Summary of relevant laws and regulations for investors in Oman


Prior to 1971 the sharia courts had jurisdiction over all civil and criminal matters, as well as personal status affairs in the sultanate of Oman. However, following the succession of Sultan Qaboos bin Said Al Said, the judicial system was reformed and Sharia Courts now only govern matters related to family disputes and inheritance.

The 1996 Basic Statute of the State – promulgated by Royal Decree No. 101 of 1996 and known as the Basic Law – reshaped and codified the legal system in Oman, creating separate structures for the executive bodies, the judiciary, and the rights and obligations of individuals. The principles of the Basic Law entail that Oman is a free market based on the cooperation between public and private activity. The law provides that Islam is the religion of the state and that sharia law is the basis of legislation.

Current Structure

Oman has two types of legislation: primary and secondary. Primary legislation, also referred to as a sultani decree or a royal decree, is promulgated by the sultan. Secondary legislation, also referred to as ministerial decisions or regulations, are promulgated by ministers and government bodies in accordance with the respective authority given to them by the royal decrees. The Basic Law states that if there is a contradiction between the provisions of legislation and the Basic Law, the content of the Basic Law will prevail.

As a civil law jurisdiction, Omani courts are given considerable discretion to interpret the legislation on a case-by-case basis. In cases involving commercial disputes, the commercial court judge’s discretion extends to allow them to interpret or amend an agreement in a way that accurately represents the respective parties’ intentions when the terms of said agreement are ambiguous or poorly drafted.

Judges may use a previous judgment recited by the legal representation in their statement of claims as persuasive precedent, but it is not legally binding. Judges in Omani courts tend to rely heavily on the statement of claims presented to them in the commercial and civil courts. It is therefore important for your legal representation to ensure that the statement of claims covers all of the points needed to argue your case. Conversely, criminal and sharia courts require legal representation to have a more interactive role, as they are more likely to require cross-examination of witnesses.

Business in Oman

Until some years ago, the process of commercial registration would take several months to complete. The process for registering a business has since become easier, as law firms are permitted to submit documents online through the Ministry of Commerce and Industry (MoCI) e-portal ( The remaining documents, licences and capital requirements may be formalised after the online registration is complete. Still, set-up costs are relatively high and processing the post-registration requirements typically takes another two to eight weeks, depending on whether special permissions or licences are required from other government ministries.

Investors must also comply with Omanisation laws that have been introduced by the Ministry of Manpower (MoM). These require all companies to hire a certain percentage of Omanis, with the rate varying from industry to industry. Meeting the Omanisation rate enables the foreign company to employ non-Omanis. If the foreign company does not meet the minimum prescribed Omanisation percentages, it must submit an Omanisation Plan to the MoM detailing how it intends to achieve the required percentage. Persistent failure to meet required Omanisation thresholds could result in the company being fined and blocked from obtaining further labour clearances for non-Omani workers.

Foreign Investment

Foreign investors and companies in Oman must comply with the Foreign Capital Investment Law, as promulgated by Royal Decree No. 102 of 1994, and the Commercial Companies Code, as promulgated by Royal Decree No. 73 of 1996. Only certain business structures are allowed foreign ownership, with foreign entities or persons typically electing to perform business in Oman through a registered Omani agent or distributor; by establishing a limited liability company (LLC) with an Omani partner; by creating a private joint-stock company; or by setting up a branch office if working on a government contract. The full list of the different types of entities – some of which are only available to Omani nationals – is as follows:

• LLCs;

• Joint-stock companies;

• Partnerships;

• Sole proprietorship;

• Commercial agencies;

• Branch offices; and

• Commercial representative offices.


LLCs are the most commonly incorporated business structure in Oman. Companies that wish to be incorporated in the form of an LLC must have a minimum of two shareholders and a maximum of 40 shareholders. The liability of the shareholders is limited to the nominal value they contribute to the business’ share capital.

If a non-Omani investor wishes to become a shareholder of an Omani LLC, then at least 30% of the share capital of the local firm must be owned by either an Omani national or a fully Omani-owned corporate entity. However, if the non-Omani investor is a GCC national or a company that is fully owned by GCC nationals, then the Omani LLC may be 100% owned by the GCC national or GCC-owned company.

This rule also applies if the foreign investor is a US national. Pursuant to the free trade agreement (FTA) that is currently in force between the US and Oman, US nationals and 100% US-owned companies are permitted to fully own an Omani LLC. However, it should be noted that the US ownership requirements are strictly enforced, so if the US entity has a shareholder or several shareholders that are not US nationals, the application to open a company pursuant to the FTA will likely be denied.

The minimum share capital required for registering an LLC with foreign ownership participation is OR150,000 ($390,000). If the LLC is a financing or lending company, the share capital requirement is greater. However, if the LLC is to be wholly owned by GCC nationals or US nationals, then the share capital requirement is reduced to OR20,000 ($51,900).

Joint-Stock Companies

Joint-stock companies are based on the French société anonyme structure and may take the form of either a private joint-stock company (société anonyme Omanaise close, SAOC) or a public joint-stock company (société anonyme Omanaise generale, SAOG).

Incorporating a company under this structure is more complicated when compared to an LLC by virtue of the additional information and approvals needed from the MoCI. Similar to an LLC, however, at least 30% Omani ownership is required for each type of joint-stock company.


SAOCs are closed, or private, joint-stock companies, meaning they do not offer their shares for public subscription. SAOCs require a minimum of three shareholders. As with LLCs, the transfer of shares in an SAOC is subject to the shareholder’s pre-emptive rights. Minimum share capital of OR500,000 ($1.3m) is required for an SAOC, although only a partial payment of the shares is required upon incorporation. It is also necessary to have a board of directors to manage the company, with at least three directors and no more than 12.


SAOGs are open, or public, joint-stock companies, and at least 40% of its shares must be freely issued to the public. Each SAOG must have a minimum share capital of OR2m ($5.2m). It should be noted that following an amendment to the Insurance Companies Law (Royal Decree No. 39 of 2014), any insurance company wishing to establish in Oman must have a minimum paid-up share capital of OR10m ($26m).

Insurance companies that existed prior to these amendments were granted a grace period of three years within which to comply with the new requirements, and this period ended in August 2017. All insurance companies operating in Oman must now either be incorporated as an SAOG or converted into an SAOG through an initial public offering. Like other SAOGs, insurance companies must offer the public at least 40% of their shares that are in issue.

Shares of SAOGs are purchased through the Muscat Securities Market, which is closely monitored by the Capital Market Authority. The Central Bank of Oman governs foreign investments in financial institutions and regularly issues circulars that have a similar binding effect as ministerial decisions or regulations. SAOGs are also required to comply with the Code of Corporate Governance and the Executive Regulations of the Capital Market Law. Similarly to SAOCs, SOAGs must have a board of directors that is responsible for managing the company. The minimum number of directors required is five and the maximum is 12. One-third of the directors must be independent. SAOGs also require the appointment of an auditor.


Partnerships are firms created among at least two individuals. They can take several forms, including general and limited partnerships. General partnerships: A partner in a general partnership has unlimited joint and several liability. General partnerships require registration within one month of the execution of the partnership agreement. A partner requires the consent of the other partner(s) to transfer his or her interest. A partnership may dissolve upon the death, incapacity or bankruptcy of one of the partners, unless the other partners unanimously agree to continue. Limited partnerships: This type of partnership requires at least one of the partners to have unlimited liability and at least another one of the partners to have liability limited to the extent of the capital they contributed to the company.

Sole Proprietorship

Omani nationals and GCC nationals may also establish a sole proprietorship. The minimum share capital for incorporating this type of business is comparatively low, at just OR3000 ($7790), but only one shareholder is permissible. The sole proprietorship will be named after the individual who owns it. A sole proprietor is not protected by a corporate veil, and as such, he or she may be found personally liable for debts incurred by the business. It is common practice in Oman for a sole proprietor to convert his or her business into an LLC, as the conversion process is relatively simple.

Commercial Agencies

If a non-Omani supplier wishes to sell its goods in Oman without incorporating a company, then a commercial agent may be appointed in order to distribute, market and promote the sale of the goods. Foreign investors should seek legal advice before entering into an agency agreement, since there are several requirements that need to be complied with under the Commercial Agency Law (Royal Decree No. 26 of 1977 and amended by Royal Decree No. 34 of 2014). If the agency agreement is not with a registered agent in Oman and registered with the MoCI, the foreign investor could find him or herself without a right to legal recourse in the country.

Branch Offices

For non-Omani entities, a branch office may only be established if the foreign parent has a contract with either a government or quasi-government body. The registration of the branch office remains valid for the duration of the contract. Although its scope is limited, a branch may be an attractive option for a foreign investor as it allows the foreign company to keep 100% of the business without diluting control of its operations or assets. It should be noted that branch offices are not permitted to undertake private sector work, their sole purpose being to perform the government contract that established it. In addition, the foreign parent company is required to submit a form stating that it will be fully responsible and liable for the debts, losses and liabilities of the branch office. The rationale behind this provision is that a branch office is not, strictly speaking, a separate legal entity, but is treated as part of the foreign parent.

A branch office allows a foreign company to keep 100% of the business without diluting control of its operations or assets COMMERCIAL REPRESENTATIVE OFFICES: A commercial representative office may only be used for the purposes of marketing and promotion of the foreign parent’s products or services to retailers, not directly to consumers. The commercial representative office may not sell products or services, or engage in other commercial activities. The representative office may hire and/or sponsor employees.

Joint Ventures

A joint venture is an unincorporated business that does not have separate legal personality. It is formed by way of contract between two or more investors with the intention of working together in a common business venture. Although it is not treated as a separate legal entity, as it cannot independently form agreements, a joint venture must keep their own audited accounts and is taxed as a separate legal entity. Investors tend to prefer incorporating their business in other forms to this, as the shareholders of a joint venture may be subject to unlimited joint and several liability.


In February 2017 the New Tax Law was published through Royal Decree No. 9 of 2017 and is effective for all tax years starting from January 2017. This law applies to companies and permanent establishments that are operating and registered in Oman. It requires companies to pay an annual income tax of 15% on the net profits of the enterprise – up from 12% previously – and entities are no longer exempt from paying income tax for the first OR30,000 ($77,900) earned on their net profit. Sole proprietors, meanwhile, are required to pay income tax of 3% if they meet the following requirements:

• Registered capital of below OR50,000 ($130,000);

• Maximum gross income of OR100,000 ($260,000);

• An annual average number of employees not exceeding 15; and

• The trade activity qualifies for this reduced tax rate according to the Ministry of Finance (MoF). Provisions for penalties have also been enhanced under the New Tax Law. Failure to file tax returns on their due date could now lead to the company or permanent establishment being fined a minimum of OR100 ($260) and maximum of OR2000 ($5190). Additionally, failure to submit information requested by the tax authority or to attend scheduled hearings could result in a fine of at least OR200 ($520) but no more than OR5000 ($13,000).

Free Zones & Special Economic Zones

Although income tax has increased in Oman, companies incorporated in free zones and special economic zones (SEZs) still benefit from tax advantages, including exemptions and incentives. In addition to other commercial advantages, the free zones allow 100% foreign ownership. Currently, Oman has three free zones in Salalah, Sohar and Al Mazunah, and two SEZs in Duqm and Muscat with the intention of attracting different types of businesses to Oman.

Each area has its own set of incentives, requirements and rules. Most of the free zones are restricted to trading activities, not service provision. Furthermore, the free zones are not intended to facilitate trade onshore in Oman. If a free zone company wishes to sell or distribute its goods in Oman, it must appoint an agent or establish one of the other entities described above. Salalah Free Zone: The Salalah Free Zone is located in the south of Oman. It has been established for investors involved in industrial activities, logistics, tourism and other related endeavours. In addition to allowing full foreign ownership, this free zone has a relaxed Omanisation rate of just 10%, a 30-year tax holiday and no Customs duties. Additionally, investors do not need to meet any capital requirements to be able to incorporate here. Sohar Port and Freezone: This free zone is located near Sohar Port and the Sohar Industrial Estate, west of Muscat, near the Strait of Hormuz. It seeks to attract investors in steel and metal, trade, logistics and the food sector. However, it also welcomes investors interested in incorporating companies with other trade activities. Companies incorporated under the Sohar Port and Freezone enjoy full exemptions from Customs duties on imports. The share capital declared to the Sohar Port and Freezone in the investors’ application must be deposited in the company’s bank statement. The Omanisation requirement is reduced to 15% for the first 10 years, and companies are given a 25-year tax holiday. Al Mazunah Free Zone: Situated in the south of the sultanate, the Al Mazunah Free Zone borders Yemen. It is designed for investments in warehousing, food processing and general industry, with a particular focus on trade with Yemen. Similar to the Sohar Free Zone, companies incorporated in this zone enjoy full exemptions from Customs duties on imports and no minimum capital requirements. Investors may also benefit from a 30-year tax holiday and relaxed Omanisation rates of 10%. Moreover, Yemeni nationals are able to work in this free zone without having to obtain a visa or work permit. Duqm SEZ: Duqm, in the middle of the country, is regarded as a key hub between the Middle East, South Asia, and North and East Africa. It includes a port, dry dock and fishing port, and hosts businesses in the fisheries, logistics and tourism industries. It is home to many industrial estates and other mixed-used developments. Investors are bound to a relaxed Omanisation rate of 25%, as well as no minimum capital requirements, a 30-year income tax exemption and no Customs duties. Investors are also offered competitive land lease rates in this SEZ. Knowledge Oasis Muscat Economic Zone: This economic zone was established to attract investors wishing to incorporate IT service companies in Oman. These investors enjoy reduced Omanisation rates of 25%. The zone requires a minimum capital investment of OR20,000 ($51,900).

Labour Law & Omanisation

Foreign employees must obtain a labour clearance from the MoM before being able to start working in Oman. The clearance is applied for by the employer of the foreign worker. The cost of the labour clearance was increased from OR201 ($522) to OR301 ($782) in 2017. The majority of employees in the domestic private sector are non-Omani, representing about 88% of the total labour force.

Since 1988 government has run an Omanisation programme to increase the number of nationals in the public and private sectors. The government has focused more on Omanisation in the private sector since 2002, with the MoM designating certain jobs for Omani nationals only. Different industry sectors have different Omanisation percentages. If a company fails to meet the required percentages, it must submit an Omanisation plan to the MoM detailing how the company intends to train and hire more nationals in the coming years.

Companies are rewarded for their compliance with the Omanisation quota in several ways, including by obtaining a green card, which prioritises that company when dealing with ministerial approvals – processes which could otherwise be lengthy and bureaucratic. Meeting Omanisation requirements also increases the goodwill of the company, as it becomes publicly recognised for its high employment rate of nationals through media publications, and it can also help the business secure government contracts or a part in infrastructure projects.

Some companies and individuals are critical of Omanisation, given that non-Omani specialists can transfer skills to the local workforce. While this may be true to a certain extent, the argument fails to consider that there are Omani nationals who are also capable of transferring skills to the expatriate workforce. In fact, according to statistics from the Public Authority of Manpower, 87% of the registered Omani job seekers in 2017 had at least a general diploma. In addition, in 2017 the MoM and the National Training Fund established various training programmes to equip and prepare Omani nationals prior to their employment in the private sector. The cost of such training is covered by the government and ensures that the employees hired in any given company participating in this programme will be properly prepared and skilled for the job.

The minimum monthly salary for Omani nationals working in the private sector is OR325 ($844). The salary is comprised of OR225 ($584) for the basic salary and OR100 ($260) as allowances. All Omani employees who have been working for at least six months with their current employer as of January 1 of each year are entitled to a salary increase of at least 3%, as long as he or she does not receive a poor performance review.

All Omani employees must also be registered with the Public Authority for Social Insurance (PASI). PASI was formed as a social insurance to provide for Omani nationals in old age, disability, death, or occupational injury and disease. Under the Social Security Law, the employer must contribute 11.5% of the employee’s gross salary – which includes 1% for occupational injuries and disease – to PASI, while the employee must contribute 7%.

Under the Labour Law, non-Omani employees are entitled to an end-of-service gratuity payment. If employed more than one year but less than three years, the payment shall equal 15 days’ worth of the employee’s basic salary. If the employee has worked with the company for three years or more, they are entitled to one month’s basic salary for each year worked. Those who have been working for less than one year do not qualify for end-of-service gratuity.

Mergers & Acquisitions

Foreign companies may choose to acquire or invest in a pre-existing Omani business through share or asset purchase. However, acquisitions in Oman can be challenging for several reasons, which is why sound legal advice is recommended. Primarily, it may be difficult to gather sufficient information about the target company from a due diligence perspective, as the amount of publicly available information is relatively limited. Moreover, foreign companies in Oman require a minimum of 30% Omani ownership by either a citizen individual or a fully Omani-owned business. Employee contracts would have to be transferred as part of an asset deal.

Real Estate

The law restricts foreign ownership of land in Oman. Such affairs are regulated by the Land Law (Royal Decree No. 5 of 1980). While GCC nationals are given similar, but more limited, rights to land ownership to Omanis, non-GCC nationals and companies with non-GCC shareholders may only own property in designated areas of the country, known as integrated tourism complexes (ITCs).

Omani law imposes further restrictions on corporate ownership of land. It is only possible for companies that are incorporated as LLCs and fully owned by Omanis and/or GCC nationals, and for joint-stock companies with a minimum of 30% Omani shareholding to own real estate in Oman. Additionally, companies may only own property for the purpose of using it as warehouse space, staff accommodation, office space or for meeting the company’s trade objectives. Real estate development companies are afforded less restrictions on the use of land, as they are also able to (re) construct and resell the property as residential and commercial units. However, this is conditional upon the real estate development company stating in its commercial registration documents to the MoCI that one of its objectives is real estate development.

Although non-Omani or non-GCC nationals and non-Omani or non-GCC-owned companies are treated similarly to Omanis with respect to land ownership, they are subject to some restrictions that Omanis and wholly Omani-owned companies do not face. The law requires GCC entities that own a vacant plot of land to develop the plot within four years from the date of purchase. The law also limits the fully owned non-Omani or non-GCC corporate entity’s land use to investment purposes only.

Corporate entities that are unable to own land in Oman have the option of entering into a usufruct to carry out a particular project on another party’s land that the government considers to be “a contribution to the Omani economy and/or social development”. A usufruct allows the holder of the agreement to use and exploit the plot for the purposes of the project. The usufruct holder’s rights also permit the ability to mortgage the land. The mortgagee’s rights with respect to the mortgage remain protected even after the termination of the usufruct; it essentially gives the usufruct holder the capacity to act as the owner of the land without actually having freehold ownership. The usufruct agreement must have an expiry date on which the holder is obliged to return the land to its original owner. The duration of a usufruct must not exceed 50 years, but it is allowed to be renewed upon expiration.

ITCs are governed by the ITC Law (as promulgated by Royal Decree No. 12 of 2006) and Ministerial Decision No. 191 of 2007, which outline the principles relating to the rights and obligations of ITC developers and purchasers. The purpose of developing ITCs is to market and encourage tourism in Oman. This enables non-Omani companies to own real estate and/or develop units for investment or residential purposes within the ITC. ITCs are usually required to consist of commercial, residential and tourism components. It is permitted for non-Omani individuals and companies to purchase residential and non-residential property in these areas, and register the freehold with the Ministry of Housing.


Although it is not legally required to do so, most private sector, large-scale construction projects in Oman use the Omani Standard Documents for Building and Civil Engineering Works – referred to as the Standard Contract – issued by the MoF. This is from the Fédération Internationale Des Ingénieurs-Conseils (FIDIC), an internationally renowned organisation that forms contract templates for construction and engineering projects. In March 2017 FIDIC published the fifth edition of this standardised contract, the 2017 White Book, which the Standard Contract will be based on following approval by the MoF and the Ministry of Legal Affairs. The 2017 White Book has made significant amendments to the fourth edition that was published over a decade ago in 2006.

The main element of a construction contract in Oman is the scope of work outlined for the contractor to perform for the employer. Most disputes related to construction contracts thus occur because of ambiguity arising out of the responsibility for the scope of work, which is why it is essential for the contracting parties to ensure that this provision in the contract is well drafted to reflect the expectations of the employer, as well as the exact scope of work to be performed by the contractor. It must be noted, however, that this scope of work is usually subject to change for reasons uncontrollable by the parties to the agreement. Therefore, the parties must account for such occurrences by considering variations, and agreeing on them and documenting them as the project progresses, rather than trying to deal with them at the end.

Variations are addressed under Omani law in Article 640 of the Civil Code (promulgated by Royal Decree No. 29 of 2013), which requires a contractor to immediately notify the employer of any variation that is necessary to complete the project, and specify the additional costs of such variation. If the contractor fails to notify the employer, then the contractor shall bear the additional costs of that variation. Moreover, Article 640 gives the employer the right to withdraw from the agreement and suspend execution of the project if the variation proves to be something substantial.

Under Article 51 of the Standard Contract, the engineer, who is usually appointed by the employer, is designated to represent the employer. Any orders made by the engineer to the contractor that would have the effect of increasing the contract price require the express consent of the employer.

The Standard Contract gives the engineer the right to make variations to the project that:

• Increases or decreases the amount of any work included in the agreement;

• Omits any work;

• Alters the style or quality of work;

• Changes the levels, line positions and dimensions of any part of the works; and

• Relates to any necessary additional work for the completion of the project. The 2017 White Book extends the list of circumstances that allow for a variation, including provisions dealing with:

• The process for requesting variations;

• Agreeing on their effect on the project; and

• The consultant’s remuneration. Moreover, Article 628 of the Civil Code stipulates certain basic requirements that must be included in a construction contract in order for it to be valid. These are as follows:

• The location where the work will be performed;

• The type of development that will be made;

• The method of performance;

• The time it will take for the performance to complete; and

• Consideration for the works being done.

Energy Sector 

Although Oman has made efforts to diversify its economy beyond oil and gas amid the recent period of lower global prices, the sector continues to be the country’s main source of income, contributing 78% to the economy annually.

The oil and gas sector in Oman is governed by laws administered through the Ministry of Oil and Gas (MOG) and the Ministry of Environmental and Climate Affairs, with the consent of the sultan. The main law that regulates hydrocarbons-related activities is the Oil and Gas Law (promulgated by Royal Decree No. 8 of 2011). To date, the MOG has not passed any regulations for the implementation of the Oil and Gas Law, and the host granting agreements have not yet been standardised.

Oil and gas concession agreements are granted though exploration and production sharing agreements (EPSAs). The terms of each EPSA are negotiated among its parties: the MOG and the concession holder. After its execution, the EPSA requires ratification and endorsement by royal decree to be enforceable. This decree does not disclose the terms of the agreement, it merely announces the execution of the EPSA in the Official Gazette. Any amendments to the EPSA must be subject to the written consent of both the concession holder and the MOG. The Oil and Gas Law prohibits the concession holder from waiving or transferring its rights and obligations under the EPSA without prior consent from the MOG, which must be followed by a royal decree. EPSAs are governed by the laws of the sultanate of Oman and are usually drafted in English. Although this is negotiable between the parties to the agreement, most EPSAs have arbitration provisions listed as the dispute resolution method. This tends to be held in a third-party international arbitration centre so as to prevent domestic dispute resolution bias.

Companies that operate in the upstream oil and gas segment are classified differently under the tax laws in Oman, and are required to pay income tax at the premium rate of 55%. Calculation of the taxable income is subject to the terms of the EPSA, and it may be deductible from the MOG’s oil production share rather than the concession holder’s share.


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