Oman payroll and tax overview.

Foreign Direct Investment in Oman

Officially named the Sultanate of Oman, Oman is a country located on the South-eastern coast of the Arabian Peninsula in Western Asia and is the oldest independent state in the Arab world. Sharing borders with Yemen to the southwest, Saudi Arabia to the west and the UAE to the north, Oman is ideally located with proximity to not only the Gulf, but Asian and African markets as well.

Although the country is heavily dependent on its oil and gas resources, in recent years it has seen an increase in other industries such as travel and tourism, manufacturing, construction and education. With its stable political and economic situation, strong infrastructure and ideal geographical location, Oman attracts foreign investors from around the globe. Some other incentives that attract foreign investors include:

• No personal income tax for individuals, both citizens and expatriates
• An investor-friendly environment
• A robust and diversifying economy
• Home to some of the most strategically placed ports in the world, allowing quick sailing to major markets in Asia
• A highly skilled workforce
• Well-regulated stock exchange
• A free trade and open market policy
• English is widely spoken

Registering a Company and Establishing an Entity in Oman

Foreign investors are required to establish a legal presence in the country should they wish to conduct business. There are various business entities to choose from, however a Limited Liability Company (LLC) is the most popular entity used by both local and overseas investors and is the preferred choice for small to medium sized businesses.

Limited Liability Company (LLC)

Two shareholders are required to form an LLC, however there should be no more than 40 in total. LLCs are less regulated than other companies, however they are not suitable for certain activities including banking or insurance, a joint stock company would be required for these types of activities.

LLCs are subject to a lower minimum capital requirement, OMR 150,000 for LLCs with investment from abroad and OMR 20,000 for LLCs with 100% Omani or GCC national ownership. It is necessary to appoint an advisor who must be credited in Oman and one director should also be appointed (if required, the director can also be one of the shareholders).

Other business entities available in Oman include: limited partnership company, joint stock company, holding company, branch office and representative office.

Business Banking in Oman

It is mandatory to have an in-country bank account to process payments in Oman. Banks are generally open Sunday to Thursday from 8 am to 2 pm. These hours vary during the holy month of Ramadan.

What Are the Working Days and Working Hours in Oman?

The typical working week in Oman is Sunday to Thursday from 8.30 or 9 am to 5.30 or 6 pm. Depending on the particular company’s policy, working hours can vary between 40 and 48 hours per week. Friday is the Muslim rest day, making it the only official weekend day. Saturday is often a working day for the construction and service industries.

During the month of Ramadan, the working day is reduced to six hours, legally this should apply to all staff, however some companies will only apply it to Muslims who are fasting during daylight hours.

Basic Facts about Oman

Official Name: Sultanate of Oman

Capital: Muscat

Population: 4.829 million (World Bank, 2018)

Area: 309,501 km²

Major Language: Arabic

Major Religion: Islam

Monetary Unit: Omani Rial (ر.ع.)

GNI Per Capita: $15,140 (World Bank, 2018)

Main Exports: Crude petroleum, refined petroleum, iron ore and cyclic hydrocarbons

Internet Domain: .om

International Dialling Code: +968

The tax year in Oman runs from 1 January to 31 December.

Income Tax in Oman

Expatriates are often drawn to Oman due to its lack of personal income tax. Individuals are not taxed on any of their personal income and are not obliged to file a tax return. Only commercial companies operating in Oman are required to pay income tax.

Foreign businesses operating in Oman pay a 15% flat tax on any income earned, however this excludes Omani proprietorships and limited liability companies (LLCs) that meet the following criteria:

• registered capital should not exceed 50,000 Omani rial (OMR) at the beginning of the tax year
• gross income should not exceed OMR 100,000 for any tax year
• the average number of employees during the tax year should not exceed 15, and
• taxpayer activities should not include air/sea transport; extraction of natural resources; banking, insurance, or financial services; public utility concessions; or any other activities to be decided by the Minister of Finance after approval by the Council of Ministers.

Should the above criteria be met, a 3% tax rate is effective. SME taxpayers are also required to file income tax returns.

A tax rate of 55% applies to entities engaged in oil and gas operations.

Social Security in Oman

Omani nationals are subject to social security contributions. A contribution of 17.5% is applicable, the employee pays 7% of their salary and the employer contributes the other 10.5%. In addition, the employer also contributes to insurance for work related injuries to the amount of 1% of the employee’s salary, bringing the total monthly social security and insurance contributions made by the employer to 11.5%.

The above is not applicable to expatriate employees working in Oman. In some circumstances, the above may be extended to expatriate employees working in the private sector, however this is rare and the decision has to be made by the Ministry.

In Oman, the Public Authority for Social Insurance (PASI) administers social security law and it is mandatory for employers that employ Omani nationals to subscribe with PASI and remit the monthly dues of social security contribution. Employers must pay their contributions every month within 15 days of the subsequent month.

New Employees in Oman

There is a demand for skilled workers in Oman, however expatriates wishing to work in Oman must receive a job offer before travelling to the country, they will not be allowed to work in the country if they are holding a visitor visa. All expatriates must obtain an employment visa from the Royal Oman Police. The Ministry of Manpower (MoM) has to issue a labour clearance for the position before the employment visa can be obtained. As the approvals are at the discretion of the MoM, the process can often be time consuming.

Once the expatriate is in Oman, they must obtain a residence permit, this is also provided by the Royal Oman Police. Expatriates can only work for the employer that obtained these clearances and visas for them.

A probation period of three months applies, the probation period must be set out in the employment contract or it will not apply. Upon employment, the employer should supply the employee with a contract of employment or an agreement letter. The contract may be written in English, however like all official business documents in Oman, the Arabic version is the one that will be officially recognized. Should the employee or employer wish to terminate the contract during the probation period, a seven-day notice must be provided. Should it be that the employer is terminating the contract, they must provide suitable and detailed reasoning in a dismissal letter.

Leavers in Oman

The labour law in Oman states that if a contract is for an unlimited period and the employee is receiving a monthly salary, the employee or employer can choose to terminate it by giving the other party a thirty-day written notice of termination, and fifteen days for other employees unless it is agreed in the contract for a longer period.

Should a contract be terminated without a notice period being observed, the terminating party will be obliged to pay the other party a compensation equal to the gross salary of the notice period or the remaining part thereof.

As it currently stands, should an expatriate wish to work for another company, they must ensure this is approved by the current employer, who will issue a no objection certificate (NOC) to the new employer. If the current employer is not supportive of the job move, which is often the case, it is highly recommended that the expatriate leaves Oman and re-enters on a new visa, provided by the new employer.

From 1 January 2021, a NOC will no longer be required for expatriates in Oman who want to change jobs, provided they have completed at least two-years of service with their current employer. It is hoped that the new law will provide more competitiveness in the Omani job market.

When it comes to payslips and payment frequency, there is no specific rule, however payslips are generally released monthly. It is legally acceptable to provide employees with an online payslip, there are no procedures regarding the provision of online payslips. Although there are no personal income tax obligations in Oman, it is important to always comply with labour law requirements together with certain mandatory requirements, such as the Wage Protection System (WPS).

The Wage Protection System (WPS) was launched in 2017 by the Ministry of Manpower (MoM) in conjunction with the Central Bank of Oman to safeguard employees’ rights against late and non-payment of wages by employers in the private sector. Employers who fail to pay employees in the local currency by way of bank transfer to their local bank account, will face financial penalties and have issues renewing or processing new visas for their workforce. The WPS applies to all employees registered with the MoM.

Payroll reports must be archived for at least 10 years.