What is Company Formation in Oman?
It is a country in the Middle East. Its economic performance improved significantly in 1999 due to largely to the mid-year upturn in Oil Prices. The government is moving ahead with privatization of its utilities, the development of a body of commercial law to facilitate foreign investment, and increased budgetary outlays. Oman liberalized its market in an effort to accede to the world trade organization and gained membership in 2000. Oil and gas fuel the economy, and revenues from petroleum products have enabled Oman to witness a remarkable development over the past four decades. Knowing the fact that Oman is highly dependent on the hydrocarbon sector, and oil and gas will run out in the future, the Omani government in recent years has been focusing on the development of industry, trade, and tourism. It has reunified the basic infrastructure and facilities to uplift the various aspects of economy and boost the nation with growth.
Business Structure & Formation
Almost all kind of business structure is available in Oman as like another country too. Sole proprietorship, partnership (either general or limited liability partnership), agency or branch office and company. For company formation person can choose among its three types i.e. Limited Liability Company (LLC), closed joint stock company and the open joint stock company. The most popular form of business structure among company is limited liability company (LLC).
Limited Liability Company (LLC)
It must have a minimum of two and a maximum of 40 shareholders. It can undertake activities set out in the objects contained in the LLC's constitutive contract i.e. similar to Memorandum of Association (MOA)/Articles of Association (AOA). The minimum capital of an LLC is OMR 150,000.
Stepwise procedure to register LLC in Oman is listed below:-
- Name Reservation
- MCI Application (Incorporation documents submission)
- Oman Chamber of Commerce and Industry (OMCI) registration
- Company Seal
- Post registration
- Municipality license
- Tax registration
- Registration with Royal Oman Police
- Registration with Ministry of Manpower, to apply for labor clearances and visas.
- Import Export License, depending on the nature of business,
- Industrial, environmental and other permits and licenses, depending on the nature of business.
Applicant requires submitting application to Ministry of Commerce and Industry (MCI) under applicable law to reserve the name of company subject to restriction of uses of particular name as given in Omani Law.
After approval and reservation of Name, now the next step is to prepare and obtain documents like foreign shareholder documents or Omani shareholder documents, Constitutive contract and authorized signatory form, bank certificate for evidence of compliance with LLC's capital requirements.
This is the final step of registration process and is obtained immediately on the MCI completing its registration process to obey the other prescribed commercial rules and regulation for corporate in Oman.
Depending on the size, nature and composition of business, further government approvals may require.
The instruction to make the company seal or stamp is issued by the registered authorized signatory of the LLC. When issued to the supplier of the stamp or seal, such instruction should be send with an attested signature specimen confirming the requesting persons' authority to obtain the stamp or seal.
Once the LLC is registered the company will need to organize and obtain following registration or approval, as the case may be to run business/trade in Oman
Oman's income tax laws seek to tax the worldwide income of Omani Entities and the Oman-source income of branches and other permanent establishment. Rate of tax in Oman is nil up to First OMR 30,000 then above OMR 30,000 the rate of tax is 12%. However the company engaged in petroleum exploration will be charged to 55% of tax on income derived from sale of petroleum products.
Further, the foreigner has option of Branch office and Agency set up in Oman under applicable Omani Law to do trade/business in Oman briefed below.
A company not formed in Oman which has entered into a contract with a government entity or quasi-government entity is authorized to operate with registration in Oman as a foreign branch. It can be interpreted as Branch is possible for foreigner provided they have secured contract from authority. The branch registration is dependent upon the term of the government contracts, which must also be registered. The branch office is not normally entitled to seek and carry out business within the private sector. A branch office is a ‘footprint’ of the foreign company in Oman. Therefore, this kind of corporate entity not required to have share capital and any local partner too. And the foreign company remains liable for all of the debts and other liabilities of the branch office.
Oman has many well-established local commercial and trading companies, some of which have grown into sizeable conglomerates with extensive local, regional and international business interests. Many of these entities are used to acting as agents or distributors for overseas companies. Foreign investors who wish to appoint an agent or distributor need to draft the agency or distribution agreement with care and take legal advice on the background legislation to these forms of contract because Oman’s Commercial Agencies Law provides an agent significant protection from the termination of its appointment by an overseas principal on due course of business.
Oman, itself a struggling with new process and advanced technology of day by day growth and the process and length of time attributed to registering a company in Oman can vary and sometimes unforeseen hurdles can arise. However, the country is an evolving/developing market for a broad spectrum of businesses. The government of Oman plans and targeted to develop its economy through a series of five (5) year plans, under the umbrella framework known as Vision 2020. The government is committed to steady progress, diversification and the involvement of the international and local private sectors investments, and the legal framework is continually developing to improve and support foreign investment. As a consulting firm, we believe Oman remains a country full of possibilities for investors.