Oman: Banking, Currency & Taxation
Banking and Currency
Foreign Currency Control
Oman’s exchange system is free of restrictions on payments and transfer for international transactions, and the Omani trade system may be regarded as virtually fully open.
The financial institutional framework of Oman is mainly composed of banks, money exchanges companies, insurance companies, pension funds, hire purchase and leasing companies and the Muscat Securities Market. The banking sector is the major component of the financial system and is comprised of the Central Bank of Oman, 17 commercial banks of which seven are locally incorporated and three specialized banks. The banking industry is regulated by the Banking Law of 1974.
The Central Bank
The Central Bank of Oman (CBO), which was established in 1975, has taken several measures to strengthen its supervisory role and to ensure the soundness of the banking system and the economy. These measures include the raising of the maximum limit on investment in Government Development Bonds, encouragement of mergers within the financial system and the issuance of regulations governing investment banking activities. The CBO requires that commercial banks maintain minimum capital holdings of RO 10 million for locally incorporated commercial banking institutions and RO 3 million for foreign incorporated commercial banking entities.
Oman Development Bank
The Oman Development Bank provides loans and guarantees for financing development expenditure for manufacturing, tourism and service projects in designated sectors of the economy. The loans and guarantees may amount to 100 percent of the paid-up capital. In addition, the Oman Development Bank may participate in the share capital of the company or underwrite an issue of shares to the public up to 51 percent of the capital of the company. The government may bear 3 percent of the interest for projects located in Muscat, and 5 percent for projects located outside Muscat. The term of such loans may range between three and ten years. As to security, the Oman Development Bank may require that mobile and fixed assets be mortgaged in its favor, and, in certain cases, personal guarantees may be necessary.
The Sultanate joined the World Intellectual Property Organization in September 1996. The sultanate is also applying for membership in the WTO, which would require a signing a number of agreements, including one on protection of intellectual property rights.
In 1996, the country enacted a copyright protection law but did not begin enforcement until 1999, when the government destroyed pirated cassettes. In its attempt to gain acceptance to the WTO, the country is working to become TRIPS compliant.
The Omani trademarks regimes consists of Royal Decree 68/87, Decree Law No. 635/1991 and Royal Decree 33/91. Registrable marks consist of distinctive shapes consisting of words, signatures, letters, drawings, symbols, headings, seals, pictures, engraving or any other distinctive mark or combination. With the exception of alcoholic goods of Class 33, Oman has adopted all forty-two classes of the International Classification. Prior to registration, marks are published in the Official Gazette and in one daily paper. Opposition may be filed within thirty days from the date of publication in the Official Gazette. Upon registration, a ten year period of protection is granted, renewable for similar periods, and exclusive ownership of the mark is given. Marks which have not been used for five years or more may be challenged for lack of use. Marks unlawfully registered or which have not been effectively used for five consecutive years can be canceled upon a petition filed by the Registrar or any interested party. Violation of the law triggers criminal penalties including fines, imprisonment or both.
In 1996, Oman enacted a new copyright law by Royal Decree 47/96. Under this law, the authors of original works of art in literature, science (including computer programs), arts and culture in general enjoy the protection of the law irrespective of the value, type, manner of expression or purpose of those works. The copyright is the sole right of the author unless proved otherwise. Such rights include the right to translate, abridge, publish, financially exploit and reproduce the work. Certain exploitations of such works are allowed for, e.g. teaching purposes, use by public libraries, personal use and the like. The Commercial Disputes Settlement Committee may make orders regarding unauthorized publication or display, which include stopping publication, display or manufacturing and attaching the revenues made by virtue of the breach of the author’s rights. The right to financially exploit the work lapses after fifty years from the death of the author or the death of the last author in case of joint works. A protection period of twenty-five years from the date of publication applies to movies, applied-art works, photographs, works belonging to private or public corporations, works firstly published after the author’s death and works published under a pseudonym or without bearing the author’s name.
Authors possess the right to transfer all or part of their rights in the work free of charge. Publications of literary, artistic and scientific works which are published in Oman by means of reproduction, shall first be filed with the Ministry of Commerce and Industry, and the works will be also published in the Official Gazette. Violation of the provisions of the Royal Decree 47/96 triggers criminal penalties including fine and imprisonment.
The Omani tax regime has been considered to be both reasonable and pragmatic in its dealing with taxpayers. The tax system has undergone important changes reflecting the government policy of opening up the economy to foreign investment, and more changes are forthcoming. By and large, taxation is moderate because many of the government’s revenues are oil revenues. Therefore, Oman levies no personal income tax, estate tax or gift tax. All entities, both foreign and locally owned, are taxable in Oman.
Taxation of Companies
The most important tax in Oman is the tax on business income, which is based upon the Corporate Income Tax Law of 1981 and subsequent Royal and Ministerial Decrees. Taxable entities are entities that have a permanent establishment in the country, so that any entity that has personnel present in Oman is taxed. Taxable income includes business profit, interest, royalties and capital gains, and is computed on the net income arising in Oman or deemed to have risen in Oman after deducting all ordinary expenses, such as expenditure incurred in producing the gross revenue, bad debts, auditors’ fees, depreciation, head office expenses, sponsorship fees and certain donations. Losses may be carried forward for up to five years.
Beginning in 1999, the government no longer required minority foreign-owned joint ventures to include a publicly traded joint stock company listed on the national stock exchange.
The tax rates vary in accordance with the amount of taxable income and the percentage of Omani ownership. Tax holidays granted under the investment incentives laws also provide a reprieve.
Minority foreign-owned joint ventures are taxed at the national corporate rate of 12 percent. Majority foreign-owned joint ventures with Omani participation are taxed at a maximum 25 percent. And wholly foreign-owned companies are taxed at maximum of 50 percent.
The government offers foreign investors various incentives, including a five-year tax holiday for companies engaged in industry, mining, tourism, fishing, agriculture, and public utilities; national tax treatment and an income tax reduction for joint ventures with at least 51% Omani ownership.
In October 1996, by Royal Decree 87/96, the Law of Income Tax on Companies was amended by Royal Decree 87/96, and the Law of Profits on Tax on Commercial and Industrial Establishments (applicable to Omani companies in which there are foreign participants) was amended by Royal Decree 89/96. These amendments, among other things, substantially reduced the tax rates applicable to Omani mixed public joint stock companies, as follows:
Amount of Taxable Income
Approximate Tax Rate Before Amendments / Tax Rates After Amendments
The first RO 30,000 Between 0 –10%/ Exempt
The following RO 30,000 Up to 30% / 5%
Any amount in excess of the above Up to 50% / 7.5%
To qualify for these reduced tax rates, at least 51 percent of the share capital of the mixed entity must be held by Omani nationals, and at least 40 percent of the share capital must have been offered to the public. The amendments provide that the shareholdings of foreign companies’ branches are to be included in the calculation of Omani shareholding, thus encouraging foreign companies to hold shares in Omani public joint stock companies.
In entities other than public joint stock companies in which there is foreign participation of not more than 90 percent, the amendments provide the following tax rates shall apply:
Amount of Taxable Income
Approximate Tax Rate Before Amendments / Tax Rates After Amendments
The first RO 30,000 Up to 10% / Exempted
The following RO 30,000 Up to 25% / 15%
The following RO 150,000 Up to 30% / 20%
Any amount in excess of the above Up to 50% / 25%
Omani companies having foreign participation exceeding 90 percent are subject to the prevailing tax rates prior to the enactment of the amendments.
Royal Decree 89/96 amended the Profits Tax on Commercial and Industrial Establishments Law that is applicable to Omani companies in which there is no foreign participation. The amendment provides that, under certain circumstances, those tax rates will continue to apply to the entity even if some of the shares are held by a branch of a foreign company, a foreign company or a mixed Omani company established under the Foreign Business and Capital Investment Law.
The amendment also grants a tax exemption to entities owned or used by Omani nationals. To qualify for the exemption, the entity must be engaged in certain sectors of business activity or organized under the Law on the Organization and Encouragement of Industry, and the exemption is valid for five years from the date production commences unless renewed for an additional period of not more than five years.
As of the 1996 tax year, certain payments made by Omani businesses to foreign companies that do not have a permanent establishment in Oman are subject to a withholding tax, introduced by Royal Decree 87/96. The withholding tax applies to payments such as royalties, management fees, machinery and equipment rentals, payments for the transfer of technical expertise or for research and development. The withholding tax is levied at a rate of 10 percent of the gross payments made.
Tax Holidays and Tax-Related Incentives
Foreign investment projects are exempt from tax on profits for a period of five years, effective from the date of establishment. An additional five-year income tax exemption may be granted. Moreover, foreign investment projects may be exempt from customs duties on imports of machinery and equipment required for their establishment. Raw materials required for the production of products unavailable in Oman are also exempt from customs duties. The exemption from customs duties on such products is given for five years from the production date and may be renewed once more for another period of five years.
The above exemptions are also applicable to new extensions in projects. The Capital Investment Law defines “extensions” as the increase in capital which is utilized for adding new fixed capital assets which results in increase in the production capacity of the project and which aims at producing or providing new activities or services.
Levies and Duties
Oman imposes other taxes as well. These include:
Labor Levy: This levy is applicable to all business entities. Rates up to 6 percent of Gross Employees’ salaries.
Social Security Levy: This levy is applicable to all business entities employing Omani nationals. The employers contribute 9 percent of gross employees salaries, the employees contribute 5 percent of gross employees’ salaries.
Customs Duties: These duties apply to all importers. Mostly, they are of 5 percent of CIF value charged for most goods. Certain essential goods are exempt (e.g. gold, silver bullion, seeds, live plants, refined petroleum products, books, various foodstuffs). Special 100 percent duties apply to alcoholic beverages, tobacco and pork products. With a few exceptions, goods produced in GCC states enter Oman duty-free.