THE LEGAL ASPECTS OF DOING BUSINESS IN OMAN

1. THE LEGAL ASPECTS OF DOING BUSINESS IN OMAN Primer: Said Al Shahry Law Office’s “A Legal Guide To Doing Business In Oman”

2. EXCHANGE RATE • RO1 = US$2.60 (Fixed Rate) • RO1 = S$3.80 (Approximate) • RO1 = RM9.17 (Approximate)

3. Gulf Cooperation Council (“GCC”) • A trade bloc involving the six Arab states of the Arabian Gulf: • Bahrain; • Kuwait; • Oman; • Qatar; • Saudi Arabia; and • the United Arab Emirates

4. I. ESTABLISHING A COMPANY

5. USA Oman Free Trade Agreement • Duty-free access to the US market; • Expansion of Omani's services sector through cross-border supply of services or through establishment in the US. • Removal of barriers to inward investment by US investors, creates opportunities for partnering and other business arrangement, facilitates exchange of technology, know-how and expertise.

6. General Partnership Company Limited Partnership Company Joint Stock Company (“JSC”) Limited Liability Company (“LLC”) Holding Company Joint Venture (“JV”) Branch of a Foreign Company Commercial Agent Commercial Representative Office (“CRO”)

7. 1. General Partnership Company • Two or more persons. • Partners jointly and severally liable for company’s debts to the full extent of their property.

8. 2. Limited Partnership Company • One or more general partners, who are jointly and severally liable for the company’s debts, to the full extent of their property; or   • One or more limited partners, whose liability for the partnership company’s debts is limited to the amount of their contribution to the partnership company’s capital.

9. 3. Joint Stock Company (“JSC”) • SAOC (Société Anonyme Omanaise Close) - “closed” joint stock company; or • SAOG (Société Anonyme Omanaise Générale) - “public” joint stock company (Muscat Securities Market). • Minimum three persons but JSC formed by the government an exception to this rule. • SAOC - minimum issued capital of RO500,000. SAOG - minimum issued capital of RO2 million.

10. 4. Limited Liability Company (“LLC”) • Minimum two members, characteristics of a partnership, fixed capital divided into shares; • No company directors or board of directors; • Non-Omani shareholder cannot hold more than 70% whilst Omani shareholder holds balance 30% - Mixed LLC; • Minimum issued capital for Omani LLC is RO20,000, for mixed LLC it’s RO150,000.

11. 5. Holding Company • Either a JSC or a LLC which financially and administratively controls one or more other companies; • Subsidiaries of a holding company if the latter owns at least 51% of the shares; • Capital of a holding company must not be less than RO2,000,000.

12. 6. Joint Venture (“JV”) • Commercial company, min two persons, Omani nationals or Omani companies; • No separate legal personality, no entity or name of its own; • Contract defining objectives and terms of JV between its members; • JV’s existence no defence against 3rd party claims, 3rd party can only claim against the JV member they deal with.

13. 7. Foreign Company Branch • Foreign company branch allowed if contract with government (“Qualifying Contract”); • Registration relates only to that specific contract and effective for its duration; • Operates as a permanent establishment without Omani participation; • Does not require a dedicated capital except in the case of foreign banks.

14. 8. Commercial Agent • For foreign companies exporting goods and services to Oman without a permanent operation in Oman; • Agent must be Omani national or business with minimum 51% Omani participation; • Commercial agencies and commercial agency contracts must be registered with MOCI in order to be enforceable in Omani courts.

15. 9. Commercial Representative Office (“CRO”) • Foreign companies may open representative offices in Oman but their activities limited to: - establishing contacts with local suppliers; - promoting their company’s products; and - receiving complaints from local customer. • Does not require an Omani agent or sponsor; • CRO cannot import, export or sell products or services.

16. II. TAXATION & COMPANY ACCOUNTS

17. 1. Taxes On Companies • Corporate income tax chargeable on income realized or arising in Oman; • Non-resident parties in Omani contracts for supply & installation, know-how & management services, leasing agreements for plant & equipment – carried on in Oman?; • Offshore income, eg. Investment dividends may also be taxable; • Capital gains mainly not chargeable as taxable income of company.

18. LLC and SAOC, taxes levied on corporate profits exceeding RO30,000: • Wholly owned by Omani nationals, 12%; • Wholly owned by 100% GCC entities, 12%; • All shares owned by Omani nationals and GCC entities, 12%; • Not more than 70% of shares owned by non-GCC entities, 12%; • More than 70% of shares owned by non-GCC entities, in accordance with table (pg 10 primer).

19. 2. Taxes On Individuals • No Income Tax. • No Capital Gains Tax. WYEIWYG (What You Earn Is What You Get)

20. 3. Withholding Tax • Payable by foreign companies with no permanent establishment in Oman but derive income from:  • royalties (as one-off or series of payments); • management fees; • lease of machinery or equipment; • payments for transfer of technical expertise; • payments for research and development. 10% charged on gross amounts paid to them.

21. 4. Other Taxes • Social Security - Omani employees aged 15 - 59; - 9.5% (employers) and 6.5% of basic salary. • Dividends - no withholding taxes. • Lease Agreements - 0.5% tax if more than 7 years. • Various Municipality Taxes • No Sales Tax or Value Added Tax - but GCC VAT maybe introduced soon.

22. Allowable Deductions for Companies Double Taxation Company Accounts Penalties

23. III. CUSTOM DUTIES

24. Categories • GCC Custom Union – 1st Jan 2003. • GCC products duty free. Non-GCC states have 5% duty unless exempted goods. • High duty – 100% on pork, alcohol, tobacco. • 10% price preference given to Omani products on government purchases and to foreign industrial producers in JVs with Omani companies.

25. Oman & USA Free Trade Agreement • In force 1st Jan 2009. Almost all Omani consumer and industrial products duty free in US, and vice versa. • Investment provisions strengthen protections for U.S. investors operating in Oman. • Provisions on intellectual property rights, government procurement, labour, environment, and dispute settlement to improve bilateral trade and investment.

26. IV. INTELLECTUAL PROPERTY RIGHTS

27. Signatory to all important IP treaties. • World Intellectual Property Organisation – 1997 • WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) • World Trade Organisation (“WTO”) – 2000 • Oman Copyright Law 1996, reenacted 2000 • Oman Industrial Property Rights Law – 2008

28. V. IMMIGRATION, EMPLOYMENT & OMANISATION

29. 1. IMMIGRATION • Single Entry Visa • Combined tourist, business, short visit visa. • 1 month. • Employment Visa • Omani sponsor required. • 2 years and renewable.

30. 2. EMPLOYMENT • Expatriate and Labour Clearance • Basic Elements of Employment Contract • Termination • Public Authority for Social Insurance • End of Service Benefits

31. 3. OMANISATION • Support employment of Omani citizens • Omanisation Percentages (4 years period min) • Omnisation Plan

32. VI. PROPERTY

33. Only Omani and GCC individuals, and 100% owned companies allowed to own property. • Non-GCC nationals allowed to own property in Integrated Tourism Complexes. • Tenancy (Residential and Commercial)

34. VII. ARBITRATION

35. Arbitration Law (UNCITRAL Model Arbitration law) and Foreign Awards Law. • Preferred method for commercial disputes resolution in building, construction, oil & gas, project financing. • Choice of substantive law. • Conducted in Arabic unless parties agree otherwise. • Omani Courts rarely interfere in an arbitration. • UN Agreement on Recognition & Enforcement of Foreign Arbitration Awards – New York Convention (accession 1996).