Are you in the process of launching your own enterprise but find yourself at a crossroads regarding the location of your establishment? Consider Oman as an ideal destination for your fledgling company. Oman boasts a robust economy and an exceptional business climate, making it an ideal environment for business operations. This guide will provide you with comprehensive information on the process of establishing a business in Oman, covering everything from legal requirements to the compelling reasons to invest in this country. Whether you are a budding entrepreneur, an established investor, or a seasoned business professional, establishing a presence in Oman is likely to yield significant returns.
About Oman
Positioned as the third-largest country on the Arabian Peninsula, Oman has a rich history of entrepreneurship and international commerce. Its maritime trade once extended to the shores of China, Europe, and Africa.
In 1970, Sultan Qaboos Bin Said assumed control of Oman and remained in power until his demise in 2020. His leadership has been a beacon of inspiration for foreign entrepreneurs considering Oman as a base for their ventures. His visionary approach to governance has facilitated rapid socioeconomic progress while maintaining the country's cultural heritage.
The economy of Oman has seen substantial growth, largely driven by its oil and gas reserves. However, under Sultan Qaboos's leadership, the country has adopted a forward-thinking economic strategy focused on industrialization and diversification. This approach aims to reduce the economy's dependence on these resources and attract foreign investors for business establishment in Oman.
Oman is recognized as a premier business hub, particularly for logistics and trade within the Middle East. The government's strategic agreements with international partners have enhanced opportunities for small and medium-sized enterprises and increased foreign direct investment.
The objective of Oman's development strategy is to diminish the economy's reliance on the oil industry through industrialization, privatization, and diversification of sectors. This vision has received the endorsement of His Majesty Sultan Haitham bin Tarik.
‘Oman Vision 2040’ serves as the roadmap for the Sultanate's social and economic development, launched in 2021 and scheduled to continue until 2040. The strategy emphasizes the pillars of industrialization, privatization, and diversification, with a focus on sectors such as aquaculture, tourism, mining, shipping and logistics, and manufacturing.
Benefits of Establishing a Business in Oman
The Omani government actively encourages foreign entrepreneurs to invest in the country, offering a range of incentives and free zones to foster a business-friendly environment. Oman presents a wealth of untapped investment opportunities and business potential across various sectors, including logistics, tourism, fisheries, mining, and manufacturing. Foreign investors have a plethora of options to establish themselves as long-term business partners and to invest in local enterprises. Additionally, here are some of the advantages of setting up a business in Oman.
A Promising Economic Landscape
Oman is perceived as a nation that places a high emphasis on its future development and is keen on achieving swift economic expansion. The liberalization of markets within the country has opened up new avenues for foreign investors, making it an attractive destination for business owners and investors across various sectors. In Oman, several key sectors stand out:
- Logistics
- Tourism and Travel
- Construction
- Hospitality
- Manufacturing
- Education
- Oil and Gas
- Food Processing
Global Connectivity
Oman is well-connected to the international economic community, with membership in organizations such as the World Trade Organization (WTO), Gulf Free Trade Area (GAFTA), and the Gulf Cooperation Council (GCC), in addition to having free trade agreements with countries including Switzerland, the United States, Iceland, Norway, Singapore, and many more.
Strategic Geographic Advantage
The territory of Oman boasts a coastline exceeding 1700 km, positioning it as one of the world's busiest maritime trade routes. It serves as a principal gateway to the Indian Ocean and Arabian Gulf, with accessibility extending to neighboring countries such as Bahrain, the United Arab Emirates, Saudi Arabia, Qatar, and more. This strategic location offers significant advantages for businesses looking to expand into the region.
Transparent Legal Framework
One of the key advantages of conducting business in Oman is the presence of a friendly and transparent legal system, which fosters a conducive environment for business operations.
Talent Pool Availability
With a population of 5.4 million (as of May 2023), Oman has a substantial number of working-age residents, making it easier for businesses to recruit qualified professionals who can contribute significantly to their success. The country also excels in research and development (R&D) activities.
Strong Infrastructure Development
Oman is at the forefront of infrastructure development, with the government's initiatives facilitating smooth business operations. The country's infrastructure, including road, sea, and airport networks, is of high quality and reliability.
Business-Oriented Environment
The region has established itself as a hub for business activities, thanks to the strategic implementation of business processes. It has cultivated a robust business network with its neighboring countries and holds over 35 Double Taxation Agreements (DTAs), enabling investors and entrepreneurs to engage in transactions with more than 35 countries without facing tax liabilities on exports or imports.
Tax Exemption
Given the absence of personal income tax in Oman, professionals in the business sector are exempt from the obligation to pay income taxes. However, it is anticipated that the country will introduce Value Added Tax (VAT) services by the start of 2021, in alignment with its membership in the GCC region.
It is evident that the legal procedures associated with the incorporation of a business involve several layers of documentation clearance. This process may appear daunting to those unfamiliar with its intricacies.
By engaging the services of a third-party incorporation firm, entrepreneurs can alleviate themselves of undue stress, thereby allowing for a greater focus on the development of business strategies and plans. Concurrently, the resources and time invested by companies are utilized in a manner that is both efficient and profitable.
Documents Required for Business Registration in Oman
- Completed Business Registration Form
- Articles of Association and Memorandum
- Passports and Visas of Shareholders
- Certificate of Initial Deposit
- Affiliation Certificate from the Chamber of Commerce and Industry
- Shareholders' Identity Cards
- Tax Registration Certificate
Prerequisites for Establishing a Company in Oman
The following are the essential prerequisites for the registration of a company in Oman:
- A minimum capital of OMR150,000
- A minimum of one director, whose nationality is not a requirement
- A registered office address
- A minimum of two shareholders
Oman Company Registration Process
The process of registering a company in Oman is a multifaceted procedure that requires meticulous attention to detail. This guide aims to outline the steps involved in establishing a business entity in Oman, ensuring compliance with local regulations and facilitating a smooth incorporation process.
Step 1: Selection of an Appropriate Business Structure
The first and most critical step in the incorporation process is the selection of an appropriate business structure. The Omani legal framework recognizes several business entities that are suitable for commercial activities, including:
- Commercial Agency
- Sole Proprietorship
- Representative Office
- Branch Office
- Joint-Stock Company
- Limited Liability Company
It is essential to choose a structure that aligns with the nature of your business operations and legal requirements.
Step 2: Reservation of a Company Name
The reservation of a company name is a crucial step that involves submitting an application to the Ministry of Commerce and Industry (MOCI) with a name that is both distinctive and suitable for your business. It is important to adhere to the following guidelines when selecting a name:
- The name should not inaccurately represent any geographic division of the Sultanate of Oman.
- It should not be an exact copy of the names of existing competitors.
- The name should not contain any symbols or honorifics that are associated with international, regional, or Arab organizations.
- It should not be offensive in any context, including but not limited to content, religion, military, politics, or cultural significance.
- The name should not include the terms "Omani" or "Oman."
Step 3: Submission of Incorporation Documents
Upon approval of the selected company name, the next step involves the submission of the authorized signatory form, shareholders' documents, bank certificate, and the company constitution to the MOCI. These documents are essential for the formal recognition of the company.
Step 4: Establishment of a Capital Account
A prerequisite for the incorporation process is the deposit of the initial incorporation fee into a designated capital account. This step ensures that the necessary financial requirements are met and that the company is legally recognized.
Step 5: Registration with the Oman Chamber of Commerce and Industries (OCCI)
Following the completion of the registration process with the MOCI, it is imperative to proceed with the registration with the Oman Chamber of Commerce and Industries (OCCI). This step is crucial for ensuring compliance with all relevant commercial laws and regulations.
Step 6: Registration of the Business
The final step in the registration process involves the submission of the following documents to the relevant authorities:
- Share Capital Certificate
- Legalized Opening Forms
- Approval from the Municipality
By following these steps diligently, businesses can successfully navigate the registration process in Oman, laying a solid foundation for their operations within the country.
Step 7: Securing Approvals from Government Authorities
In the process of registering a company in Oman, it is imperative to secure a series of approvals from the appropriate authorities, which may vary based on the specific characteristics of your firm, including its type, size, and nature. These approvals may encompass the following:
- Registration with the Public Authority of Social Insurance
- Tax Registration
- Registration with the Ministry of Manpower
- Registration with the Oman Police
- Obtaining Industrial, Environmental, and Other Permits and Licenses
- Municipal License
- Registration with the Oman Police
- Application for an Import-Export License as Required
Step 8: Creation of a Company Seal
Upon registration, the authorized signatory of the Limited Liability Company (LLC) is responsible for the creation and issuance of the company seal.
Step 9: Post-Registration Procedures
All submitted documentation must be received following the completion of the company registration process.
Step 10: Application for Oman Visa Services
Following the completion of the incorporation process, the subsequent step involves applying for Oman visa services for all employees.
Step 11: Registration of Employees
It is essential to register all employees under the name of the company to ensure their recognition as integral members of the business entity.
Step 12: Conversion of Business Capital Account
To facilitate smooth and efficient commercial transactions, it is necessary to convert the business capital account to a current account.
Factors to Consider When Establishing a Corporation in Oman
When contemplating the establishment of a corporation in Oman, it is imperative to take into account the following factors:
Business Considerations
Oman is a member of both the Arab League and the Gulf Cooperation Council (GCC), and its commercial laws are structured in a manner reminiscent of those found in other Middle Eastern nations. Over the recent years, the country has implemented robust economic policies aimed at attracting foreign investment across a broad spectrum of industries.
While Oman presents an appealing investment opportunity for international enterprises in certain sectors, it is crucial to navigate through bureaucratic hurdles. These include the complexities associated with obtaining permits and visas for foreign employees, bridging the gap between the public and private sectors, and adhering to Oman's Omanization policy. This policy mandates the fulfillment of Omani national quotas for the majority of industries.
The selection of the appropriate investment vehicle for an international corporation will be contingent upon the target market, the nature of the product or service offered, and the decision to engage in manufacturing or importing.
Additional Considerations
The existence of pre-existing trade relationships or agreements, the specific industry and sector of operation, the nationality of the corporation's headquarters, and the location are all critical factors to consider.
Location
The geographical location of the corporation is another significant consideration. Variations in rules, costs, and availability of resources may exist across different regions and cities within Oman. It is advisable to seek consultation with relevant experts, including business and legal advisors, accountants, and others, to ensure alignment with the corporation's specific needs.
Language
Arabic is the official language of Oman, with Urdu, English, Baluchi, and certain Indian dialects serving as secondary languages. Given that business activities are predominantly conducted in English, Arabic, or a combination of both, English is extensively utilized within the business community. It is also a common language taught in schools from an early age, further facilitating business interactions.
Business Climate in Oman
The process of establishing a business or conducting commercial activities within Oman is subject to minimal restrictions, with the notable exception of a select few services and trades. The forthcoming revised Foreign Capital Investment Law (FCIL) RD 50/2019 is set to expand the scope of foreign ownership in Omani businesses, allowing for 100% foreign control.
This document outlines a limited number of business activities that are prohibited from achieving full foreign ownership. These activities include:
- Taxi services
- Photocopying and translation services
- Rehabilitation centers
- Automotive and vehicle repairs
- Salon and hairdressing services
- Sale of drinking water
- Fishing
- Tailoring
It is important to note that these restricted activities constitute a relatively small segment of Oman's economy. The introduction of this law aims to attract foreign investment by opening up new sectors for 100% foreign ownership.
In an effort to foster an investor-friendly environment within the Sultanate of Oman, the Ministry of Commerce and Industry (MOCI) has taken significant steps towards modernization through the enactment of the new FCIL regulation.
The regulation does not impose a minimum share capital requirement, potentially altering the landscape for foreign investment in Oman. The MOCI has recently relaxed the previous requirement for a company with foreign owners to have a minimum starting share capital of OMR 150,000. However, as with any new regulation, this change may necessitate confirmation from the MOCI on a case-by-case basis.
The enactment of the new FCIL law signifies a pivotal moment in Oman's journey towards modernization and globalization, promising a plethora of opportunities for foreign business communities.
Free Zones in Oman
To attract foreign investment, Oman has established two special economic zones and three free zones. These zones offer a range of incentives, including 100% foreign ownership, tax holidays, waivers of initial capital requirements, and exemptions on import duties.
Free Zones
The free zones in Oman encompass the following:
- Al Mazunah free zone
- Salalah free zone
- Shohar free zone
Additionally, eight industrial estates are available, including those in Sohar, Rusayl, Raysut, Nizwa Al Buraimi, Sur, Al Muzanah, and Sumail. These estates provide attractive tax holidays, favorable land rental terms, and exemptions on equipment and machinery.
Special Economic Zones (SEZ)
The Knowledge Oasis Muscat and Duqm SEZ are notable examples of special economic zones in Oman.
Types of Companies in Oman
For investors looking to establish a business in Oman, it is crucial to understand the various business entity options available. The following are the recognized legal structures for business formation in Oman.
Limited Liability Company (LLC)
In a limited liability company, the liability of a shareholder is limited to the extent of their shareholding. The LLC formation process is particularly favored by international investors in Oman.
To form an LLC in Oman, the entity must have at least two shareholders. One of these shareholders must be a citizen of the GCC, an Omani national, or a US citizen who holds more than 30% of the company's shares. The registration fee for an LLC in Oman is a minimum of 150,000 Omani Riyals. Additionally, the company must have at least one director.
Public Joint Stock Company
Public joint stock companies utilize shares for the distribution of capital and allow for the trading of shares on the Omani market. The minimum share capital required to establish a public joint stock company is 150,000 OR. The incorporation of a joint-stock company necessitates approval from the Ministry of Commerce and Industry and the issuance of a license by them.
Private Joint Stock Company (PJSC)
Shares of a private joint stock company are not traded publicly. To form a private joint stock company in Oman, a minimum of three shareholders is required. At least one of these shareholders must be an Omani national, with a minimum shareholding of 30% in the company and a minimum of 50,000 OR in share capital.
Limited Partnership
In the context of Oman, a limited partnership is mandated to have a minimum of two members. This entity is composed of one registered limited partner and one registered general partner. The limited partner bears responsibility for the obligations and liabilities to the extent of their allocated shares within the partnership. Conversely, the general partner, who must be a citizen of Oman and be fully accountable for all obligations and liabilities of the partnership without any limitations, is the primary legal entity.
Holding Company
A holding company is defined as a business entity that possesses 51% or more of the equity shares in a limited liability company or one or more joint-stock companies. It is recommended for significant investments or business ventures to establish a holding company.
Tax Exemptions
Certain entities are exempt from paying income tax in Oman. These include:
- Foreign companies engaged in government projects
- Omani marine companies
- Dividends received from an Omani company
- Profits from the sale of Securities listed on the Muscat Stock Market
- Investment funds
- Foreign airlines
- Foreign companies involved in activities related to the exploration of oil and gas
Personal Tax
In Oman, there is no requirement for individuals to pay personal income tax.
Withholding Tax
For cross-border transactions, a flat rate of 10% is applied as a withholding tax on the gross payment made in Oman. This tax applies to the following transactions:
- Provision of services
- Consideration for computer software
- Management fees
- Royalties
- Consideration for Research and Development (R&D)
Indirect Tax
Oman does not impose property tax, Value Added Tax (VAT), or sales tax. However, a 5% Value Added Tax (VAT) was introduced in April 2021. Transactions related to real estate are subject to a 3% stamp duty. Additionally, Oman levies a 5% import duty on all imported goods.
If you need assistance for Company Formation in Oman get in touch with us and our experts will guide you step by step.
FAQs
How much does it cost to open a business in Oman?
The cost to open a business in Oman varies on various factors and differs from case to case.
Which business is best for Oman?
The best businesses in Oman are as follows:
- Mining and Minerals
- Oil and Gas
- Digital Services
- Transportation and Logistic Services
Can I start my own business in Oman?
Yes, you can start your own business in Oman.
Can a foreigner own a company in Oman?
Yes, a foreigner can own a company in Oman.
Conclusion
Establishing a business in Oman presents a relatively straightforward process, requiring adherence to the established procedures outlined in this guide. We anticipate that, upon completion of this guide, you will be equipped to form a company in Oman without encountering any complications. Should you experience any confusion or require additional guidance, please do not hesitate to contact the appropriate authorities.