Benefits and problems of registering a company in Oman
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Benefits and problems
Benefits of Oman company registration
- The 2009 Oman-USA Free Trade Agreement ensures US entrepreneurs are afforded the same business rights as Omanis. Specifically, this trade agreement allows for 100% US ownership in all of Oman’s industries and eliminates tariffs on industrial and consumer products between the two nations;
- Citizens of Gulf Cooperation Council (GCC) member states are allowed 100% foreign ownership of Oman companies under the national treatment provisions of the treaty;
- Oman boasts three free zones and several industrial zones offering foreign companies i) 100% foreign ownership, ii) up to 50 years of tax exemption and iii) special infrastructure support;
- Limited liability companies incorporated in Oman pay no withholding taxes on i) dividends ii) interest or iii) VAT;
- Oman is trying to replicate the success of Dubai, with an aim of continuing to liberalize regulations and drive annual growth to 7% for the foreseeable future. Healy Consultants predicts that, within 20 years, Oman will be where Dubai is today and early investors will have profited immensely;
- Government spending represents 32% of total domestic output. Obtaining government contracts can be immensely lucrative. A company conducting government contracts can be 100%-foreign owned.
Problems with Oman company registration
- Sultan Qaboos is the longest-serving ruler in the Middle East and perhaps the world’s only absolute monarch not to have a publicly-designated successor. He appears to be unwell and his death could unleash major political opposition and market uncertainty;
Doing business in Oman
- For most business activities, foreign ownership is limited to 65% and requires a minimum of US$390,000 in share capital;
- Companies are required to hire 30% Omani nationals through a rule known as “Omanization”. Most Omanis are unproductive and poorly qualified, making it a challenge to fulfil the 30% quota;
- One of the biggest challenges of running a business in Oman is government red tape and an incompetent bureaucracy. When there is ambiguity about Omani law, it gives rise to corruption and unnecessary delays in doing business in the country;
- Omani business practices and opaque laws favor Oman nationals over foreigners in disputes over business and investments. Disputes with Omani shareholders and agents cause serious problems for foreign investors. Oman’s courts can impose precautionary restraint on foreign company assets pending the adjudication of a commercial dispute;
- While lucrative, conducting business in Oman is slow and burdened with massive administrative overhead. This is very frustrating for multi-national companies;
- The government tenders in procurements favor i) Omanis ii) companies with Omani shareholders of at least 35% of the capital and iii) products of Omani origin;
- Oman LLCs suffer a corporate tax rate of just 12% on global profits, but can receive up to 50 years exemption from tax if registered in a free zone or industrial zone. This is one of the higher rates of corporate tax in the region, where corporate income is often taxed at either 0% or 10% in non-oil businesses;
- During business registration and corporate bank account opening, the Oman government frequently requests documents to be attested by the Oman embassy in the country of origin of our Client. Fortunately, Oman is a party to the Hague Convention on Apostilles, which simplifies the process somewhat. However, this requirement remains both costly and time consuming that complicates the company registration process. Examples of required documents include: i) passports copies of directors; ii) certificates of incorporation and the memorandum & articles of association for the parent companies; iii) powers of attorney issued by the parent company. In addition, the new company’s memorandum and articles of association (known as the “constitutive contract”) must be translated into Arabic, although the document can have both English and Arabic versions.
Best uses for an Oman company
- Oman is an ideal location for trading companies that do business with Europe, the Middle East and Asia. Located on the Arabian Sea and the Gulf of Oman, Oman’s ports serve as an excellent pit-stop for international shipping. Oman free zones cost roughly 30% less than Dubai and docking in Oman can cut three hours off a sea bound journey;
- Oman enjoys trading and transport access through rail, road, sea and air to large economies such as Saudi Arabia and the UAE;
- Labor costs and secondary costs such as office space are lower Oman than in Dubai. For example, the average commercial rent per meter square is only two-thirds that of Dubai. Energy costs are also 30% lower.