Middle Eastern Laws

This document is provided as information only and should not be used as a substitute to proper research.

Doing Business in Oman


The Commercial Code of Oman (“The Code”) (Royal Decree No. 55 / 90) provides that foreign nationals may not engage in commerce in the Sultanate of Oman except after obtaining “permission to do so in accordance with the applicable Laws” (Article 24). Article 25 of the Code provides that foreign companies may not establish a branch in the Sultanate or engage in Commerce except through an Omani local agent who is a merchant and in accordance with the rules set forth by the Law.

Royal Decree No. 102 / 94 relating to the Regulation of Foreign Capital Investment (Repealing Royal Decree No. 4 / 74) provides the general framework for foreign investment in Oman. In particular, it provides:

  1. Foreign nationals may not conduct any business activities or participate in an Omani company without obtaining a license to that effect from the Ministry of Commerce and Industry
  2. Licenses to conduct business in Oman are granted to Omani entities whose share capital is not less than OR 150,000 and in which the foreign participation is not more than 49%. The percentage of foreign ownership may be increased in certain situations.
  3. Foreign investors are permitted to own up to 100% of an entity provided it is engaged in a national economic development project that is approved by the National Development Council, and that it has a minimum capital investment of Omani Rial (OR) 500,000 (Article 2 of Decree 102/94).
  4. Foreign companies that have special contracts with the government, or provide services that are needed in Oman, are exempted from the requirement of obtaining a license (Article 3 of Decree 102/94).
  5. All license applications are to be submitted to the Foreign Capital Investment Committee (Article 4 of Decree 102/94).


The following forms of entry into the Sultanate’s market are available to foreign nationals and foreign entities:

  1. Participation in a local commercial company
  2. Formation of a joint venture with a local partner
  3. Appointment of a local commercial agent
  4. Contracting with the public sector


The Commercial Companies Code provides that commercial companies with non-Omani partners must comply with the Foreign Capital Investment law (Article 7 of the Commercial Companies Code). The following types of commercial companies are open for foreign participation under the Commercial Companies Code.

A. Limited Liability Companies “LLC”

An LLC must have at least two partners (national or juristic persons). Their share capital may not be less than Omani Rial (OR) 10,000 when all partners are Omani and OR 150,000 if there is foreign participation. The capital is divided into equal parts that are not available for public subscription. The partners’ liability is limited to their share of the capital. An LLC may not engage in banking, financial guarantees, or commercial aviation activities. LLC’s are popular since they are relatively easy to form.

B. Joint Stock Companies

There are two types of joint stock companies permitted in Oman:

  1. Closed joint stock companies whose shares are not publicly traded (minimum capital OR 50,000)
  2. Public joint stock companies whose shares are publicly traded (minimum capital OR 150,000)

The minimum capital is set at OR 150,000 for both types of joint stock companies if there is foreign participation. The minimum par value per share is OR 1 and the maximum is OR 5. Joint stock companies may not be incorporated without the prior approval of the Ministry of Commerce and Industry and issuance of a license to that effect.


Joint ventures are regulated by the Commercial Companies Code (Royal Decree 4/74, as amended by Royal Defense Decrees 13/89; 83/94; 16/96). Joint ventures are not considered juristic persons under the law (Articles 3 and 52). Joint venture agreements are private arrangements, and thus, do not require public recording (Articles 6 and 52). An Omani partner must hold at least 51% ownership of the joint venture project (Article 7).

If the joint venture conducts business with third parties as a joint venture, the transactions will be subject to the provisions of Al-Tadamon Company and the provisions of the general partner in a Tadamon Company (Article 54). Tadamon companies are very similar to general partnerships in common law legal systems.


Commercial agencies are utilized as vehicles for importing products and/or services into the Sultanate and not to establish a business presence. Commercial agencies are governed by the Commercial Code (the “Code”) (Royal Decree 55/90), the Commercial Agencies Law (Royal Decree 26/77 as amended by Royal Decree 82/84 and Royal Decree 73/96), and the Commercial Register Law (Royal Decree 3/74 as amended by the Royal Decree 88/86).

The Commercial Agencies Law defines a commercial agency as “Any agreement through which a merchant or a commercial company in the Sultanate is assigned to promote or distribute the products or services of a foreign person or entity in consideration for profit or commission”.

Only Omani nationals (or a naturalized person who has been a citizen at least three years) who is eighteen years age or older and who is registered as a member of the Oman Chamber of Commerce, or companies duly established in accordance with the laws of Oman and with at least 51% Omani ownership may be appointed as commercial agents.

Commercial agency agreements need not be exclusive. This means that the principal is free to appoint more than one agent in Oman. The commercial agency agreement must be in writing and must be duly certified and authenticated. The agency agreement must include at least the following essential elements (Article 6):

  • The names of the agent and principal and their nationality;
  • The products or services subject matter of the agency;
  • The term and the territory.

The agreement must be directly between the provider of the services or the manufacturer of the products and the agent. Furthermore, during the term of the agency, the principal may not engage in the sale of the products and services in the territory, whether directly or through any other intermediary. The agent will be entitled to his/her commission/share of profit for any such sales (Article 7).

An agency agreement must be registered at the Commercial Agencies register at the Ministry of Commerce and Industry to be enforceable. No claim may be heard regarding any agency that is not duly registered (Article 11 (D)).

Omani law provides substantial protection to commercial agents, especially in the context of termination. If the principal terminates an unlimited term commercial agency without cause, the principal must compensate the agent. With respect to limited term agencies, the principal is free to cancel registration at the end of the term. However, an agent may seek compensation where the principal has abused this right to terminate. The most common example is where the principal unjustly terminates or fails to re-new.

The Dispute Resolution Authority has jurisdiction over commercial agency disputes (Article 18). The Dispute Resolution Authority was formed by Royal Decree 79/81 and is the sole body responsible for hearing Commercial disputes in the Sultanate. The Authority has sole discretion in determining the appropriate amount of compensation to be paid in disputed cases.

Types of Commercial Agencies:

  1. Contracts agency: The principal compensates the agent for promoting the principal’s services/products in the territory. The agent remains independent and may or may not have the authority to sign on behalf of the principal. Principals wishing to contract with the public sector usually use this type of agency.
  2. Commission Agents: This type of agency is usually used when the principal is concealed and the agent contracts in his/her name but for the benefit of the principal.
  3. Trade Representatives: This is a type of employment contract whereby the principal sends representatives to Oman.
  4. Brokers: This is an agency agreement whereby the principal entrusts the agent to locate and identify possible buyers in consideration for a commission.


The Public Tenders Law governs public procurements in the Sultanate (Royal Decree 86/84 and the amendments thereto). Article 1 of the Public Tenders Law provides that all government procurement and public works contracts are to be governed by the Tenders Law and shall be conducted via a public tender with the exception of:

  1. Defense contracts and projects: The Ministry of Defense oversees defense procurement through an internal tenders committee.
  2. Specific exceptions provided for by the law: The law provides that, upon meeting certain criteria, Ministries may form their own internal tenders committees, contract directly with the supplier, or sole source.

The Tenders Committee is responsible for overseeing all government tenders (Article 2). Persons who reside in the Sultanate and have an address to which a valid notice may be served are permitted to submit bids. Furthermore, the bidder must have a local agent or a sponsor who must be named in the bid. Tenders may also be submitted through local agents who must present a proper power of attorney duly authenticated from the bidder’s country.


Royal Decree No. 1/79 and the amendments thereto relating to the Encouragement and Regulation of Industrial projects provide various incentives for local industrial projects. These include tax holidays for five years; exemptions from export and import taxes and provision of utilities at reduced rates. Furthermore, the government gives preference to local products in its procurements.


There are no personal income taxes in Oman. Corporate income tax in Oman is regulated by the Corporate Income Tax Law (Royal Decree 47/81 and the amendments thereto) (The “Tax Law”). All corporate entities as defined in Article 2 of the Omani Commercial Companies Law are subject to corporate income tax. The law also applies to Omani joint ventures and any entity which has a “permanent presence” in Oman and is supported by a foreign entity, or which the Director of Taxes deems to be supported by a foreign entity (Article 2(4) of the Tax Law). The Tax Law defines the words “Entity with Permanent Presence” in Article 2(11) as: “An entity that has a fixed place of activity in which the project conducts all or part of its business” and it includes in particular:

  • a place for selling;
  • a place for management;
  • a branch;
  • an office;
  • a manufacturing facility;
  • a mine, quarry, or any other place for natural resources;
  • a construction site or place or an assembly plant.

The Law also carves out certain exclusions to the above definition.

Income is defined in Article 8 in the broadest possible terms. Article 13 defines the allowable deductions. Ministerial Decision No. 91/84 defines further the deductions that should be taken into account when calculating the corporate income tax of Omani branches of foreign corporations. These include corporate headquarters expenses that are actually incurred and are attributable to the branch. If determination of actual expenses is difficult, the law provides various formulas for the purpose of accounting for headquarters expenses. The applicable tax rates vary depending on whether or not the company is wholly owned by Omani nationals, the percentage of Omani participation in the company’s share capital if it is “a mixed company” (i.e., includes Omani and foreign shareholders) and the activity in which the company is engaged. In all cases, the applicable rates apply to slices of income on a progressive scale.

A. Tax Rates

  • Purely Omani entities & Mixed Public Joint Stock Entities are taxed between 0%-7.5%
  • Other Mixed Corporate entities:
    • 0-99% Omani participation (i.e., 1-90% foreign ownership): taxes range from 0% to 25%
    • 9% or less Omani participation (i.e., 91% or more foreign ownership): taxes range from 0% to 50%

B. Exemptions and Tax Holidays

Corporations whose main object is manufacturing, agriculture, fishery, tourism, exportation of local products, public utility projects and infrastructure projects, as well as companies whose activities are deemed essential for economic development, may be exempted from tax for five years (Royal Decrees 125 / 94; 102 / 94; 75 / 21). These corporations may carry forward losses incurred during the five-year exemption period for as many years needed until the losses are set off against taxable income.

C. Withholding Tax

Royal Decree No. 89/96 provides that foreign companies without a permanent presence in Oman and who receive fees/income from management contracts, royalties, leases of equipment and machinery, technical expertise and/or research and development, will be subject to a withholding tax amounting to 10% of the total fees/income received.

Middle Eastern Laws

These pages contain some basic information about business structure and procedures regarding some key Middle Eastern markets. The following articles are for information only:

Doing business in Egypt
Doing business in Kuwait
Doing business in Lebanon
Doing business in Libya
Doing business in Oman
Doing business in Saudi Arabia
Doing business in U.A.E.