Nick Simpson, pictured, who leads the Corporate practice of international law firm Dentons in Muscat, gives his top 10 tips on the legal ins and outs of starting a business in Oman.
Foreign investment into Oman has been regulated by law since the early 1970s. Although an economic diversification strategy has been pursued by the Government over the past two decades, the country is still subject to foreign investment controls.
An understanding of the key issues that one faces as a foreign investor is critical in paving the way to commercial success in the Sultanate.
Here are some points an investor should carefully consider:
1. If your business needs to have anyone on the ground in Oman for any length of time, you have to
follow one of the legally accepted routes to establishing a business in Oman, which means either:
setting up a representative office;
setting up a branch;
appointing an Omani distributor, agent or representative qualifying as a "Commercial
establishing a company or participating in an existing one.
2. Representative offices are restricted to engaging in marketing and promotional activities only and such marketing is limited to retailers, not individual consumers. They cannot engage in any sales activities or earn any income.
3. Branch offices of non-Omani companies are currently limited to specific Government projects and you will need the support of the government entity involved. Projects for companies with certain levels of government ownership may also qualify.
4. If a branch or representative office is not appropriate, but you do not want to get involved in participating in a company, and do not need anyone from your business to be in Oman for any length of time, consider appointing an Omani individual or company as a qualifying "Commercial Agent" to represent you or sell your goods or services.
5. Businesses that do not want to sell through an independent commercial agent need to consider establishing an Omani company or participating in an Omani company by acquiring some of its shares. In general, foreign ownership of up to 70% of shares in an Omani company is permitted, although ownership of up to 100% is permitted for wholly owned GCC companies, US companies, Singaporean companies in the construction sector, and companies established in certain free zones and industrial areas.
6. The most common corporate vehicle used by investors is a limited liability company (LLC). The capital of an LLC with foreign ownership must be at least OMR 150,000 (approximately US$390,000). However, you should bear in mind that in order to bid for significant projects, you may be required to have higher capitalisation.
7. Sometimes the more formal structure of a joint stock company is required by law or seen as more appropriate, for example where a legally mandated board structure is required, or where the investor may want to pledge shares, have different classes of shares, or avoid pre-emption rights.
There are two types:
the public joint stock company (SAOG), shares in which are open to the public, and listed on the Muscat Securities Market, where the minimum capital is OMR 2,000,000 (approximately US$5.2 million) where there is foreign participation in most cases; and
the closed joint stock company (SAOC), shares in which are not offered to the public, for which the minimum capital is OMR 500,000 (approximately US$1.3 million) where there is foreign participation in most cases.
8. Establishment by partnership with an Omani company is also possible, but this route is usually not recommended because it means unlimited liability for any partner involved in management of the partnership.
9. Tax is payable by Omani companies and foreign entities which have a "permanent establishment" in Oman at a rate of 12% on net profit over OMR 30,000. Withholding tax is payable on certain payments to foreign companies at a rate of 10%.
10. Omani companies are required to employ a certain percentage of Omani workers, depending on the type of company and the sector.
Lastly, watch this space. The Oman Government is reviewing the foreign investment requirements and doing business in Oman may be significantly easier in future.
For further details contact: Nick Simpson, Partner, Muscat Tel: + 968 2457 3029 Email: firstname.lastname@example.org