Doing Business in Oman: The Complete Legal Framework for Foreign Investors.

The Sultanate of Oman, implementing its Vision 2040 economic diversification strategy, has undertaken substantial legislative reform to attract foreign investment and reduce dependence on hydrocarbon revenues. Recent years have seen modernised commercial, labour, and investment laws, alongside the expansion of special economic zones and free zones. For foreign investors, Oman offers a combination of strategic geographic position, stable governance, and an improving regulatory environment — though the framework differs in important respects from neighbouring GCC states. This guide covers the key legal and regulatory considerations.

Foreign Investment Framework

Oman's Foreign Capital Investment Law (Royal Decree No. 50/2019) establishes the framework for foreign investment. The law permits foreign investors to own up to 100% of an Omani company in sectors specified by the Council of Ministers, eliminating the previous general requirement for Omani majority ownership. Sectors open to 100% foreign ownership include manufacturing, mining, tourism, logistics, education, healthcare, technology, and fisheries, among others. Certain sectors — including retail trade, certain services, and activities connected to national security — remain restricted or require Omani participation.

Foreign investment projects may benefit from incentives including: corporate tax exemptions for up to 10 years; customs duty exemptions on imported equipment and raw materials; allocation of government land at concessional rates; and simplified administrative procedures. These incentives are administered by the Ministry of Commerce, Industry and Investment Promotion (MOCIIP) and the Public Authority for Special Economic Zones and Free Zones (OPAZ).

Company Formation: Commercial Companies Law

The Commercial Companies Law (Royal Decree No. 18/2019) governs the formation and operation of companies in Oman. Key structures available to foreign investors include: the limited liability company (LLC), requiring a minimum of two shareholders and a minimum capital of OMR 20,000 (approximately USD 52,000); the joint stock company (SAOG or SAOC); the branch office of a foreign company; and the sole proprietorship (available to Omani nationals only).

For LLCs, foreign ownership beyond 70% requires prior approval from MOCIIP. Branch offices of foreign companies may be established for specific government contracts or projects, typically requiring a no-objection certificate from the relevant government entity. Registration is through the Invest Easy portal, Oman's online business registration platform.

Labour Law: Royal Decree No. 53/2023

Oman enacted a new Labour Law through Royal Decree No. 53/2023, replacing the previous Royal Decree No. 35/2003. The new law, which came into effect in July 2023, introduced significant modernisation to employment regulation. Key provisions include: maximum working hours of 45 per week (9 hours per day), reduced during Ramadan; annual leave of 30 calendar days after one year of service; sick leave of up to 182 days (the first 21 days at full pay, next 21 at 75%, next 21 at 50%, next 21 at 25%, and the remainder unpaid); maternity leave of 98 days at full pay (a significant increase from the previous 50 days); paternity leave of 7 days at full pay (newly introduced); and end-of-service gratuity of 15 days' basic salary for each of the first three years and one month's basic salary for each subsequent year.

The new law also introduced provisions on: fixed-term contracts (the default contract type, with a maximum initial term of five years); non-compete clauses (permitted for a maximum of one year and must be limited in scope); remote working arrangements; and protections against workplace harassment and discrimination.

Omanisation

Oman's workforce nationalisation programme — Omanisation — is one of the most structured in the GCC. The programme mandates specific percentages of Omani nationals across different sectors, administered by the Ministry of Labour. Rates vary by industry: banking and finance (90%+), insurance (60%), transport (60%), communications (45%), hotels (30%), and construction (varying rates depending on the size and type of project).

Non-compliance with Omanisation targets results in: restrictions on obtaining new work visas for foreign employees, suspension of government services to the company, and financial penalties. The National Employment Centre coordinates training and placement programmes to help companies meet their Omanisation obligations.

Social Insurance

Employers must register all employees (Omani and foreign) with the Social Protection Fund (formerly the Public Authority for Social Insurance). For Omani employees, contributions are: employer (12.5% of basic salary), employee (7%), and government (5.5%), for a total of 25%. For foreign employees, a separate contribution structure applies. End-of-service benefits for Omani employees are calculated under the social insurance scheme, while foreign employees receive end-of-service gratuity under the Labour Law.

Taxation

Oman's corporate income tax rate is 15% on worldwide income for companies registered in Oman and on Oman-source income for branches. Small and medium enterprises meeting specified criteria may qualify for a reduced rate of 3% on income up to OMR 100,000. There is no personal income tax. Oman introduced VAT at 5% in April 2021, applying to most goods and services, with exemptions for basic food items, healthcare, and education.

Free Zones and Special Economic Zones

Oman has developed several free zones and special economic zones administered by OPAZ. The Duqm Special Economic Zone Authority (SEZAD) administers the Special Economic Zone at Duqm — one of the largest economic zones in the Middle East, spanning 2,000 square kilometres with deep-water port facilities, an airport, a refinery, and industrial, commercial, and tourism areas. Benefits include: 30-year tax exemptions (renewable for an additional 25 years), customs duty exemptions, 100% foreign ownership, and full repatriation of capital and profits.

The Sohar Free Zone, adjacent to the Port of Sohar, offers similar benefits with a focus on metals, logistics, food processing, and petrochemicals. The Salalah Free Zone, near the Port of Salalah, targets logistics, warehousing, light manufacturing, and assembly operations. Al Mazunah Free Zone, near the Yemen border, is focused on trade and re-export to East Africa and South Asia.

Dispute Resolution

Oman's civil court system operates under a three-tier structure: Primary Courts, Courts of Appeal, and the Supreme Court. Oman ratified the New York Convention in 1999. The Oman Commercial Arbitration Centre (OCAC), affiliated with the Oman Chamber of Commerce and Industry, provides domestic and international arbitration services. Oman enacted the Arbitration Law (Royal Decree No. 47/1997), which is based on the UNCITRAL Model Law, providing a supportive framework for commercial arbitration.

Government contracts are subject to the Government Tenders Law (Royal Decree No. 36/2008) and typically include dispute resolution provisions requiring initial negotiation or mediation before proceeding to arbitration or litigation.

GSDA Legal Consultants' Muscat office provides comprehensive legal advisory services for businesses entering and operating in Oman, including company formation, investment licensing, labour law compliance, government contract advisory, free zone establishment, and dispute resolution. Contact our Oman team for a market entry consultation.