Foreign investment in Oman

Mansoor Jamal Malik

Al Busaidy, Mansoor Jamal & Co, Muscat

mansoor.malik@amjoman.com

Angad Ahuja

Al Busaidy, Mansoor Jamal & Co, Muscat

angad.ahuja@amjoman.com

Introduction

Oman, as was the case for other Gulf Cooperation Council (GCC) countries, experienced an economic transformation during the oil boom in the 1970s. Even today, Oman is a sought after and attractive destination for foreign investment due to its geographical advantage as a trading location and its natural resources, including its oil-based resources. In addition to its location, which offers easy access to Africa, Asia and Europe, the government has also been working hard to implement favourable policies and offer lucrative incentives to attract investment. Oman has a fast-diversifying economy, with local to global growth prospects. Factors such as 100 per cent foreign ownership nationwide, quick hassle-free business setup, no personal income tax, political and economic stability, long-term investor visas and customs exemptions, etc, make Oman a business-friendly economy, offering several investment opportunities for foreign investors.

Taxation

From a tax perspective, while the country was one of the first jurisdictions in the Middle Eastern region to implement corporate income tax, over the years, along with significant global developments, taxation in Oman has evolved and, currently, the country levies a relatively low corporate tax rate of 15 per cent. In addition to this, the country’s Income Tax Law outlined in Royal Decree No 28/2009 offers a five year tax exemption for companies involved in industrial activities, subject to the fulfilment of certain conditions. Further, Oman does not currently levy personal income tax, which makes it an attractive destination for expatriates and investors. Although several press releases have been issued on the introduction of personal income tax in Oman, there is currently no information on the date for the introduction of a tax on personal income.

Apart from corporate income tax, which is levied on the worldwide income of entities formed in Oman and income sourced from branches and other forms of permanent establishment located in Oman, repatriation benefits have been granted with respect to withholding tax applicable in Oman at a rate of 10 per cent. Withholding tax is applicable to payments made by an Omani taxpayer to a foreign entity, where the foreign entity has no ‘permanent establishment’ or taxable presence in Oman, and the income received by such foreign entity overseas falls into the ambit of one of several specified categories. While initially such categories included payments in the form of dividends and interest, the withholding tax on such payments of dividends and interest was suspended in 2023 by His Majesty Sultan Haitham bin Tarik, which provided a major boost to foreign investors setting up projects in Oman.

With respect to indirect tax, value-added tax (VAT) is chargeable on all supplies of goods and services throughout the territorial area of Oman, with limited exceptions specified in the Value-Added Tax Law and the relevant Executive Regulations. While the standard rate of VAT in Oman is five per cent, the export of goods or services outside Oman may be zero rated, subject to the fulfilment of the conditions provided therein. Further, excise tax is only applicable to certain categories of products, such as tobacco (including tobacco derivatives), pork products, alcoholic beverages, energy drinks, sugar-sweetened beverages and carbonated drinks. As part of the GCC, Oman follows the GCC Common Customs Law, which sets out the customs regulations and procedures, with the practical application and interpretation of such provisions being the responsibility of the Royal Oman Police. Subject to any preferential treatment as the result of a free trade agreement between Oman and a foreign country, the value of most non-GCC sourced goods is subject to customs duty at a standard rate of five per cent.

Oman also has a wide network of double tax treaties, with over 30 countries, including France, Japan, Korea and the UK, and is also in discussions concerning the ratification of more treaties with other countries. The availability of double tax treaties acts as a tool to promote investments in the country, by offering exemptions and lower tax rates, and relieves a significant burden faced by several multinationals concerning the payment of tax on the same income in different jurisdictions.

Efforts to attract foreign investors

Significant efforts have been made by the Government of Oman and the concerned ministries to ease access by foreign investors to the country from a compliance perspective. Once the required documentation is made available, the company registration process within mainland Oman can be completed by completing a quick online application on the Ministry of Commerce, Industry and Investment Promotion’s website, which typically only takes a few minutes. In less than a week, a limited liability company structure can be incorporated with ease. Further, opening a bank account requires the applicant to provide a few standard commercial documents and certain information, in addition to satisfying the bank’s know-your-customer (KYC) requirements. Any additional requirements, such as registration with the municipality, VAT registration, application for visas for expatriate employees, applying for the requisite licences and permits, etc, may be submitted by post.

This procedure is further simplified for foreign investors planning to set up companies in free zones, for undertaking activities that are permitted to be undertaken from a free zone, ie, industrial, manufacturing or distribution activities, etc. An application for the registration of a company in free zone is processed through a one-stop shop set up for the convenience of investors. A one-stop shop assists investors in regard to obtaining the requisite licences from the various authorities concerned, including, where applicable, tax exemptions, such as the income tax exemption for up to 30 years and the full customs duty exemption, subject to the fulfilment of certain conditions.

While Oman does not have a specific exit tax for individuals leaving the country, businesses are required to settle any outstanding liabilities or business obligations before their departure. With respect to the exit of a business, it is imperative that such companies ensure that all their taxes are settled and that Omani regulations regarding business closure, such as the liquidation and/or bankruptcy rules, are complied with. The tax consequences related to the liquidation of companies are also relatively straightforward. While there is no separate capital gains tax in Oman, all capital gains (except gains on sale of shares in companies listed on the Muscat Securities Market) are subject to a 15 per cent corporate tax rate. Once all the applicable tax liabilities are settled, the Oman Tax Authority will provide a tax clearance certificate, based on which the company’s tax file is closed. Once all the other debts are settled by the company, the commercial deregistration process is complete. 

Additionally, several initiatives have been taken by the Government of Oman as a part of Oman’s Vision 2040 goals to boost economic diversification by moving away from the country’s dependence on oil and attracting foreign investment in sectors such as tourism, manufacturing, logistics and technology. With such changes being brought about by the Government of Oman and the upgrade to Oman’s credit rating to BBB-, with a stable outlook predicted by credit rating agency S&P Global Ratings, an inflow of foreign investors and businesses to Oman is expected in the coming years.