About the country Oman

The Sultanate of Oman is located in the extreme South - East corner of the Arabian Peninsula.It is the 3rd largest country in the peninsula with total land area of approximately 310,000Sq.Km.It shares borders with Saudi Arabia, Yemen and the U.A.E.

As per the latest stastical data published the population of Oman has grown from 2.35 million in the year 1999 to 3.4 million by the year 2009, a whole decade has shown a drastic increase of both nationals as well as expartiates in this country.

Infrastructure and Social Services

Oman has developed an excellent infrastructure to meet the internal and external requirements for economic development. Since 1970, the country has developed rapidly with public services, roads, educational institutions, telecommunication systems and trtansportation and other facilities being available widely across the country.

Economy and Trends

The Sultante of Oman has been enjoying a stable political, econommic and social system; thanks to the wise policies of its visionary leader His Majesty Sultan Qaboos Bin Said Al Said. The economy of Oman is heavily dependent on the production of oil and gas.

The Government has embarked on a policy of diversification of the sources national income so that the dependence on oil as a dominant income source can be gradually reduced. This country along with oil and gas has diferent industries such as agriculture, fishery, tourism, mining, petrochemicals and other heavy industries and service sectors.

GROSS DOMESTIC PRODUCT AS PER CURRENT PRICES(Omani Rials Millions)

Development Plans

The Government strategy for economic development has been based on a series of five year development plans. The seventh five year plan,covering the period 2006 to 2010 were determined by three major factors - the basic targets and principles of Oman's long-term development strategy (1996-2020), an assessment of the performance of the Sixth Five-year Development plan, and an evaluation of new developments scheduled to take place during the period covered by the Seventh Plan.

a)The plan aims to attain average annual economic growth rates.
b) The 7th five year plan aims to speed up the process of diversifying the sources of national income by increasing non-oil activities.It is anticipated that industries dependent on natural gas, as well as tourism and non-oil exports of Omani origin.
c) The develpment of human resources is another major priority of the Seventh plan. Accordingly, major importance is being attached to education, health, the creation of employment opportunities for nationals and the further development of Omanisation programmes.
d) The plan also provides for a wide range of projects in various sector under the civil ministries development programmes.

Industrial Sectors

The major contributors to the economy apart from oil sector include natural gas, manufacturing and mining, agriculture and fisheries, construction and tourism industries.

Privatization

The private sector which is expected to play a vital role in the country's free market economy receives both incentives and encouragement from the Government.The impetus for privatization is derived from the need to mobilize private sector capital, including inward investment to finance the further development of basic services.

Omanisation

The Government has decided to implement Omanisation in various sectors of the economy.Targets for Omanisation exists for organizations in banking, financial services, cargo, storage and transportation, manufacturing, hotels and restaurants, communications wholesale and retail trade, contracting, insurance and real estate. According to the Seventh Five year plan, the plan suggests that Omanisation should reach approx 80% by 2010.

Omanisation in private sector break up is:
Transport, storage and communications-60%
Finance, insurance and real estate-45%
Industrial-35%
Hotels and restaurants-30%
Wholesale or retail trading-20%
Contracting-15%
Many of the government ministries have already reached 100% Omanisation.

Banking and Finance

The Sultanate's monetary policy has been closely controlled by the Central Bank of Pman which fulfils the entire range of functions traditionally undertaken by central banks.Finance can also be obtained from Oman Development Bank(SAOG), Oman Housing Bank and those funds could also be channeled from abroad also.The ODB is the only bank that grant loans at 3% per annum for amounts up to 1 million Omani rials.

Business entities in Oman

Business may be carried out in Oman in various forms

All types of business entities with the exception of joint ventures and inviduals engaged in agricuture and small scale services must obtain commercial registration and must become members of the Oman Chamber of Commerce and Industry.The commercial company law recognizes and regulates different types of business entities.

Salient features of these types of entities are listed below:

(1) General Partnership

• 2 or more natural/juristic persons
• Joint and several liability
• No partner can transfer the interest without the approval of other partners

• Liability of only one or more partners limited to their respective shares in capital

• 2 or more natural/juristic persons
• Joint Venture will have no name, not a seperate entity and no registration required

• Minimum 2,up to 40 natural/juristic persons
• Liability limited to their share in company's capital
• Minimum capital is RO 20,000/-without foreign participation and RO 150,000/- with up to 70% foriegn participation

• 3 or more natural/juristic persons
• Special approval of the Director General of Commerce
• Capital for closed company, where no shares offered to public , should be RO 500,000/-
• Capital for Public Company should be Ro 2,000,000/- of which a minimum of 40% and up to 70% must be offered to the public for subscription
• It must retain 10% of their annual profits in a statutory reserve until the reserve reaches one third of the company's capital.The statutory reserve is not available for distribution

• It is a Joint Stock Co. or Limited Liability Company which financially and administratively controls one or more other companies,which become subsidiary to such company by means of its holding at least 51% of such company whether they are Joint Stock Company or Limited Liability Company
• Minimum capital of RO 2 Million

• Permitted to Omani Nationals
• GCC nationals can carry on proprietorship business in certain permissible activities only

Accounting and Auditing

All Commercial entities are required to maintain proper books of accounts.All Taxable entities with a capital of more than Ro 20,000/- must have their financial statements audited by a firm of auditors licensed to practice in Oman.

Foreign Investments

As per Foreign Capital and Investment Law, any foreign national or entity wishing to conduct business in Oman should obtain the approval of the Ministry of Commerce and Industry.The business shall be conducted by the Omani companies with a capital of not less than RO 150,000/-.Foreign capital shall not exceed 70%.However, 100% foreign share is permissible if projects contribute to National Economy, and having a capital of not less than RO 500,000/-.

In addition, a business may be carried out as a branch of a foreign company

Incentives

Exemption from Income tax for a period of 5 years, which may be extended to a further 5 years for Industrial Establishments engaged in the following activities:

• Manufacturing and Mining
• Fisheries
• Export of products manufactured locally
• Tourism promotion industry including the operating of hotels and tourism villages, excluding hotel management
• Agriculture and Livestock
• Public Utilities and infrastructure projects excluding contracts relating to construction or management of these projects
• Exemption from customs duties on import of Plant, Equipment and raw material
• Preference in the allocation of Government Land
• Reduction in charges for utilities
• Subsidized loans
• Financial assistance towards the cost of technical and feasibility studies
• Provision of industrial plots for nominal charges

Financial Support Offered by Government

Oman development bank was formed in 1997 and has they have been helping upcoming industries and entrepreneurs.They provide a variety of loans for different industries for example Industrial loans, Professional loans, loans for smaller investors etc.

The bank provides loans for establishing new educational projects and for expansion of existing educational projects up to an amount of RO 1,000,000/=.The bank finances a maximum of 50% of project cost if the project is located in the Muscat region and 56% for other locations.The bank offers an interest rate of 3% only on these loans.These loans have an expiry of 10 years.

It also provides loans for smaller investors.These are loans for projects its investment cost not exceeding RO 20000, the bank financing these projects with rate equivalent to 90% of the total cost, whereas the loan bank not exceeding RO 5000.The loan duration is for about 6 years which can be increased by 1 year.(Grace Period)

Indusrial Estates

Industrial estates are available in Rusayl(50Kms from Muscat),Nizwa (170Kms from Muscat), Sohar (250Kms from Muscat), Buraimi(350Kms from Muscat) and Salalah (1000 Kms from Muscat).

'Industrial Plots' and 'ready industrial units' with varying areas are available in the different industrial estates.These are normally given on a lease of 25 years,which is renewable for a further 25 years.
The rates for these plots are as follows:

Imports and Exports

• No restriction on exports
• Customs duty on imported goods @5%
• No customs duty on imported products of AGCC origin

Labour Law

The Labour law specifies that the preference in employment should be given to Omani Nationals.Recruiting an expatriate requires Labour clearance from the Ministry.

The terminal benefits payable to expatriates and the contribution towards social security for Omani employees should be according to the guidelines prescribed under Labour laws.

Social contribution for Omani citizens:

In addition to that, employer shall contribute 1% towards occupational injuries and sickness.

The rules relating to the terminal enefits to expatriate employees is as follows:

Gratuity : 15 days salary for every year of service for the forst three years of service and 30 days salary for every year of service from the fourth

Leave Salary : 15 days leave salary for every year of service for the first 3 years of service and 30 days salary for every year of service from the fourth

Tax Laws

The principal tax in Oman is Income tax on business entities.

Taxable period is 1 year - Tax year end on 31st December.Companies can use any other date provided this date is followed consistently.

Taxable entity should submit a provisional return of income within 3 months from the end of its accounting period.Tax should be paid along with the provisional returns.

An annual return must be filed within 6 months from the year end.

Withholding tax on income like management fees, royalties, lease of equipment, technical know-how etc on payment made to foreign companies having no permanent establishment in Oman, rate is 10% of total fees/income generated.

With effect from tax year 2010, new tax laws have been enacted, which can be accessed here

Tax Rates

The tax rates applicable on various business Establishments with effect from year 2000 is summarized below:

For Omani Proprietorships, 100% Omani companies, mixed companies with up to 70% foreign shareholding and investment funds coming under Capital Market Authority:

Up to RO 30,000 of the income - Nil

Above RO 30,000 - 12%

The above rates also apply to public share holding companies irrespective of foreign shareholding.

For mixed companies with more than 70% foreign participation and 100% foreign companies:

The above rates are not progresive in nature but will be applied at the respective rates if the total income falls into that bracket.

Other Highlights:

• Companies and Establishments engaged in Marine and Shippinig Industries, Private Universities and Higher Educational Institutions will enjoy tax exemption for 5 years, renewable for a period of 5 more years.
• Dividend income will be exempt in the hands of the recipient.
• Civil professional companies will be subject to taxation.
• All companies irrespective of whether they are having commercial registration or not will be subject to taxation.