Understanding the various legal and regulatory requirements in Oman is a top priority for foreign-owned businesses planning to establish themselves there. From foreign ownership regulations and company types to taxation and employment laws, staying informed about legal regulations ensures a smooth company setup in Oman. This article will explore key areas of legal compliance that all foreign investors should be aware of.
Key Areas of Legal Compliance for Foreign Businesses in Oman
Company setup in Oman requires legal compliance in the following areas:
1.Foreign Investments and Ownership Regulations
The Foreign Capital Investment Law (FCIL), introduced in 2020, allows foreign investors to own 100% of their businesses without the need for a local partner, who was previously required to hold at least 30% of the business shares.
Full ownership applies to most sectors, including manufacturing, information technology (IT) and software development, renewable energy, logistics, supply chain and much more. On the other hand, there are some restricted sectors that do not allow for full foreign ownership, which requires an Omani partner, and some of the industries are solely reserved for Omani nationals.
Understanding ownership regulations helps investors make strategic decisions and maximise their ownership rights while simultaneously avoiding ownership conflict.
2.Types of Companies
There are various legal types of companies that foreign investors can own. The most common company type or structure is the Limited Liability Company (LLC), which is suitable for most businesses that can have two or more shareholders. Foreign investors can own up to 100% of the LLC in most sectors, and local partners are required only in some cases, such as professional services. Another option is the Single Proprietary Company (SPC), which is owned by a single shareholder that has the same parameters as an LLC.
Foreign-owned companies wanting to establish a branch office in Oman retain full ownership of the branch. However, the branch must conduct business activities similar to those of the parent company, remaining within the same scope of operation. A branch office in Oman is allowed to operate under a specific government contract. A representative trade office is also one of the structures that the international companies can choose from. They can promote and market the sale or do production of products but cannot be permitted to trade.
Freezone companies, whether LLC or SPC, are also common among foreign investors planning company setup in Oman. Free zones allow full foreign ownership of the business in addition to various incentives like simplified export-import procedures. This is an ideal opportunity for companies in the manufacturing, logistics, and warehousing sectors.
3.Capital Requirements
No minimum capital is required to be paid by newly established LLCs or SPCs in Oman. However, the authorised capital is determined by the five company grades, ranging from Grade Excellent—primarily for international companies, set at OMR 250,000—to the lowest grade, Grade Four, at OMR 20,000, mainly for local Omani companies. It is important for international companies to seek proper advice on this before they register a company.
Branch offices do not require authorised minimum capital. But foreign-owned companies planning to establish a branch office in Oman still need to prove financial stability and capability.
Staying informed about capital requirements is crucial to efficient financial planning and smooth operations when starting a business in Oman.
4.Taxation
Oman offers a wide range of taxation incentives to drive foreign investments in the country. As of now, personal income tax is not applicable to individual salaries, making Oman an appealing destination for skilled professionals. Businesses operating in priority industries can also enjoy tax exemptions for up to ten years, which supports their long-term growth.
Oman’s free zones provide an incredibly favourable environment for foreign-owned businesses thanks to various tax incentives, some of which include the exemption of corporate income tax for 5-10 years, along with no withholding tax on the repatriation of profits and dividends. Moreover, goods imported and exported through the free zones are generally exempt from customs duties. Some of the taxes that are applicable for businesses in Oman are corporate income tax, value added tax (VAT), withholding tax, customs duties, municipality fees, and the social protection fund.
5.Employment and Omanisation Laws
Omanisation refers to Oman’s nationalisation policy that aims to train and hire skilled nationals in the private and public sectors, reducing dependence on foreign labour. That said, every foreign-owned company established in Oman is required to hire Omani nationals to meet the specified quota determined by the Omani government. All the companies should adhere to the Omanisation laws and comply with Oman Labour Law regulations, which specify contractual terms and obligations, termination notice, end of service benefits, work hours and leave policy, social protection fund and other benefits.
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