4. Industrial Policies
Oman offers several incentives to attract foreign investors such as competitive lease rates for certain types of companies established in recognized industrial estates, free zones, and specific locations, but only on a case-by-case basis. Oman’s sweeping government restructuring in August 2020 brought the Tax Authority under the charge of the Minister of Finance. Oman has no personal income tax or capital gains tax. The Sultan in October 2020 approved a Medium-Term Fiscal Plan in which it announced Omani plans to introduce an income tax for higher-income individuals in 2022 or 2023, as part of the government’s efforts to increase revenue. The government has yet to define what that higher-income threshold will be.
However, some of Oman’s investment incentives, such as for reductions in utility rates, have diminished since 2017. Most industrial and commercial consumers now pay cost-reflective tariffs for utilities.
Oman’s overhaul of its corporate tax law in 2017 by Royal Decree 9/2017, and amendments to Oman’s Tax Law in 2020 through royal decree 118/2020, eliminated many tax exemptions for foreign investors. Oman taxes corporate earnings at 15 percent.
Foreign Trade Zones/Free Ports/Trade Facilitation
The government established the Public Authority for Special Economic Zones and Free Zones (OPAZ) in August 2020 by Royal Decree 105/2020 to oversee the Special Economic Zone at Duqm, Almazuna Free Zone, Salalah Free Zone, Sohar Free Zone, and any other special zone or free zone in Oman to complement its port development projects in Duqm, Salalah, and Sohar. These areas include strategically located ports and are well connected with modern infrastructure and facilities. An incentive package for investors includes a tax holiday, duty-free treatment of all imports and exports, and tax-free repatriation of profits. Additional benefits include streamlined business registration, processing of labor and immigration permits, assistance with utility connections, and lower “Omanization” employment quota requirements. Foreign-owned firms have the same investment opportunities as Omani entities.
Performance and Data Localization Requirements
Since 1988, the Omani government has had a labor market policy of Omanization, which includes minimum employment quotas for Omani nationals. These quota targets vary depending on the sector; they can be as low as 10 percent in the Special Economic Zone at Duqm (SEZAD) and as high as 90 percent, for example, in the banking sector. Most government ministries have achieved Omanization rates at or near 100 percent.
Omanization targets are prevalent throughout the private sector but the government enforces them inconsistently. In practice, each company in Oman submits an Omanization plan to the Ministry of Labor (MoL), which has the authority to adjust required Omanization percentages. In response to the economic fallout from the COVID-19 pandemic, the MoL adopted stronger measures to force companies to increase their employment of Omanis and also to retain their Omani employees.
Employers seeking to hire expatriate workers must seek a visa allotment from the MoL and Royal Oman Police (ROP). The MoL and ROP scrutinize visa allocations, often using opaque criteria. Foreign investors complain of the difficulty in hiring expatriates to the point that it deters companies from investing or expanding in Oman. As of January 1, 2021, the ROP allows expatriate workers to switch employers upon completion or termination of their employment contracts without the need to obtain a “no-objection” certificate (NOC) from their current employers.
In January 2018, the MoL issued a decree that imposed a six-month ban on visas for expatriates in 87 job categories across 10 private sector industries. The MoL has extended the dates for this ban several times and has added additional job categories to the visa ban.
Currently, Oman does not have any requirements for companies to turn over source code or to provide access to surveillance. However, the Telecommunications Regulatory Authority (TRA) requires service providers to house servers in Oman if they are to provide services in Oman. The TRA is the lead agency on establishing data quotas in Oman.