Setting up a company in Oman
When setting up a company you may want to consider these factors:
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Business Factors
Oman is a member of the Arab League and part of the Gulf Cooperation Council (GCC). Businesses are governed by the Sultanate of Oman’s Commercial Law, which are similar in nature to other Middle Eastern countries. The country has engaged in sound economic policies to attract foreign investments in a wide variety of industries in the last few decades.
Although it may be attractive for foreign companies to invest into Oman in certain sectors, there are bureaucratic obstacles that exist such as difficulty of obtaining visa and permit clearances for foreign workers and the divide between government and the private sector. In particular, many international firms must face Oman’s policy of Omanization, which involves setting quotas for Omani nationals that must be filled for most industries.
The type of investment vehicle chosen by a foreign business depends on the industry or service, geographical market, and whether importing or manufacturing is involved. These factors must be considered, in addition to:
- The industry and type of business that will be conducted
- Nationality of the headquarters / individuals (s)
- Presence of existing trade agreements or relationships
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Location
Location will be another factor. Separate cities and regions may have different rules, costs and availability. Although Oman is a geographically small country, it is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.
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Language
Arabic is the official language used in Oman. English, Baluchi, Urdu and some Indian dialects are spoken as well as secondary languages. English is generally taught at school from a young age and used widely in the business community, where business is conducted largely in Arabic, English or both.
Your Options
The Sultanate of Oman has made significant progress towards economic growth and prosperity in the last 40 years, which makes Oman an increasingly favorable location for business investment. They country has in place strong incentive schemes to drive further investment into the country, ranging from subsidized interest rates, custom duty exemptions and income tax exemptions for a period of time. There has been a shift towards liberalizing the Foreign Business and Investment Law, allowing up to 70% of foreign equity ownership, and up to 100% for vital development projects to Oman.
Commercial entities should register with the Ministry of Commerce and Industry and the Chamber of Commerce and License of the municipality of incorporation before beginning business. Foreign companies and individual investors may establish operation in Oman through several main forms:
- Limited Liability Company
- Joint Stock Company
- Branch
- Commercial Agency
- Commercial Representative Office
Limited Liability Company
The Limited Liability Company (LLC) is the most common type of business entity used in Oman. The business operates under a company name and ownership of the company is in the form of shares in the capital of the company. Much like limited liability companies, the liability for each shareholder is limited to the portion of their own capital contributions. In the LLC the directors are personally responsible for the prudent management of the company, and are not required to be shareholders.
LLCs in Oman may not engage in banking, financial guarantees, or commercial aviation activities. They are required to withhold 10% of their net profits after tax as legal reserve. The annual shareholders meeting should be held within six months of the financial year end.
Liability
Liability of each shareholder is only limited to the capital they have invested in.
Minimum Ownership
At least one Omani partner with a minimum of 30% shareholding. Companies 100% owned by GCC shareholders do not require a local Omani partner.
Number of Founding Members
At least two shareholders, up to a maximum of 40.
Minimum Capital Requirements
OMR 150,000 for public joint stock companies or companies with foreign participation. OMR 50,000 for closed joint stock companies.
Procedure:
1. Initial capital deposit in bank
The capital of a LLC must be fully paid at the time of registration. The founding members must deposit the minimum required capital depending on their foreign shareholdings status.
2. Registration at the Commercial Registry of the Ministry of Commerce and Industry
The company must submit a name for approval to the Ministry of Commerce and Industry (MOCI) that has not been taken. Company names with certain words require a higher starting share capital, such as “Oman”. This is done online.
Once the name has been checked, the application form and the following documents must be submitted to the one-stop shop at MOCI:
- Copy of passport or identity cards of shareholders
- Copy of passport or identity cards of all intended authorized signatories
- Approved authorized signatory form, with names and sample signatures of each authorized signatory reproduced
- Standard company registration forms, including constitutive contract and articles of association
- Application for specific licenses depending on the company’s activities
- Certificate of initial capital deposit from bank
The one-stop shop includes the MOCI, Ministry of Civil Defense, Royal Oman Police, Muscat Municipality, Chamber of Commerce, Ministry of Regional Municipalities, Environment and Water Resources and the Ministry of Manpower. Registration is expedited through this method.
During registration with the MOCI, the fees differ depending on the grade of the company, ranging from Excellent grade to Fourth grade in descending order of startup capital.
The company must also obtain the license from the Municipality of Muscat through submitting the following documents at the one-stop shop:
- Company lease agreement
- Company statutes including memorandum and articles of incorporation
- Chamber of Commerce and Industry affiliation certificate
- Agency Certification if applicable
Time: 3 days
Cost:
- OMR 40 for 5 year business registration
- OMR 128 for Chamber of Commerce
- OMR 15 for registration with Muscat Municipality
3. Notification of the Tax Department of the Finance Ministry
The company must register at the Tax Department under the Income Tax Law. Registration involves submission of a completed Declaration of Business Particulars form.
Time: 1 day
Cost: no charge
4. Registering employees for social insurance
For every worker employed, a copy of the employment contract must be submitted to the Public Authority for Social Insurance for the employee’s social security registration purposes. The LLC must be obligated to the employee’s retirement benefits contributions to the Public Authority in accordance to the Social Security Law of Oman.
Time: 1 day
Cost: no charge
5. Make a company seal
The company seal or stamp must be issued by the registered authorized signatory of the LLC. The creation of the seal must be accompanied by an attested signature specimen confirming the issuer’s authority to obtain the stamp.
Time: 2 days
Cost: OMR 50
6. Post registration procedures
The following must be obtained after the formal incorporation process, which may vary depending on the intended business activities:
- Municipality license
- Tax registration
- Registration with the Royal Oman Police
- Registration with the Ministry of Manpower to apply for labor clearance and visas
- Import/export license if required
- Industrial, environmental and other permits
Joint Stock Company
Also known as a Closely Held Joint Stock Company (SAOC), it is equivalent to a public company in most countries. There are two primary forms of joint stock companies, where the company can be a private or publicly held joint stock company. The privately held joint stock company does not offer their shares for public subscription, while the publicly held joint stock company does offer shares to the public.
Also known as a Closely Held Joint Stock Company (SAOC), it is equivalent to a public company in most countries. There are two primary forms of joint stock companies, where the company can be a private or publicly held joint stock company. The privately held joint stock company does not offer their shares for public subscription, while the publicly held joint stock company does offer shares to the public.
Liability
Liability of each shareholder is only limited to the capital they have invested in.
Minimum Ownership
At least 30% of shareholdings owned by Omani nationals. Companies 100% owned by GCC shareholders do not require a local Omani partner.
Number of Founding Members
At least three shareholders.
Minimum Capital Requirements
OMR 500,000 for a privately held joint stock company. OMR 2 million for a publicly held joint stock company.
Procedure:
1. Initial capital deposit in bank
The capital of a LLC must be fully paid at the time of registration. The founding members must deposit the minimum required capital depending on their foreign shareholdings status.
2. Drafting Constitutional documents
The proposed constitutional documents of the company must be drafted and translated into Arabic if English. These include the memorandum and articles of association. The MOCI must review these documents and may negotiate the terms of the contracts.
3. Capital Market Authority registration procedures
A written application must be submitted to the Capital Market Authority (CMA) if the joint stock company is public. These include the following documents:
- Memorandum of Incorporation, articles of association and feasibility study
- Statement of Issuance Expenses
- Proposed bylaws of the company
- Bank certificate as proof of deposit
- Statement of the quota system
- Statement of appointing an advisor for issuing shares
4. Application for administrative decision
Approval must be obtained from the Director General of Commerce and also the CMA. The following documents are required for administrative approval:
- Covering letter in Arabic
- Final constitutive contract and articles of association
- Foreign shareholder documents
- Omani shareholder documents
5. Constitutive general meeting and board meeting
A general meeting is required for the election of the board of directors, and to formally approve contracts, articles of association and appointment of auditors. The appointment of authorized signatories, a chairman and a vice-chairman is required, who must approve the submission of the business application to the MOCI.
6. Registration at the Commercial Registry of the Ministry of Commerce and Industry
The company must submit a name for approval to the Ministry of Commerce and Industry (MOCI) that has not been taken. Company names with certain words require a higher starting share capital, such as “Oman”. This is done online.
Once the name has been checked, the application form and the following documents must be submitted to the one-stop shop at MOCI:
- Copy of passport or identity cards of shareholders
- Copy of passport or identity cards of all intended authorized signatories
- Approved authorized signatory form, with names and sample signatures of each authorized signatory reproduced
- Standard company registration forms, including constitutive contract and articles of association
- Application for specific licenses depending on the company’s activities
- Certificate of initial capital deposit from bank
The one-stop shop includes the MOCI, Ministry of Civil Defense, Royal Oman Police, Muscat Municipality, Chamber of Commerce, Ministry of Regional Municipalities, Environment and Water Resources and the Ministry of Manpower. Registration is expedited through this method.
During registration with the MOCI, the fees differ depending on the grade of the company, ranging from Excellent grade to Fourth grade in descending order of startup capital.
The company must also obtain the license from the Municipality of Muscat through submitting the following documents at the one-stop shop:
- Company lease agreement
- Company statutes including memorandum and articles of incorporation
- Chamber of Commerce and Industry affiliation certificate
- Agency Certification if applicable
Time: 3 days
Cost:
- OMR 40 for 5 year business registration
- OMR 128 for Chamber of Commerce
- OMR 15 for registration with Muscat Municipality
7. Notification of the Tax Department of the Finance Ministry
The company must register at the Tax Department under the Income Tax Law. Registration involves submission of a completed Declaration of Business Particulars form.
Time: 1 day
Cost: no charge
8. Registering employees for social insurance
For every worker employed, a copy of the employment contract must be submitted to the Public Authority for Social Insurance for the employee’s social security registration purposes. The LLC must be obligated to the employee’s retirement benefits contributions to the Public Authority in accordance to the Social Security Law of Oman.
Time: 1 day
Cost: no charge
9. Make a company seal
The company seal or stamp must be issued by the registered authorized signatory of the LLC. The creation of the seal must be accompanied by an attested signature specimen confirming the issuer’s authority to obtain the stamp.
Time: 2 days
Cost: OMR 50
10. Post registration procedures
The following must be obtained after the formal incorporation process, which may vary depending on the intended business activities:
- Municipality license
- Tax registration
- Registration with the Royal Oman Police
- Registration with the Ministry of Manpower to apply for labor clearance and visas
- Import/export license if required
- Industrial, environmental and other permits
Branch
A foreign branch offers non-Omani corporate entities and individuals to conduct business in Oman with a limited legal presence. The branch office is essentially a footprint of the foreign company in Oman, which allows very limited activities to be conducted in Oman.
A foreign branch offers non-Omani corporate entities and individuals to conduct business in Oman with a limited legal presence. The branch office is essentially a footprint of the foreign company in Oman, which allows very limited activities to be conducted in Oman.
Commercial Agency
A Commercial Agency is any agreement whereby a merchant or a commercial company in the Sultanate is assigned to promote or distribute products or services of a foreign entity. Unless the foreign entity is conducting business in Oman under a government contract, an Omani agent is required to conduct business activities. The main purpose of a Commercial Agent is to export goods and services to Oman by a foreign business. This form of business entry does not establish a business presence. These Commercial Agencies are governed by the Commercial Code (Royal Decree 55/90).
Agents must be Omani citizens, and all agencies must be majority Omani-owned and controlled. The agent must be members of the Omani Chamber of Commerce and Industry. The commercial agency relationships between the agent and the foreign entity must be registered, along with the registration of a principal place of business in Oman.
Commercial agencies do not have to be exclusive. The foreign business may appoint more than one agent in Oman. Any commercial agency agreements must be in writing and certified and authenticated. They must include:
- Name of the agent and principal and their respective nationalities
- Products or services subject matter
- Term and the territory
The agency agreement is registered at the Commercial Agencies Register at the Ministry of Commerce and Industry (MOCI). Upon registration, the agreement may come in three forms:
- Contracts agency: Where the principal compensates the agent for promoting the service or products in Oman. The agent remains independent.
- Commission Agents: The agent contracts on their own behalf, while the principal is usually concealed.
- Brokers: The principal entrusts the agent to locate and identify possible buyers in return for a commission.
Commercial Representative Office
A commercial representative office is established if the primary purpose of establishing a legal presence in Oman for the foreign company is to conduct market research, advertising, marketing, promotional or administrative functions with other commercial entities in Oman. Representative offices are not allowed to engage in commercial activities that will generate any profits, while imports are restricted to samples used for promotional purposes.
Representative offices may only be established by companies that have a head office and at least three other branches in other countries. The representative office must be registered at the Commercial Register. They are not allowed to engage with customers, and only with potential importers of the product.
This form of business entry may be chosen due to the ease of setting up and the relatively lower risks as the foreign company establishes more contacts and know-how with Omani businesses and consumers.
- Oman
