Thanks in large part to the government’s interest in developing private investment in key sectors, the Sultanate of Oman is harnessing its resources to position itself as a burgeoning investment destination that is capable of competing with its regional counterparts. In its Doing Business 2015 report, the World Bank Group ranked Oman 66 out of 189 economies in terms of ease of doing business. In a recent report by Deloitte, the Sultanate has specific protocols that must be adhered to, though exchange controls on inward or outward investment, as well as on the repatriation of capital or profits—either by nationals or expatriates—do not exist. Oman’s tax year is the standard calendar year. With no personal income tax, private sector employees must contribute 7% of their salary each month to social security. Employers, however, contribute an amount equal to 10.5% of an employee’s monthly stipend to social security, with a further 1% of the same salary for industrial illnesses and injuries, according to a Deloitte Highlights 2015 report. Oman’s corporate taxing mechanism carves out certain exceptions for businesses, varying dependent on ownership of the company. Additionally, there are no capital duty, real property or transfer taxes. The same report indicates that, in terms of corporate tax, residence is not defined, and any foreign company that has provided services within the Sultanate for 90 days or more within a 12-month period is considered to have a permanent establishment (otherwise known as a PD).
Principal business entities are joint stock companies, limited liability companies, partnerships, join ventures, and branches of foreign companies. Non-Omani nationals must obtain licenses from the Ministry of Commerce and Industry in order to trade or conduct business in Oman. In terms of foreign businesses, current laws mandate that Omani nationals must own at least 30% of capital of an Omani company; however, certain waivers allow for upwards of 100% foreign participation so long as there is a minimum of OMR500,000 ($1.3 million) in capital and that there is direct correlation to the development of the national economy.
In line with its goal of attracting investment, growing the economy, and becoming increasingly competitive, Oman has in place an intricate tax mechanism with attractive incentives. According to Deloitte, upon recommendation from the Industrial Development committee, the Law for Unified Industrial Organization of Gulf Cooperation Council Countries allocates particular incentives to licensed industrial installations. These incentives include, but are not limited to, a five-year exemption from all taxes and a total or partial exemption on customs duties levied on certain classifications of goods imported by local industries.
FREE ZONES (FZs)
As Oman looks to position itself as a strategic trading hub, it has established four free zones throughout the country: Sohar, next to the port of Salalah in the south, Duqm, and Al-Mazunah, near the Yemeni border. FZs offer 100% foreign ownership, corporate tax exemptions that extend for 10 years, zero customs duties, and comparatively lower Omanization requirements—though 10% of the free zone company’s employees must be locals.
As with any country in the region, business etiquette is centered on respect for both colleagues and supervisors—and at the very least a basic knowledge of the culture and its norms. Omanis place great emphasis on the personal relationships they form with their business associates, and therefore, prefer to work with people they are already familiar with and that they trust. Conservative dress should be worn, and women should be mindful to keep knees and elbows covered. Arabic is the official language in Oman, though English is widely spoken in business dealings; however, key Arabic words and phrases will help greatly in establishing a sense of trust. Businesses in Oman operate on a Sunday to Thursday workweek.