New Local Partnership Requirements for Foreign Companies in Oman
With the aim of creating a more investment-friendly Oman, a new Foreign Capital Investment Law (FCIL) recently came into effect, designed to revitalise the regulations and administrative processes that were previously in place.
Bringing in a raft of changes, this new law is one of the significant steps being put into place to open up foreign investment in Oman, with the overall aim of creating a more open, welcoming and robust regulatory framework within which to conduct business.
Back in July 2019, the late Sultan Qaboos (the then ruler of Oman), issued Law No. 50/2019 to enact the new foreign capital investment law. Coming into effect as of 1 January 2020, this new FCIL replaces the earlier foreign capital investment law, which was enacted under the Law No. 102/1994.
As the corporate regulator in Oman, the Ministry of Commerce and Industry (MOCI) is expected to issue executive regulations under the new FCIL in July, later this year. While the outline of the changes this law will bring about have been announced, not all details are clear as yet.
Here is what we know so far.
The new procedures being put in place are designed to simplify the processes of company registration for foreign investors. With the requirements and conditions simplified, this should make it quicker for foreign businesses to set up here in Oman.
What is known is that an Investment Service Centre will be established at the MOCI. This Centre will be tasked with carrying out licensing, while easing the procedures involved in the granting of licences, permits and other consents required for investment projects.
100% Foreign Ownership
Under the old FCIL, foreign ownership was restricted initially to 49%, then to 70% upon Oman’s accession to the World Trade Organisation. That meant foreign investors who wanted to set up shop in Oman needed to have a local partner or agent.
There were certain exceptions to this condition, however. GCC and US citizens were permitted 100% ownership, as were foreign investors setting up special projects contributing to the national development (with a minimum capital of OMR 500,000, or equivalent US$1.3 million).
Now, with the new FCIL in place, 100% foreign investment is permitted, effectively removing the need for foreign investors to have an Omani partner. It should be noted, however, that there are certain business activities that do not allow for 100% foreign investment.
Within this unofficial ‘blacklist’ released by the MOCI, 37 types of commercial activities have been named. These include translation and photocopying services, tailoring, laundry, vehicle and automotive repairs, the transportation and sale of drinking water, manpower and recruitment services, hairdressing and salon services, taxi operation, fishing, and rehabilitation homes for the elderly, disabled and orphans.
It’s worth noting that the new FCIL won’t affect existing legislation related to GCC investments, the free zones (including the Special Economic Zone at Duqm), and the Public Establishment for Industrial Estates.
Minimum Capital Requirement
Under the old FCIL, the minimum share capital requirement for foreign investors was RO 150,000 (approximately US$390,000). The New FCIL does not stipulate a minimum share capital requirement, which should work to open up Oman even further to foreign investment.
The new FCIL will also affect the fee structure for foreign investors registering a company in Oman. Reports of this new fee structure vary, with some saying the fee will start at RO 3,000 and increase according to the proposed share capital of the new company, and others saying it will be a flat fee of RO 3,500.
Further clarity regarding the specific provisions of the new law is expected to become available when the Executive Regulations are issued later this year. We will update you when they are published, but in the meantime, please contact Fusion if you have any questions.