Oman presents a favorable environment for conducting business. The Sultanate has achieved a commendable position in global business assessments, ranking 71st out of 190 nations in the World Bank’s Ease of Doing Business index for 2018. The country excels in specific areas, notably securing the 31st position for starting a business and the 11th for tax payments.
Business Culture in Oman
To thrive and succeed in any market, it is crucial to grasp the local business culture and remain receptive to innovative ideas. We aim to enhance your understanding of this aspect to support your company's growth.
It is important to note that Oman is classified as a high-income nation, featuring four free zones and numerous business opportunities.
Hierarchy
In Oman, the prevailing management style is hierarchical, though it tends to be less rigid than in some neighboring countries. Typically, decisions made by top management are communicated as direct instructions for staff to implement.
Legal System
The legal framework in Oman is primarily derived from Islamic Sharia law, with many regulations influenced by a common law system. The Sultanate enforces strict laws and regulations that are regularly updated to provide a dynamic and adaptable legal environment for businesses. Commercial disputes are resolved through the country’s specialized commercial courts.
Business Vehicles
In Oman, foreign companies have two essential legal structures to establish either a direct or indirect business presence. A direct presence is achieved through the formation of a corporate entity, while an indirect presence can be established via commercial agents.
The Commercial Companies Law in Oman provides a variety of partnership options for foreign entities. The available structures include:
- General Partnership
- Limited Partnership
- Joint Venture Company / Joint Participation
- Limited Liability Company (LLC)
- Joint Stock Company
- Holding Company
- Branch Office
- Representative Office
Management Structure
Limited Liability Companies (LLCs) are managed by authorized managers, whose powers to bind the LLC are detailed in the Consumer Report and the LLC's founding agreement, as determined by the partners or shareholders. These authorized managers may designate a manager to oversee daily operations, working under their guidance. While the authorized manager can reside outside Oman, they may need to appear before specific authorities in the country to fulfill certain registration or procedural requirements.
Taxes
In Oman, personal income is currently subject to income taxes; however, individuals are not required to file income tax returns, and there is no defined concept of tax residency for individuals at this time. The primary tax obligation for businesses in Oman is the corporate income tax, which is set at a rate of 15% on all taxable profits. A higher provisional rate of 55% is applied to income generated from petroleum sales. It is advisable to consult with a taxation service firm for further guidance.
Omani legislation mandates that private sector employers provide insurance for Omani employees against disability, death, old age, and occupational injuries and diseases through the Public Authority for Social Insurance (PASI). Employers in the private sector are required to contribute 10.5% of each Omani employee’s monthly basic salary to PASI.
For non-Omani GCC nationals employed in Oman, contributions to PASI are made at a rate that corresponds to their home jurisdiction, with any shortfall covered by their home country if their benefits are significantly more generous than those offered by the Omani system.
Free Zones
Oman has created a special economic zone along with three free zones, each governed by specific laws that outline permitted activities and associated benefits. These free zones typically allow foreign investors to maintain 100% ownership of their companies. They also feature reduced Omanisation requirements, duty-free imports and exports, tax exemptions, no minimum capital investment mandates, and unrestricted repatriation of capital, investments, or profits.
Oman provides opportunities for business operations in free zones such as the Salalah Free Zone, Special Economic Zone at Duqm (SEZD), Sohar Port and Free Zone, and Al Mazunah Free Zone.
Exempt from Custom Duties on Exports
The Sultanate of Oman is a member of the Gulf Cooperation Council (GCC). The ongoing implementation of the GCC Customs Union, initiated in 2003, aims to eliminate customs and trade barriers among member states.
The GCC countries adhere to a Common Customs Law and a Unified Customs Tariff, which generally imposes a standard customs duty rate of 5% based on the cost, freight, and insurance of goods. However, certain exceptions apply, such as tobacco and alcoholic products, which are subject to a customs duty rate of 100%.
Planning for Business Setup in Oman? Drop us a call or message today and get free assistance 24/7