Economy

Nuts and Bolts

As part of its hugely ambitious economic diversification and reform package known as Tanfeedh, the Omani government is deftly overhauling its legal structure to widen its local tax base and entice more foreign investment.

Oman consistently outranks the vast majority of neighboring countries in ease of doing business indicators, particularly but not limited to Saudi Arabia, far and away the largest regional economy, and Iran, the second largest, not to mention Jordan, Iraq, and the MENA average. Its strongest suits are in ease of paying taxes and starting a business, where according to the World Bank, it consistently ranks around the 90th percentile, though it has also shown noted recent improvement in the ease of trading across borders and dealing with construction permits. Altogether, in 2017 it rose 0.8% in the World Bank’s “Distance to Frontier” index that measures overall economies’ progression toward optimal ease of doing business, where 100 is the most sought-after.

To be sure, shrinking oil revenues since 2014 have driven the government to adopt a wide-ranging number of economic reforms to make up for the persistent deficits since the prolonged slump began. This economic diversification effort has become known as Tanfeedh. These include but are not limited to strengthening corporate governance, restructuring capital markets, and regulating the Islamic finance sector to diversify funding options for public and private sector entities. The government is also fighting to restructure the country’s logistics sector, an area that has been designated as top priority under the government’s ninth five-year plan, covering 2016-2020. One of the biggest and most welcome of these for the international business community is a proposed foreign capital investment law that would allow 100% foreign ownership and remove the existing minimal capital requirements.
Based on previous successes in its water and electricity utilities, Oman is also set to unveil its first-ever PPP law in 2017-18. As part of its broader effort to secure more robust sources of private financing, the PPP law will build on Oman’s previous Privatization Law to enhance private sector confidence across the board. As part of Tanfeedh’s efforts to cut red tape, encourage investment, and standardize labor requirements across the manufacturing, tourism, and logistics sectors, the country also unveiled a radical reform of its corporate tax law. Boosting the corporate tax rate from 12 to 15% (and standardizing it at 3% for micro-enterprises), the reforms also removed the tax-free threshold of USD78,000, and required government ministries, bodies, and state administrative units to deduct withholding tax, another move that will significantly expand the tax base. What’s more, a 10-year tax exemption on income from agriculture, hotels and tourist villages, mining, export of local goods, fishing, animal produce, education, and healthcare have all been removed.
In most cases, foreign investors looking to put their money into Oman must have a legally registered presence by obtaining a foreign capital investment license from the Ministry of Commerce and Industry (MOCI). Once obtained, these investors can form a new company or purchase an existing one with up to 70% ownership. The other 30% must be locally owned. As mentioned, however, the government now allows for significant exceptions to be made, and 100% foreign ownership is now permitted for projects recommended by MOCI and Council of Ministers and deemed critical to national development and have a minimum capitalization of USD1.3 million; in most sectors to companies set up by GCC and US nationals—the latter a product of the US-Oman FTA; power and water desalination projects; and companies set up in Oman’s free economic zones. LLCs with foreign ownership generally require minimum capital outlays of USD390,000, compared to only USD52,000 for GCC and US nationals.
Of the other incentives to foreign investors thinking of setting up shop in Oman are the interest-free loans for companies engaged in fisheries, agriculture, industry, mining and quarrying, and tourism.

You may also be interested in...

Green,Hydrogen,H2,Gas,Molecule.,Production,Of,Green,Hydrogen,Energy

Energy & Mining

Quick off the block

Oman as a global green hydrogen hub

View More

Economy

Omani Investment Law

What is Oman like for investors in 2022?

View More
The,Facades,Of,The,Supreme,Court,Building,,The,Council,Of

Economy

Rewriting the Future

Oman Vision 2040 and the 10th Five-Year Development Plan (2021-2025)

View More
Close,Up,Doctor,Holding,Syringe,And,Using,Cotton,Before,Make

Tourism

Close to Home

Staycation and quarantine packages

View More
Muscat,,Oman,-,Nov,29,,2015:,Port,Sultan,Qaboos,Cruise

Industry

Dynamic Development

Advantages of Free Zones

View More
View All Articles