Doing Business In... 2023 Comparisons

Oman is a civil law jurisdiction. Legislation is the primary source of its laws, not judicial precedent.

Royal Decrees form the bedrock of Oman's legislative framework and are often supplemented by secondary/delegated legislation in the form of Ministerial Decisions. Royal Decrees are identified in this article with the initialisation "RD".

Oman's Civil Transactions Law RD 29/2013 (the Civil Code) regulates all matters not addressed by other specific laws. Under the Civil Code, commercial arrangements between parties are governed by the contract between them unless the law imposes a contrary requirement. The principles of Islamic jurisprudence, the principles of sharia and customary practices may also be relevant when interpreting a contract (in that order of descending authority).

The courts take a purposive approach to the construction of contracts and will seek to identify the parties' intention to a contract. Broadly speaking, a party exercising rights under a contract will be expected to act reasonably and in good faith.

The Basic Law of the State RD 6/21 (the Basic Law) essentially serves as Oman’s constitution. Under the Basic Law, judicial power is independent and vested in the courts, which operate in accordance with the rule of law.

The judiciary consists of the Primary Courts (the Courts of First Instance), the Appeal Courts and the Supreme Court (Oman's highest Court).

General Principles

Non-Omanis may only conduct business in Oman through a locally registered entity. In practice, this means that non-Omanis must either establish a presence in Oman or conduct their business through a local commercial agent in order to invest in Oman.

Establishing a Presence in Oman

Oman's Foreign Capital Investment Law RD 50/2019 (the FCIL) came into force and effect in January 2020, and its impact has been to relax Oman's foreign ownership restrictions significantly.

Oman's Ministry of Commerce, Industry and Investment Promotion (the MOCIIP) has issued, pursuant to Ministerial Decision 209/2020, a list of activities subject to foreign ownership restrictions (the restricted activities list). The restricted activities list includes activities such as automotive repair, translation/interpretation services and labour recruitment offices; it may be updated from time to time by a decision of the Minister of the MOCIIP.

Certain industry sectors do not appear on the restricted activities list, despite historically requiring a higher level of local ownership. Oman's engineering law, for instance, requires engineering consultancy offices to have a minimum of 35% local ownership. The MOCIIP is expected to continue to apply any such industry sector restrictions.

Even prior to the introduction of the FCIL, foreigners establishing a presence in Oman's "free zones" or "special economic zones" or under the US–Oman free trade agreement or certain reciprocal arrangements implemented within the GCC (Gulf Cooperation Council), were able to take advantage of less onerous foreign ownership restrictions. However, the restricted activities list also applies to non-Omanis establishing a presence under these routes.

Conducting Business Through a Local Commercial Agent

Any arrangement under which a foreigner conducts business through a local commercial agent must be registered with the MOCIIP. Commercial agents must be duly licensed by the MOCIIP.

Companies, partnerships, branches and representative offices must be registered with the MOCIIP. Where the entity being established is owned in whole or part by non-Omanis, the application for registration will need to be processed through the investment services centre of the MOCIIP. MOCIIP registration is required before any of these types of entities can commence operations.

Contractual joint ventures (see 3.1 Most Common Forms of Legal Entities) are the exception to this general rule: although they are treated as legal entities formed under the Commercial Companies Law RD 18/2019 (CCL 2019), they do not require registration with the MOCIIP. However, at least one of the parties to the contractual joint venture will need to have an appropriately licensed presence in Oman.

A foreigner undertaking investment activity in Oman other than in compliance with the FCIL may be fined between OMR20,000 and OMR150,000, as may an Omani who participates with a foreigner in an investment project other than in accordance with the FCIL.

The FCIL's executive regulations were issued in June 2020 and amended further in March 2022. The FCIL's executive regulations set out the types of investment projects that may apply for preferential treatment (eg, projects established in Oman's less developed regions) and the financial and non-financial conditions that must be satisfied for an investment project to qualify.

There is no formal procedure to challenge a decision by the MOCIIP to reject a foreign investment (eg, where the MOCIIP declines to issue the necessary licence or approval of the necessary registration). If an investor believes an application has been unreasonably rejected, the first response should be to open a dialogue through the appropriate channels at the MOCIIP. It is prudent to appoint local counsel with an understanding of the MOCIIP's structures, practices and ethos to assist with these discussions. If that approach is unsuccessful, an investor may challenge any such decision in court. Oman's legal system operates in accordance with the rule of law.

The types of legal entities available in Oman are companies established under the CCL 2019, branches and representative offices.

For new entrants to Oman, a presence is typically established by incorporating a limited liability company/single-person company or by establishing a branch.

Entities may be established either "onshore" in Oman or in one of Oman's industrial free zones (free zones) or special economic zones (SEZs). A company established in a free zone or an SEZ may not undertake commercial activities onshore in Oman.

Companies Established Under the CCL 2019

These may be formed as:

• joint stock companies (JSCs), which may be established as:
1. public joint stock companies (SAOGs); or
2. closed joint stock companies (SAOCs);
• holding companies (Holdcos);
• limited liability companies (LLCs);
• single person companies (SPCs);
• contractual joint ventures (CJVs);
• general partnerships (GPs); or
• limited partnerships (LPs).

JSCs

A JSC must have at least three shareholders.

The minimum share capital of an SAOG is OMR2 million, and the minimum share capital of an SAOC is OMR500,000. Higher share capital requirements may be required, depending on the activities undertaken by the JSC. A JSC must allocate 10% of its net profits to a legal reserve until the legal reserve reaches one-third of the JSC’s share capital.

The liability of a JSC is limited to the amount of its share capital, and a shareholder’s liability is limited to its shareholding in the JSC’s share capital.

SAOGs and SAOCs are subject to considerably more onerous regulatory requirements under the CCL 2019 than LLCs. SAOGs must also be listed. As a listed company, an SAOG is regulated by the Capital Market Authority (CMA) and subject to its rules and regulations.

A JSC is managed by its board of directors. Subject to the CCL 2019 and the JSC’s Articles of Association, a JSC’s board of directors has all authority necessary to manage its affairs; its board also has a duty to implement any resolutions passed by the JSC’s shareholders in general meetings. An SAOG must have between five and 11 directors, and an SAOC must have between three and 11 directors. In each case, the number of directors (which must be uneven) will be specified in the JSC’s Articles of Association.

A JSC’s directors are listed in its commercial registration (a document maintained by the MOCIIP and available for public inspection), which will also set out the authorised signatories of the JSC and any limits on their powers.

The key advantage of JSCs over LLCs is that shares in JSCs may be mortgaged as security (this may be necessary in order for a company to procure debt financing). Unlike SAOCs and LLCs, SAOGs may also raise equity finance in the capital markets, as they are able to offer their shares to the public. LLCs may now procure funding through crowdfunding platforms, subject to the rules and regulations issued by the CMA. Some regulated activities in Oman may only be undertaken by SAOGs.

Holdcos

A Holdco is a JSC that exercises financial and administrative control over one or more JSCs and/or LLCs by holding at least 51% of the shares of each such company. Holdcos are generally subject to the same regulation as JSCs.

LLCs

An LLC must have at least two shareholders.

An LLC must allocate 10% of its net profits to a legal reserve until the legal reserve reaches one-third of the LLC’s share capital.

The liability of an LLC is limited to the amount of its share capital, and a shareholder’s liability is limited to its shareholding in the LLC’s share capital.

LLCs are managed by one or more managers. Subject to the CCL 2019 and the LLC’s constitutive documents, an LLC’s managers have all the authority necessary to manage its affairs.

An LLC’s managers are listed in its commercial registration (also available for public inspection), which will also set out the authorised signatories of the LLC and any limits on their powers.

LLCs are subject to a considerably less onerous regulatory regime than JSCs and are considerably more prevalent.

SPCs

An SPC must have only one shareholder.

SPCs are subject to the same regulation as LLCs under the CCL 2019, to the extent such regulations are not inconsistent with the nature of an SPC.

SPCs were introduced for the first time under the CCL 2019, and are likely to be a popular alternative to LLCs going forward.

CJVs

A CJV is formed (typically pursuant to a written joint venture contract) by two or more partners. It is described in the CCL 2019 as a “concealed company”, and is the only legal entity in Oman that is not subject to registration with the MOCIIP.

CJVs are not subject to any minimum share capital requirement.

A CJV does not have a separate legal personality. Each of its partners therefore contracts only in its own name and has unlimited liability for the obligations and liabilities it assumes under that contract.

If a CJV partner discloses the existence of the CJV to a third party who deals with that partner in the context of the CJV’s activities, then the CJV will become a general partnership. This will result in all of the CJV’s partners assuming unlimited liability for the liabilities and obligations of the CJV.

Investors tend to favour LLCs over CJVs because of the limited liability that LLCs confer. CJVs can, however, offer a quick route into the market and are subject to considerably less onerous regulation under the CCL 2019 than LLCs. Historically, foreign investors have sometimes adopted the CJV structure where they have a single contract to perform (eg, as a contractor on a project) and do not intend to remain in Oman following its completion. As a consequence of the liberalisation of Oman's foreign ownership restrictions, however, some contractors that would previously have adopted the CJV structure may view an LLC as a more attractive option in the future.

GPs and LPs

A GP is formed of two or more general partners, each of whom must be a natural person. The partners of a GP are jointly and severally liable for the GP’s liabilities and obligations.

An LP is formed of at least one general partner and at least one limited partner. The general partners of an LP are jointly and severally liable for the LP’s liabilities and obligations, whereas the liability of a limited partner in an LP is limited to the amount of its contribution.

GPs and LPs have constitutive contracts that regulate their management and operation. Subject to its constitutive documents, all partners of a GP and all general partners of an LP are considered managers of the GP/LP. The limited partners of an LP may not be involved in its management.

Neither GPs nor LPs are subject to a minimum capitalisation requirement, and neither structure has a legal reserve requirement. However, the unlimited liability of general partners means that GPs and LPs rarely attract investors when structuring their investments.

Branches

Previously, branch structures could only be established where a foreign company entered into a "qualifying contract" with the Omani government or a company in which the Omani government has a material interest. The CCL's executive regulations issued by the MOCIIP on 14 October 2021 override this requirement, and a "qualifying contract" with a government entity is no longer one of the prerequisites to establishing a branch in Oman.

Representative offices

The permitted activities of a representative office are limited to the following:

• contacting customers to promote the products or services of the foreign company or institution it represents;
• contacting exporters and sellers of raw, manufactured and semi-manufactured materials required by the foreign company or institution it represents and removing any obstacles hindering quick access to them; and
• notifying the foreign company or institution it represents of any complaints it receives in relation to the products or services and overcoming difficulties related to the distribution of such products or the provision of services.

A representative office is prohibited from engaging in any of the following activities:

• import, export or sale, except for the importation of commercial samples of goods produced by the foreign company or institution it represents for the purpose of promotion;
• promotion of products or services other than those produced or offered by the foreign company or institution it represents; or
• contacting consumers directly.

Features Common to Branches and Representative Offices

There are no foreign ownership restrictions on branches/representative offices, and accordingly, the parent company of a branch/representative office can be a foreign company.

Branches/representative offices do not have a share capital or legal reserve requirement, but their parent companies are required to guarantee their obligations. This guarantee is the letter of undertaking referred to under 3.2 Incorporation Process.

Both branches and representative offices are regulated by the constitutional documents of their parent companies. They are managed by a general manager, who will have the powers and authorities granted to him/her under a power of attorney issued by the parent company.

This section focuses on the formation process for LLCs and branches, as these are the usual alternatives for a foreign investor entering Oman for the first time. The process for establishing an SPC is the same as for an LLC.

LLCs

In some cases, pre-approval must first be sought for the LLC’s proposed name. In most circumstances, however, the process to incorporate/register an LLC is initiated by submitting an application to the MOCIIP.

The application will need to be made by the LLC's founding shareholders and must be accompanied by all necessary supporting documents, including:

• the LLC’s new constitutive contract;
• certain resolutions of the LLC’s founding shareholders;
• a foreign investment form (where applicable); and
• copies of the passports of the LLC’s first authorised signatories/managers.

Preparation of these supporting documents can involve considerable lead time because some will need to be notarised (or, in the case of foreign shareholders, apostilled) before submission to the MOCIIP. The constitutive contract must either be in Arabic or be provided with an Arabic translation (dual-language constitutive contracts are permissible). The licensing process will involve seeking approval for the specific activities to be undertaken by the LLC.

The steps following incorporation include registration with the Chamber of Commerce and Industry and application for a municipality licence. To apply for a municipality licence, the LLC will need to submit a copy of its tenancy agreement.

Branches

An application can be made to the MOCIIP for registration of a branch. The supporting documents that will need to be provided include the following:

• the commercial registration certificate of the foreign company in its principal place of business, which includes the foreign company’s commercial activities;
• the incorporation documents of the foreign company (ie, the Articles of Association, Memorandum of Association or the Constitutive Contract, as the case may be);
• the authorisation document issued from the foreign company to the manager(s) of the branch to carry out the management of the branch;
• a letter of undertaking from the foreign company to bear liability in relation to the acts of the branch; and
• copies of the passports/Omani identity cards of the authorised managers.

Preparing these documents can take time for the same reasons given in relation to LLCs above. All documents (except for copies of passports/Omani identity cards) must be translated into Arabic and duly notarised, legalised, or apostilled, as the case may be. As with an LLC, the branch's activities will need to be specifically licensed.

The MOCIIP usually registers a branch within one week of the application.

As with LLCs, the steps following incorporation include registration with the Chamber of Commerce and Industry and application for a municipality licence. The LLC must submit a copy of its tenancy agreement to apply for a municipality licence.

Any change to the constitutional documents or commercial registration certificate of an entity registered with the MOCIIP needs to be approved by the MOCIIP before it takes effect.

As noted in 3.1 Most Common Forms of Legal Entities, all companies established under the CCL 2019 (other than CJVs), all branches and all representative offices must be registered with the MOCIIP. Accordingly, MOCIIP approval and registration are needed for any change to any such entity's constitutional documents (eg, its constitutive contract or Articles of Association) or commercial registration certificate, including in relation to its managers/authorised signatories or its share capital/shareholders.

Most entities registered with the MOCIIP are required to file approved financial statements with the MOCIIP (although exceptions apply).

JSCs are subject to considerably more stringent reporting requirements than LLCs. Analysis of these requirements falls outside the scope of this article.

LLCs are managed by one or more managers. Subject to the CCL 2019 and the LLC’s constitutive documents, an LLC’s managers have all the authority necessary to manage its affairs. The CCL 2019 and the LLC’s constitutive documents specify the matters that are reserved to be decided by its shareholders.

Branches are regulated by the constitutional documents of their parent companies. They are managed by a general manager, who will have the powers and authorities granted to him/her under a power of attorney issued by the parent company.

The rules governing the liability of management and shareholders will depend on the type of Omani legal entity in question. The comments below are confined to an overview of the main rules applicable to LLCs and branches.

LLCs

General principles

The managers of an LLC are jointly or severally liable to the LLC and third parties for, inter alia, their violation of the CCL 2019 and/or the LLC's constitutive documents and their negligence in the management of the LLC.

The CCL 2019 also provides that the managers of an LLC are subject to the same liability as the directors of a JSC, regardless of any provision to the contrary in the LLC’s constitutive documents.

Conflicts of interest

The CCL 2019 contains several provisions that subject a manager to liability where he/she contravenes the CCL 2019’s provisions requiring a manager to avoid conflicts of interest.

Piercing the corporate veil

The general rule is that the liability of an LLC is limited to the amount of its share capital, and a shareholder’s liability is limited to its shareholding in the LLC’s share capital.

There is, however, the potential in certain limited circumstances for the corporate veil to be pierced in the event of an LLC’s bankruptcy, and managers can also become liable where they act outside their authority. In certain limited circumstances, managers may also become criminally liable under the Penal Code RD 7/2018 (the Penal Code) in the event of an LLC’s bankruptcy.

Branches

The liability of a branch's directors/managers and officers will, generally speaking, be determined based on the laws applicable in the jurisdiction of incorporation of its parent company and the constitutional documents of its parent company.

The general manager of a branch will also be personally liable if he/she exceeds the authority granted in their power of attorney (as will any other authorised signatory of the branch who exceeds their authority).

The parent company of a branch is required to guarantee the obligations and liabilities of the branch pursuant to the letter of undertaking referred to under the 3.2 Incorporation Process. Therefore, the liability of a branch is not ringfenced.

The employer/employee relationship in Oman is regulated by the Labour Law RD 35/2003 (as amended – the Labour Law). Regulations are issued from time to time by the Ministry of Labour to regulate particular aspects of the employment relationship further.

The Labour Law prescribes an employee's minimum benefits and entitlements, such as maximum working hours, annual leave and sick leave entitlements. The employment contract may include benefits and entitlements that exceed these minimum requirements.

Employee unions are recognised in Oman. Collective negotiations may take place between the employer and the employees' trade union to improve the terms and conditions of work, enhance productivity and settle disputes. Employees have a right to strike peacefully, provided certain procedures are followed.

The Labour Law requires a contract of employment to be in writing; it must be in Arabic and must be translated into a language that both employer and employee can understand, where applicable. A contract of employment must include certain specified information and may be for a fixed or unlimited term.

Employees may not be required to work more than nine hours a day or 45 hours a week, including at least a half-hour break. Employees should have a lunch break of not less than half an hour if the continuous work period is six hours or more.

An employee is entitled to at least 48 consecutive hours of rest per week after five continuous working days.

If an employee is required to work overtime, then the employer must pay the employee overtime equivalent to the employee’s basic salary for the extra work hours, plus at least 25% of such salary (for day-time work) and 50% of such salary (for night-time work); if the employee agrees in writing, the employer may grant the employee leave from work in lieu of the overtime.

Employees who work on an official holiday are entitled to salary for such day plus additional overtime pay equal to at least 25% of such pay or to an additional rest day.

An employment contract will terminate under the following circumstances:

• upon the expiry of the term of the contract;
• without notice on one of the grounds for summary dismissal as set out in the Labour Law;
• upon the employee’s death or permanent disability; and
• upon the service of a termination notice by either the employer or the employee.

Although an employer may terminate an employment contract by notice, the Supreme Court has held that termination should be based on a legal justification.

The Labour Law contains no provision that entitles an employer to terminate an employee on the grounds of redundancy if the employer remains solvent.

If the termination of an employee's employment contract is arbitrary or without legal justification in accordance with the Labour Law, then an employee may file a claim for unfair dismissal. In such circumstances, the court may order the employee's reinstatement or the payment of not less than three months' salary as compensation.

There are no definitive guidelines for the courts to consider in determining unfair dismissal claims or how compensation for unfair dismissal is calculated.

The Labour Law does not include any rights for employee representation.

Personal Income Tax

Although Omani citizens and residents are not currently subject to personal income tax unless they solely own an establishment (as defined in 5.2 Taxes Applicable to Businesses), an income tax on high earners/high-net-worth individuals may be introduced in the future.

Social Insurance

Each permanent employee in the private sector who is an Omani national and is aged between 15 years and 59 years must contribute 7% of their gross salary to the Public Authority for Social Insurance (PASI). This amount is deducted from their salary and paid by the employer. The employer is also required to contribute to PASI an amount equal to 11.5% of the gross salary of an Omani national. A total of 18.5% of the gross salary of an Omani national must therefore be remitted to PASI. The gross salary is restricted to OMR3,000 per month for calculating these contributions.

Employment Security Scheme

In addition to the above, Oman has recently introduced an Employment Security Scheme pursuant to RD 82/2020 (the Scheme). Employers will be required to contribute an amount equal to 2% of each Omani employee’s monthly gross wage to the Scheme each month, half of which will be deducted from the employee’s salary.

The following categories of persons (Omani taxpayers) are liable to income tax in Oman:

• enterprises;
• establishments; and
• permanent establishments.

The tax rate is generally 15% of taxable income, although a lower rate of 3% applies to certain small taxpayers where prescribed conditions are met.

For these purposes:

• "Person" means a natural or juristic person and includes joint ventures and non-Omani partnership agreements that do not assume the form of a company.
• “Enterprise” includes:
1. Individual enterprise owned by a natural Omani person which exercises in Oman any of the specific activities specified in Article 159 (bis) of the Income Tax Law. The owner of the enterprise shall be determined from the commercial or industrial registers or other fiscal records or documents.
2. Omani company that takes the form of partnership, limited partnership, or limited liability company and exercises the activities specified in Article 159 (bis) of the Income Tax Law. 
• “Establishment” means an establishment solely owned by a natural person who independently carries on a commercial, industrial or professional activity in Oman.
• “Permanent establishment” means a foreign individual or entity that carries out an economic activity either directly or indirectly through an agent, where such foreign individual/entity resides in Oman for a period exceeding 90 days within any 12-month period.

A lower income tax rate of 12% is temporarily in place for small and medium companies (SMEs), as noted under Economic Stimulus Plan below.

Special provisions apply to the taxation of income derived from the sale of petroleum.

In addition, excise duties were introduced in Oman in 2019 on certain specific goods.

Economic Stimulus Plan

The Ministry of Finance has published an Economic Stimulus Plan (ESP) as part of its efforts to mitigate the effects of COVID-19 on the economy. The plan addresses the following key areas:

• taxes and fee incentives;
• stimulating business and investment through, for example, the simplification of procedures and the relaxation of regulations for foreign companies;
• SMEs, including a temporary reduction of income tax rates and the postponement of loan repayments;
• the labour market/employment, including a reduction in fees for hiring ex-pats; and
• banking – the postponement of loan instalments.

The tax measures adopted by the ESP include the following:

• income tax on dividends and interests has been suspended for an additional period of five years, from 2020 until 2024;
• the rate of income tax for SMEs has been reduced to 12% for the tax years 2020 and 2021;
• certain provisions have been introduced relating to the carrying forward of losses; and
• hotels were exempt from income tax for 2020 and 2021, and tourist facilities were exempt from paying the municipality and tourism taxes they collect until the end of 2021.

The ESP also exempts all companies whose main activity is operating in the economic diversification sectors from income tax for five years. Only activities which commenced between 1 January 2021 and 31 December 2022 are eligible for this exemption (subject to the rules and conditions set out by the Omani tax authority).

Oman’s Supreme Committee has also issued various decisions to mitigate the effects of COVID-19, including tax relief measures.

Amendment to Income Tax Law

The Income Tax Law was amended in 2020 by RD 118/2020. Key amendments include the following:

• enabling provisions to facilitate the exchange of information between the tax jurisdictions of different countries, which will help create a more tax-transparent environment to prevent tax avoidance;
• residency provisions to enable the authorities to determine the residential status of both individuals and corporates; and
• only one tax return must be submitted within four months of the tax year/period.

Value Added Tax (VAT)

VAT was introduced in Oman pursuant to RD 121/2020, promulgating the Value Added Tax Law. The standard VAT rate is 5%, and it is generally applicable to most goods and services. Other supplies - such as food, medicine and medical equipment - are charged at a 0% rate. In addition, certain other services, such as education and healthcare, are generally exempt from tax.

Withholding Tax

Omani taxpayers are required to withhold tax on any of the following types of payment to foreign entities that do not have a permanent establishment in Oman but which derive income from Oman:

• royalties;
• consideration for carrying out research and development;
• consideration for the use or right of use of computer programs;
• management fees;
• the provision of services, whether the services are rendered in Oman or outside (subject to certain exceptions); and
• dividends or interest (subject as set out below).

Withholding tax applies to foreign entities conducting business in Oman through a permanent establishment and does not consider the amount paid or credited to them as part of their income on which tax is levied in Oman.

Withholding tax is applied at 10% of the gross income from the above sources, as modified by any Double Tax Treaties entered into by Oman. The withholding on payments of dividends and interest applies only to JSCs and investment funds.

Withholding tax related to dividends and interest has been suspended until 2024 (see under Economic Stimulus Plan above). Pursuant to a Royal Directive announced in January 2023, it is understood that dividends and interest will no longer be subject to withholding tax.

Article 4 (bis) (1) of the Executive Regulations of the Income Tax Law sets out the services which do not fall under the purview of withholding tax.

Tax Credits

The worldwide income of an entity formed in Oman is taxed in Oman. Tax credits are available to Omani taxpayers (as defined in 5.2 Taxes Applicable to Businesses) who are subject to foreign taxes on income that is also taxed in Oman. The credit is limited to the amount of tax incurred in Oman.

Tax Incentives

The FCIL's executive regulations set out the types of investment projects that may be exempt from tax, customs and other charges.

The income of companies established in the Salalah free zone, the Al Mazunah free zone and the Duqm SEZ is exempt from tax for a period of 30 years and 25 years for companies established in the Sohar free zone.

Tax Exemptions

Exemptions from tax are given in two ways: exempt activities and exempt income.

Exempt activities

Tax exemptions are available for industrial (manufacturing) activities; the exemption is for five years and cannot be renewed.

Tax exemptions are also available to establishments/Omani companies engaging in shipping.

The ESP has exempted certain commercial activities from income tax – see 5.2 Taxes Applicable to Businesses (Economic Stimulus Plan).

Exempt income

Examples of income exempt from tax include the following:

• dividends received from Omani companies and permanent establishments;
• profits or gains on the disposal of securities listed on the Muscat Securities Market;
• the income of Omani marine companies and foreign marine companies conducting activities in Oman through an authorised agent, but only where the country of the foreign company affords reciprocal treatment;
• the income of foreign airlines carrying on business through permanent establishments in Oman to the extent of the income from operating aeroplanes for international transport, but only where reciprocal treatment is afforded in the airline's home country;
• without prejudice to the Income Tax Law, the income of collective investment funds offered for public subscription and financial trusts; and
• the income of a special purpose company established in Oman under the Securities Law.

While taxable under law, foreign companies engaged in oil and gas exploration activities normally have their liability to tax discharged by the government under the terms of their oil and gas concession agreements.

Foreign companies working for the government on projects deemed to be of national importance may be able to negotiate a tax protection clause whereby the government reimburses any tax paid by them.

Oman does not have a regime of tax consolidation. Each taxable entity is required to file its own Annual Return of Income.

If the debt-to-equity ratio exceeds 2:1 in the case of related party debt, interest on the excess debt is not deductible for tax purposes. This rule applies to all Omani taxpayers other than banks and insurance companies, permanent establishments of foreign companies, or proprietary (Omani-owned) establishments. Interest paid to related parties is allowed only to the extent the loan terms are at arm's length.

Transactions between related parties must be valued at arm’s length. There is no specific guidance on acceptable methods for determining an arm’s-length price. In practice, the Oman tax authorities apply transfer pricing rules in accordance with OECD guidelines.

Oman has stringent anti-evasion rules.

Where a taxpayer fails to declare the correct income in their income return, the Chairman of the tax authority may impose a fine of between 1% and 25% of the difference between the tax value of the taxpayer's actual taxable income and the tax value as per the return submitted.

Subject to any harsher punishment specified in the Penal Code or any other law, the following offences are punishable by imprisonment for a period of between six months and three years and/or by a fine of between OMR5,000 and OMR50,000:

• intentional refusal by the tax manager to submit the actual taxable income;
• intentional abetment or assistance of the person subject to tax to submit incorrect tax declarations, accounts, records, lists of assets or debits or other documents relating to the tax return of the person subject to tax;
• intentional destruction, concealment or disposal of any documents, records, accounts or lists required by the Secretary-General to be submitted if such destruction, concealment or disposal takes place within two years of the date of receipt of the Secretary-General’s notice; or
• intentional violation of the obligations to, among other things, provide data, information or documents regarding taxation-related international treaties or failure to do so as a result of gross negligence.

Anti-competitive practices in Oman are regulated by the Competition Law RD 67/2014 (as amended – the Competition Law) and its executive regulations.

Any person intending to take any action resulting in an "economic concentration" must submit a written application to the MOCIIP.

An "economic concentration" is defined in the Competition Law as "any act that results in the transfer of the ownership of all or part of the assets, shares, stocks, use, rights or obligations of one person to another person or establishing consortiums or amalgamations or combining two or more managements under one joint management, which is likely to cause a person or a group of persons directly or indirectly to be in a dominant position." Joint ventures are, therefore, potentially caught by this definition.

Any action that would lead to an economic concentration resulting in the acquisition of more than 50% of the market concerned may not be approved by the MOCIIP, which has the discretion to approve or reject applications falling below this 50% threshold.

The scope of the Competition Law is broad. It applies to all activities of production, commerce, services and any other economic or commercial activities practised in Oman and to any economic or commercial activities performed outside Oman that would have consequential effects inside Oman.

The Competition Law also regulates the abuse of IP rights, where this would have an adverse effect on competition. It does contain limited exemptions, however, including for public utility companies and certain R&D activities.

The MOCIIP will examine any application for clearance of an economic concentration (see 6.1 Merger Control Notification) and issue a decision within 90 days (and will be deemed to have approved the application if it does not respond within such timeframe).

The Competition Law provides that any agreement, arrangement or practice (whether concluded inside or outside Oman) that has the object of preventing, limiting or weakening the competition is prohibited.

Express examples of prohibited practices include collusion in bids or tenders among persons, or drawing up provisions in the conditions of tenders such as the inclusion of the trade mark of the commodity or specification of its type (ie, cartels).

The Competition Law contains a non-exhaustive list of practices that would be treated as having the object of preventing, limiting or weakening competition.

The abuse of a dominant position is prohibited under the Competition Law. Any person who enjoys a dominant position is prohibited from carrying out any practice likely to prejudice, restrict or prevent competition. The Competition Law also contains a non-exhaustive list of practices that would be caught by this prohibition on abusing a dominant position.

The Competition Law defines a dominant position as the ability of a person or a group of persons who directly or indirectly work jointly to control or influence the market concerned, including the acquisition of more than a 35% share of that market. The "market concerned" is also defined in the Competition Law, and has two key elements: relevant product and the geographical scope. Identifying and applying the scope of the "market concerned" to the activity/practice in question is key to determining whether a dominant position has arisen.

Agreements and arrangements (whether concluded inside or outside Oman) that aim to secure the monopoly of the import, production, distribution, sale or purchase of any goods or circulation thereof are also prohibited, as is performing any monopolistic act that would affect the market. For these purposes, a "monopoly" is defined in the Competition Law as the control by a person or a group of persons directly or indirectly of the quantity and prices of a kind of goods or service in a manner that would result in a restriction or cause an adverse effect on the freedom of competition.

The Executive Regulations

In January 2021, the executive regulations to the Competition Law were issued pursuant to MOCIIP Ministerial Decision No 18/2021 (the Regulations). The Regulations aim to remove uncertainty and provide clear guidance in determining whether or not an arrangement would fall within the scope of the Competition Law.

In doing so, the Regulations provide further guidance on the meaning of dominance, relevant products and geographical scope. They should therefore be consulted when assessing whether or not an arrangement would fall within the scope of the Competition Law (ie, whether or not an arrangement would be considered a prohibited practice or whether a transaction would require MOCIIP pre-approval).

The Regulations also set out clear guidance as to when market dominance could be triggered, as follows:

• where a person or persons acquire shares exceeding 35% of the relevant market; and
• where a person is able to influence product prices, or the volume of the supply of products, even if that person’s share is less than 35% of the relevant market.

The Regulations set out the process to apply for MOCIIP approval for an economic concentration and provide that the application must be accompanied by several documents, including information determining the nature and structure of the economic concentration. Justification for the economic concentration, copies of reports, studies and questionnaires prepared for the purpose of assessing the economic concentration must also be provided. It is important to note that the Regulations provide that all documents submitted as part of the economic concentration application must be in Arabic; if they are in a foreign language, an attested and certified Arabic translation must be attached.

The MOCIIP has 90 days from the date of receiving all the required information and documents to consider the application and make its decision. The MOCIIP may approve (subject to conditions) or reject the application. A rejected or conditioned application can be appealed to the Minister of the MOCIIP.

Under the Industrial Property Rights Law RD 67/2008 (as amended – the IPR Law), an invention is patentable if it is new, involves an innovative step, and is capable of industrial application.

Broadly speaking, the procedure to register a patent is as follows.

• The procedure is commenced by submitting an application to the Directorate of Intellectual Property at the MOCIIP (the Registrar) in the prescribed form, accompanied by a petition (containing all the data concerning the applicant, the inventor and the title of the invention, and a statement proving the applicant's right to the patent if they are not the inventor) and a description of the invention.
• Eighteen months after the filing date, the Registrar will open the patent application for public examination. Upon payment of the prescribed fee at any time between the filing date and the expiry of such 18-month period, the applicant may request the Registrar to open the application for public examination.
• If the Registrar considers that the requirements set out in the IPR Law are not satisfied, they will notify the applicant to submit their observations and amend or divide the application within three months of the date of the notice.
• If the Registrar grants the patent, the applicant will be required to pay the prescribed fee within 90 days.
• The patent will be considered to be granted on the date of publication of such grant by the Registrar, and a certificate of grant signed by the Registrar will be issued.

A patent generally expires 20 years after the filing date.

The IPR Law also regulates trademarks. A trade mark is any sign capable of being represented graphically in a manner that distinguishes the goods or services of one supplier from those of another supplier.

Broadly speaking, the procedure to register a trade mark is as follows.

• The procedure is commenced by submitting a trade mark application in the prescribed form along with the relevant documents (such as details of the applicant and a power of attorney) to the Registrar.
• The Registrar will then examine the application to ensure that it complies with the prescribed requirements and is capable of being registered.
• Once the Registrar establishes that the application for registration meets all the legal requirements, the application will be published, and any interested party may submit a written objection to the registration to the Registrar after payment of the prescribed fees within 90 days of the publication date.
• If no objection is raised, the Registrar shall register the trade mark, publish it and issue a registration certificate to the applicant.
• Alternatively, the application for registration of the trade mark may be refused by the Registrar if it does not meet the requirements; the applicant would be notified of the decision and its reasons.
• The applicant may oppose the decision refusing the application for registration of the trade mark within 60 days of the date of notification. The applicant can also appeal to the competent court against the decision to refuse the application.

The protection period for a trade mark registered in Oman is ten years from the filing date (which may be renewed).

Industrial design is defined under the IPR Law as "any combination of lines, colours or any three-dimensional form whether connected with lines or colours or not, provided that such combination or form gives a distinctive appearance to an industrial or a handicraft product forming a sign of an industrial or a handicraft product which is visually perceptible with an unaided eye." For the industrial design to be eligible for registration, it must be:

• new;
• not disclosed to the public; and
• be industrially applicable.

The term of protection for an industrial design registered in Oman is five years, which may be renewed for two consecutive periods of the same duration upon the owner’s request and after payment of the prescribed fees.

Broadly speaking, the procedure to register an industrial design is as follows.

• The procedure is commenced by submitting an application for registration to the Registrar in the prescribed form, signed by the applicant or the applicant's lawyer.
• The application must be accompanied by drawings, photographs and a petition that sufficiently describes the goods incorporating the industrial design and indicates the type of products for which the industrial design is used.
• The Registrar will then evaluate the application and notify the applicant of the decision to accept or reject the application. The applicant must pay the prescribed fees within 90 days of the date of such notification.
• The Registrar will publish the industrial design in the Official Gazette.
• Upon successful completion of the no objection period, the Registrar will issue the registration certificate for the industrial design.

An industrial design expires five years from the filing date and is renewable for two consecutive periods of the same duration upon the owner's request.

The Law for the Protection of Copyright and Neighbouring Rights RD 65/2008 (as amended – the Copyright Law) regulates copyright law in Oman. Oman ratified the Berne Convention for Protection of Literary and Artistic Works in July 1999.

Protection under the Copyright Law is provided to original literary, technical and scientific works, regardless of their value, nature, method of expression, or the purpose of their authorship. Computer programs and databases read from a computer or elsewhere are protected by copyright. Mere ideas, procedures, methods of work, mathematical concepts, principles, inventions and data are not protected by copyright.

Before the author's work is published, an author or their representative may deposit an application for protection of their work to the MOCIIP in the prescribed form, together with three copies of the work. The Copyright Law considers such a deposit tantamount to ownership. The applicant will be provided with a deposit number, and the deposit will then be published in the Official Gazette. Thereafter, an application is submitted to the Ministry for the data deposit certificate for the work.

The financial rights of an author of a literary work, including computer programs, are protected during their life and for 70 years starting from the commencement of the calendar year following the year of their death.

Registration of title to the authorship of a work acts as proof of ownership to the work (Registered Owner), and the onus to prove that the work does not belong to the Registered Owner is on the infringer. In addition to the civil and penal remedies available, a titleholder is entitled to remedies at borders and interim/ex parte remedies. Civil remedies include orders to prevent the export/import of the goods involved in the infringement, orders to cease the infringement, and claims for compensation based on losses incurred and profits made by the infringer. If copyright infringement is established, the court must pass a judgment to confiscate any assets resulting from the infringement. Except in exceptional cases, the court must also order the confiscation of all the commodities involved in the infringement and the material and equipment used to commit the act of infringement and order their destruction at the expense of the judgment debtor or their disposal outside the trade channels if the destruction is liable to undermine public health or the environment.

Under the Penal Code, a person who becomes acquainted with a secret by virtue of their profession, occupation or work and (without the consent of the concerned person) discloses it other than in the circumstances permitted by law, or uses it for their personal benefit or the benefit of another person, may be imprisoned for between one month and one year.

Oman has issued its first comprehensive personal data protection law, enacted by RD 6/2022 (the DPL). The DPL came into force on 13 February 2023 and will be supplemented further by the Executive Regulations to be issued by the Ministry of Transport, Communications and Information Technology (the MOTCIT).

The DPL introduces matters such as the rights of owners of personal data (an “Owner”) and the obligations of controllers and processors of personal data.

The DPL applies to any processing of personal data, which is defined in the DPL as data that makes a natural person identifiable, directly or indirectly, by reference to one or more identifiers. Identifiers include but are not limited to an individual's name, civil identification number or other data related to an individual's genetic, physical or mental identity.

Article 3 of the DPL sets out certain circumstances in which the provisions of the DPL will not apply to the processing of personal data. These circumstances include but are not limited to the following:

• the protection of national security or public interest;
• the execution by the units of the Administrative Apparatus of the State and other public legal persons of their functions prescribed to them under law;
• compliance with a legal obligation imposed on a controller under any law, judgment or court decision; and
• the protection of the economic and financial interests of the State.

Rights of the Owner

Consent

Under the DPL, personal data may only be processed with the Owner's express consent. This is to ensure that any processing of personal data is done within the framework of transparency, honesty and respect for human dignity. Any request to process personal data must be in writing, in a clear and understandable manner.

Sensitive personal data

The DPL provides for a general restriction on the processing of certain data, including:

• genetic and biometric data;
• health data;
• data relating to an individual’s ethnic origin, sexual life, political or religious opinions or beliefs, criminal convictions; and
• data relating to security measures.

The processing of such data will require authorisation from the MOTCIT.

Other rights

Data Owners enjoy several other rights under the DPL, including the right to:

• obtain a copy of their processed personal data;
• transfer personal data to another controller;
• revoke their consent in respect of the processing of their personal data;
• amend, update and withhold personal data; and
• be notified of any breach or violation of their personal data and measures taken in this regard.

The Executive Regulations are expected to provide further guidance on the exercise of these rights by the Owners.

The DPL applies to any processing of data in Oman. Similarly, the transfer of data outside of Oman may only be done in accordance with the controls specified in the Executive Regulations.

The MOTCIT is the authority responsible for implementing the DPL and has the right to do the following:

• prepare the controls related to the protection of personal data, including specifying the necessary safeguards and measures required to protect personal data;
• issue procedures for processing personal data and ensure the compliance of controllers and processors with such procedures;
• receive complaints filed by Owners and decide on them within the period specified by the Executive Regulations;
• co-operate with competent entities in other countries with respect to the protection of personal data;
• provide advice and support to units of the administrative apparatus of the State and other public legal persons in matters related to personal data protection;
• draft guidelines for implementing the DPL whenever necessary; and
• maintain a register of controllers and processors meeting the conditions in accordance with the regulation.

To protect the rights of Owners, the MOTCIT may:

• issue warnings to controllers and processors who violate the provisions of the DPL;
• order the correction or removal of personal data;
• suspend the processing of personal data, either temporarily or permanently;
• suspend the transfer of data to another country or an international organisation; and
• take any other measures it deems necessary for the protection of personal data.

Sectoral Laws

To the extent they do not contradict the DPL, certain sectoral laws containing limited data and privacy protection provisions will continue to apply. These include the Telecommunications Regulatory Law and the Banking Law, for example.

Health Insurance Companies Regulations

In response to the increasing significance of the health insurance sector and the rapid growth of the health insurance market, the recent amendments to the Insurance Companies Law have effectively separated health insurance activities from other insurance activities. Previously, health insurance was considered part of general insurance activities. The amendments to the Insurance Companies Law envisage that the executive president of the CMA will issue a decision regulating the activities of health insurance companies.

DPL Executive Regulations

Pursuant to the DPL, the MOTCIT is required to issue the Executive Regulations of the DPL, which are expected to clarify the application of the DPL to several matters, including the exercise of Owners' rights, the transfer of data and the process of filing a complaint with the MOTCIT regarding breach of Owners' personal data.

Securities Law Executive Regulations

The Securities Law came into force on 20 June 2022, repealing Royal Decree No 80/1998 promulgating the Capital Market Law, except for Articles 46–58, which shall remain in force. The Executive Regulations are expected to be issued within one year from the date the Securities Law came into force and are expected to regulate matters such as the conditions and procedure for establishing and licensing entities that are subject to the Securities Law, activities which require a licence to be undertaken and those which do not, and the prohibited activities.

Regulation of Virtual Assets

It is understood that the CMA and other regulators in Oman intend to promote and develop fintech products. The CMA is currently preparing the regulatory framework for the regulation of virtual assets, including the licensing, regulation and supervision of Virtual Asset Service Providers.

Labour Law

A new labour law is expected to be issued, which would repeal the existing Labour Law. The exact date of publication is yet to be announced.