Doing business in Oman

How quickly can I set up a business?

The time requirement depends on the category of enterprise. Generally, within 3-10 days after submission of registration documents.

What is the minimum investment needed?

Minimum Investment is different for different categories of enterprises. Advisable minimum investment is R.O.20,000

How can I raise finance?

The capital contribution has to be arranged by the investor/s.

What are the legal requirements for setting up my business?

FOREIGN CAPITAL INVESTMENT LAW – After the promulgation of the new Foreign Capital Investment Law (FCIL) (Royal Decree 50/2019)

• Oman has allowed foreign investors to own 100% of an investment vehicle, such as a Limited Liability Company (LLC), without the need of an Omani national, as was the case previously.
• The FCIL is not applicable to Gulf investments, the Special Economic Zone at Duqm, the PEIE or Free Zones.
• Investors even have the option of registering a 100% owned Sole Proprietorship Company (SPC), the governing rules are similar to a LLC

WHOLLY OWNED OMANI COMPANY – With a MOU with the Foreign Investor

• Sole Proprietorship (with any amount of capital)
• Partnership Company (2 or more Omani partners with any amount of capital)
• Limited Liability Company (with a minimum of (Omani Rials) RO 20,000/- as capital and at least 2 Omani shareholders)

MIXED OWNED COMPANY

• An Omani national/s or entity/ies should hold a minimum 30% share capital
• Foreign nationals or entity/ies can hold a minimum of 10% or RO 15,000/- (whichever is lower), up to a maximum of 70% of the share capital.
• Minimum capital required is RO150,000/- equivalent to US$ 390,000 approx.

GCC NATIONAL OWNED PROPRIETORSHIP – For a GCC National

• GCC National as a proprietor with no minimum capital.

GCC NATIONALS OWNED LLC – For 2 or more GCC Nationals

• Two or more GCC nationals with a minimum capital of RO 20,000/-.

GCC NATIONAL AND OMANI OWNED LLC – For a GCC National with an Omani Investor

• A maximum of 50% shareholding by a GCC National and the balance by an Omani national/s or entity/ies.
• Minimum capital required is RO 20,000/-.

FOREIGN BRANCH OFFICE

• A Foreign company can set up a 100% owned branch office if it has a valid job order from government or semi-government undertaking, municipality or PDO.
• If the job order is from any agency other than mentioned above, the registration of branch will be purely for administrative purposes and has to have a local sponsor.

What advice can you give me in regards to payroll and taxation requirements?

Corporation Tax

Royal Decree No. 9/2017 was published in the Official Gazette on 26 February 2017, introducing comprehensive amendments in the tax regime. The below rates shall be effective for the tax year beginning on or after 1 January 2017.

1. Tax rates for establishments, Omani companies and businesses having permanent establishments in Oman: 15% of taxable profit without any basic exemption limit. (Earlier the tax rate was 12% with a basic exemption limit of RO.30,000/-)

2. Tax Rate for small tax payers: 3% of taxable profit without any basic exemption limit.

Small tax payer means an Omani Sole Proprietorship or an Omani Partnership or Limited Liability Company (LLC) which meets the following identified specifications:

1. Maximum registered share capital of RO 60,000 at the start of a tax year;
2. Gross income does not exceed RO 150,000 for any tax year;
3. Average number of employees (regardless of the nature, type, place or duration of work assigned) during the tax year does not exceed 15;
4. Not involved in air and sea transport; banking, insurance and financial institutions; the extraction of natural resources; public utility concessions; or any other activities decided by the Ministry of Finance following approval by the Council of Ministers.

The taxpayers engaged in petroleum exploration are subject to 55% of the income realized from sale of petroleum.

There is no personal income tax in Oman. All permanent establishments in Oman are liable for income tax. The annual return along with the audited financial statements (based on IFRS) are returned within four months from the end of the financial year. The entity has the liberty to choose its financial year end at the time of registration of the entity with the first accounting period not exceeding 18 months. Returns submitted are subject to scrutiny and assessment by tax officials.

Small tax payers would be required to submit a tax return (accompanied by a simplified ‘income statement’) within four months from the end of a financial year.

Value Added Tax (VAT)

Oman had implemented Value Added Tax (‘VAT’) from April 2021, pursuant to the Royal Decree issued by his Majesty, the Sultan of Oman. Presently, United Arab Emirates (‘UAE’), the Kingdom of Saudi Arabia (‘KSA’) and Bahrain are the other GCC countries that have implemented VAT. Oman is the 4th country in GCC to implement VAT as a part of the Unified VAT agreement signed in November 2016.

Any business with annual supplies more than RO.38,500/- (USD 100,000/-) should mandatorily register for VAT. Businesses with supplies more than RO.19,250/- (USD 50,000/-) may register voluntarily.

5% VAT in Oman will be applied to most goods and services. Some supplies will be exempt while a few will be zero-rated as well.

Withholding Tax

The Tax Law provides that foreign companies which do not have a permanent establishment in Oman and that derive income from Oman through royalty, management fees, consideration for the use or the right to use computer software and consideration for R&D, dividends paid by Omani Joint Stock Companies (JSC) to foreign shareholders, interest paid to lenders / investors outside of Oman and fees from provision of services other than supply of goods, earned by a foreign person is subject to a 10% withholding tax on the gross amount of consideration, which should be deducted by the paying entity and remitted to the tax authorities.

What Employment Taxes and Social Security will need to be paid?

There is no personal income tax in Oman, and no return of income needs to be filed by individuals. However Omani employees need to be compensated in lieu of their end of service benefits by monthly contributions to a Government owned Social Insurance Scheme. Expatriate employees are required to be paid a compulsory leave salary of 30 days per year and also an end of service gratuity of 15 days salary for the first 3 years of service and thereafter at 30 days on the last drawn basic salary.

Current Social Insurance rates applicable to Omani employees are:

Employer’s contribution                        11.5 % of Gross Salary

Employee’s contribution                          7.0 % of Gross Salary

It is the employers’ legal responsibility to deduct from the salary and pay social security insurance along with employer’s contributions to the PASI on a monthly basis.