing for foreign companies in Oman?The specific requirements and procedures for business registration and licensing for foreign companies vary depending on the type of entity and activity, but generally involve obtaining approval from the Ministry of Commerce, Industry and Investment Promotion (MOCIIP), registering with the Commercial Register, obtaining a municipality/freezone licence for example if the business is in a regulated sector.
How do intellectual property laws and regulations protect the interests of foreign businesses operating in the market?Oman is a signatory to various treaties with other countries, concerning the protection of intellectual property rights. This means that foreign business can benefit from the various protections afforded under those treaties provided their intellectual property has been registered with the authorities in Oman.
Oman has signed the OECD's Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS), which aims to prevent tax avoidance by multinational enterprises.
This implies that the foreign company can comply with the international standards on the transfer pricing of its intellectual property rights, and avoid any adverse tax consequences or disputes with the tax authorities.
What are the key labor laws, employment regulations, and workforce considerations that foreign companies should be aware of when entering the market?
Foreign companies that wish to enter the Omani market should be aware of the labor laws, employment regulations, and workforce considerations that affect their operations and employees. Some of the key aspects are:
The sponsorship system: To live and work in Oman, a foreign person must be sponsored either on the basis of the ownership of a business in Oman or an employment contract with an employer in the country. The employer must process and obtain any visas and work permits required for its employees.
The Omanisation policy: This is a policy that aims to increase the participation of Omani nationals in the private sector workforce. The policy sets minimum quotas for Omani employees in different sectors and imposes penalties for non-compliance. Foreign companies should consider the availability and suitability of local talent and the costs and benefits of hiring Omani nationals versus expatriates.
The social security and end of service benefits: Omani nationals and their employers are obliged to make social security contributions at a rate of 18.5% of the employee's gross remuneration. Expatriates employed by an Omani employer are entitled to a gratuity payment (or an 'end of service' benefit) based on their length of service and final basic salary which is calculated at the rate of. Foreign companies should factor in these payments when budgeting for their payroll and employee retention.
The labor dispute resolution: The labor law provides for the settlement of labor disputes through conciliation, arbitration, or litigation. The commercial court has jurisdiction over commercial disputes, including labor disputes involving foreign companies. Foreign companies should be aware of the procedures and remedies available in case of any labor disputes and seek legal advice accordingly.
What are the legal aspects and requirements that relate to contracts and commercial laws in Oman?One of the legal aspects that relates to contracts and commercial laws in Oman is the legal system, which is based on civil code principles and Islamic Shari'a law.
The sources of law for civil matters include the Basic Law, which states that Islam is the religion of the state and the Islamic Shari'a is the basis of legislation, and existing laws and regulations that do not conflict with the Basic Law.
The only areas that are governed by Islamic Shari'a are family law and inheritance.
Another legal aspect that relates to contracts and commercial laws in Oman is the commercial court, which has jurisdiction over commercial disputes. As Oman is a civil law jurisdiction, judges have freedom to interpret agreements in a way that reflects the original intentions of the parties, and may even amend a contract if they deem it necessary. The commercial court proceedings are conducted in Arabic, and there are rules and conditions regarding the attendance and qualifications of lawyers. Arbitration is also a recognised method of dispute resolution, especially for large-scale industrial, construction, oil and gas, and other contracts.
A third legal aspect that relates to contracts and commercial laws in Oman is the commercial agency law, which defines a commercial agency as an agreement through which a local merchant or company is assigned to promote or distribute the products or services of a foreign person or entity in exchange for profit or commission. Only Omani nationals, both natural and juristic persons, can be appointed as commercial agents, and the agency agreement must be in writing and registered at the Ministry of Commerce, Industry and Investment Promotion (MOCIIP). The principal cannot engage in the sale of the products and services in the territory through any other intermediary, and terminating an agency relationship may entail compensatory damages for the agent.
What are the Anti-Money Laundering (AML) regulations and anti-bribery and anti-corruption laws?Oman has enacted laws and regulations to combat money laundering and terrorism financing, as well as bribery and corruption, in line with international standards and best practices. The main legal framework for AML/CFT is the Law on Combating Money Laundering and Terrorism Financing, issued by Royal Decree No. 30/2016, which establishes the obligations and procedures for reporting entities, supervisory authorities, and the Financial Intelligence Unit (FIU). The main legal framework for anti-bribery and anti-corruption is the Law for the Protection of Public Funds and Avoidance of Conflicts of Interest, issued by Royal Decree No. 64/2011, which prohibits and penalizes various forms of bribery and corruption involving public officials and public funds.
The Law on Combating Money Laundering and Terrorism Financing requires reporting entities, such as banks, financial institutions, and designated non-financial businesses and professions, to implement AML/CFT policies and procedures, conduct customer due diligence, maintain records, and report suspicious transactions to the FIU. The FIU is the national authority responsible for receiving, analyzing, and disseminating financial information related to money laundering and terrorism financing, and for cooperating with domestic and foreign counterparts. Oman has joined the Financial Action Task Force (FATF), the global standard-setter for AML/CFT, and has undergone a mutual evaluation of its compliance with the FATF recommendations.
The Law for the Protection of Public Funds and Avoidance of Conflicts of Interest defines bribery as any act of giving, accepting, or mediating a bribe, in cash or in kind, to or by a public official, in order to influence the performance or non-performance of his or her duties. The law also covers other forms of corruption, such as abuse of power, embezzlement, fraud, and nepotism, and imposes penalties of imprisonment and fines on the offenders. The law applies to public funds, which include funds of companies with governmental ownership exceeding 40%, and that the employees of such companies are considered public officials for the purposes of the law.
A final market entry strategy for foreign companies is to acquire or invest in an existing local company. Both share and asset purchases are possible in Oman.
An investor must however bear in mind:
The very limited amount of publicly available information creates a need for thorough due diligence
The impact of the foreign ownership restrictions, if any.
The absence of a provisional equivalent to the European transfer of undertaking regulations and the resulting need to deal with the transfer of employee contracts as part of any asset deal.
The absence of any provisions in tax law on mergers and acquisitions.
What are the key rules/laws relevant to M&A and who are the key regulatory authorities?Mergers and acquisitions (M&A) in Oman are subject to the Commercial Companies Law (CCL), the Foreign Capital Investment Law (FCIL), the Income Tax Law (ITL) and the Competition Protection and Monopoly Prevention Law (CPMPL), among other relevant laws and regulations acquisitions of listed entities are subject to the Capital Market Authority’s takeover and acquisition regulations. Acquisitions of listed entities that are in a regulated sector such as the banking, telecommunications insurance and utility sectors are subject to the specific rules and regulations of the relevant regulated sector. The key regulatory authorities involved in M&A transactions are the Ministry of Commerce, Industry and Investment Promotion (MOCIIP, the Capital Market Authority (CMA) and the Competition Protection and Consumer Protection Authority (CPCPA).
The CCL regulates the types of companies that can be established in Oman, the corporate governance rules, the shareholders' rights and obligations, and the procedures for mergers, acquisitions, liquidations and dissolutions of companies. The FCIL sets the conditions and restrictions for foreign investment in Oman, such as the requirement of obtaining a license from the MOCIIP, the possibility of establishing wholly foreign owned companies in certain sectors, and the incentives and guarantees offered to foreign investors.
The ITL imposes a 15% corporate income tax on the worldwide income of Omani entities and the Oman-source income of foreign entities, and provides for certain tax exemptions, deductions, credits and withholding taxes. The ITL also contains provisions on transfer pricing, thin capitalisation, anti-bribery and corruption, and common reporting standards, which may affect the valuation and structuring of M&A transactions. The CPMPL aims to prevent anti-competitive practices, such as abuse of dominant position, restrictive agreements and economic concentration, and requires prior approval from the CPCPA for any merger or acquisition that may result in a market share of more than 35% or a significant impact on competition.
Which market sectors have been particularly active recently?Oman has seen significant activity in the utilities, telecommunications, manufacturing, energy, infrastructure and real estate sectors.
What are the key means of effecting the acquisition of a publicly traded company?One of the key means of effecting the acquisition of a publicly traded company in Oman is to purchase its shares through the Muscat Stock Exchange (MSX), where they are listed and traded. This method allows the acquirer to acquire a controlling stake or a minority interest in the target company, subject to the applicable rules and regulations of the MSX and the Capital Market Authority (CMA), which regulate the securities market in Oman.
Another possible means of acquiring a publicly traded company in Oman is to make a public offer to the shareholders of the target company, either for a full takeover or a partial acquisition of its shares. This method requires the acquirer to comply with the provisions of the Commercial Companies Law (CCL) and the CMA's acquisitions and control regulations relating topublic offers, which aim to protect the interests of the shareholders and ensure fair and transparent transactions. in addition to the requirement to obtain the approval of the CMA the acquiror may also require sector specific regulator consent.
The third means of acquiring a publicly traded company in Oman is to enter into a merger or amalgamation agreement with the target company, whereby the two companies combine their assets and liabilities and form a new entity or continue as one of the existing entities. This method requires the approval of the shareholders of both companies, as well as the CMA and other competent authorities, in line with the CCL and the CMA's regulations on mergers and acquisitions. The CCL also provides for certain rights and protections for the minority shareholders and creditors of the merging companies.
What information relating to a target company will be publicly available and to what extent is a target company obliged to disclose diligence related information to a potential acquirer?The availability and disclosure of information relating to a target company in Oman depends on the type and size of the company, Generally, there is very limited publicly available information on private companies, while joint stock companies whose shares are publicly listed are subject to more transparency and reporting requirements. A potential acquirer will need to conduct thorough due diligence on a target company, especially if it is a private company,
What are the duties of the directors and controlling shareholders of a target company?The duties of the directors and controlling shareholders of a target company in Oman depend on the type of company and the applicable laws and regulations. Directors owe fiduciary duties to the company and its shareholders, such as acting in good faith, avoiding conflicts of interest, and exercising due care and skill. They may also be subject to specific obligations under the Commercial Companies Law (CCL), and, if the director sits on the board of a public listed company, be bound by the principles in the Capital Market Authority’s code on corporate governance which imposes higher standards on directors of public listed entities in carrying out their duties to the company.
For example, directors and controlling shareholders of a joint stock company must comply with the CCL and the CMA corporate governance code, which aim to create a public stronger and more transparent corporate governance regime in Oman. The CCL and the CMA regulations impose certain requirements and restrictions on the directors and controlling shareholders of a public joint stock company, such as obtaining shareholder approval, disclosing material information, and ensuring fair valuation and treatment of minority shareholders in a merger or acquisition transaction.
Similarly, directors and shareholders of a limited liability company (LLC) must adhere to the CCL, which regulates the establishment, management, and dissolution of LLCs in Oman. The CCL and the FCIL set out the minimum capital requirements, the rights and liabilities of shareholders, the procedures for registration and licensing, and the conditions for foreign ownership and investment in LLCs. Directors and controlling shareholders of an LLC must also ensure that they do not violate any provisions of the CCL or the FCIL.
Cultural and Social Considerations
Cultural and social considerations are important factors for consultation when doing business in Oman, as they may affect the communication, negotiation and relationship-building aspects of the business environment. Some of the cultural and social considerations that can be derived from the document are:
Oman is an Islamic country that follows the principles of Shari'a law in some areas of legislation, such as family law and inheritance. Therefore, businesses should respect the religious and cultural norms and values of the Omani society, such as dressing modestly, avoiding alcohol consumption in public, and observing the holy month of Ramadan.
Oman is a historical trading nation that has benefited from its strategic location and has a long history of openness and tolerance towards other cultures and religions. Therefore, businesses may find a welcoming and hospitable attitude from the Omani people, as well as opportunities for regional and international trade and investment.
Oman is a civil law jurisdiction that relies on written laws and regulations rather than case law or precedent. Therefore, businesses should ensure that they have a clear and comprehensive understanding of the legal framework and requirements for doing business in Oman, and seek professional advice when necessary.
Oman is a country that is undergoing economic diversification and reform initiatives and is making strides to enhance its business environment and competitiveness. Therefore, businesses may encounter some challenges and uncertainties in the regulatory and fiscal landscape, as well as some opportunities and incentives for investing in non-oil sectors, such as tourism, logistics, manufacturing and fisheries.
Foreign companies may also find some opportunities and advantages in the Omani market, such as the availability of free zones and special economic zones that offer tax exemptions, customs exemptions, full foreign ownership and relaxed Omanisation rates for businesses operating in these areas. These zones are designed to attract investment in strategic sectors such as tourism, logistics, manufacturing and petrochemicals. Furthermore, foreign companies may benefit from the double tax treaties that Oman has signed with several countries, which may provide for reduced withholding tax rates or relief from double taxation on certain types of income. Additionally, foreign companies may leverage the arbitration mechanism as a preferred method of dispute resolution, especially for large-scale contracts, as arbitration is well-established and recognised in Oman.
A number of foreign companies have successfully established and continued their businesses in Oman. In recent years, the utility sector has witnessed partial privatisation through China State Grid’s investment into Oman’s state owned electricity transmission company. In the ports and logistics sector, ports are either operated by global names in the port services sector or are joint ventures with international operators.
Foreign companies that establish in Oman will find success through working closely with the government and adhering to Omanisation requirements complying closely with tendering and contracting guidelines.
Another challenge that foreign companies may encounter is the compliance with the tax and legal regulations in Oman, which are constantly evolving and may differ from the international standards or practices. For example, Oman has implemented value added tax (VAT) and excise tax in recent years, which impose additional obligations and costs on businesses involved in importing, producing or supplying goods and services in Oman. Moreover, Oman has adopted the Common Reporting Standard (CRS) regime and the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS), which require financial institutions and multinational enterprises to report and exchange information on their accounts and activities with the tax authorities. These measures are intended to align Oman with the global efforts to combat tax evasion and avoidance, but they may also increase the administrative and reporting burden on foreign companies operating in Oman.
