Legal and Regulatory Frameworks for Startups

LAWS APPLICABLE FOR ANY BUSINESS

Employment/labour laws

Laws and Permits

Employment in Oman is governed by the Employment Law, Royal Decree No 35/2003. It sets out the standard for employment that is mandatory for all employers, local or foreign. The law applies to all public and private sector employers in Oman. It will also apply to companies in the free zone unless specified under the free trade zone rules. It provides the right to undertake projects through which your company’s employees can obtain benefits beyond the terms stipulated by the law. It applies to any startup or company regardless of contradicting choice of law in any employment agreement.

Health and safety is another key factor for companies under employment law. Ministerial Decision No 286/2008 allowed issuing the law known as Occupational Health and Safety Measures that sets out obligations with respect to your employees’ health and safety. All companies should maintain health and safety regulations regardless of their decision to choose a type of company or premise.

Omanisation

The Ministry of Manpower has certain guidelines requiring companies to employ a certain number of Omani nationals. The percentage of Omanisation will vary between 35 to 65% depending on the area. Certain categories are specifically allocated for Omani nationals, and that list is increasing depending on a new law that might come into force.

The following job categories that are restricted to Omani citizens under Omanisation:

Specialists: Lawyer, Civil Engineer, Accountant, Legal Adviser, Department Manager

Technician: Primary School Teacher, Nurse, Architectural Draftsman, TV Cameraman

Occupational Worker: Accounts Clerk, General Car Mechanic, General Sales Person, General Leather Worker

Skilled worker: Leather Worker, Welder, Typist, Electrician

Limited skilled worker: Newspaper Vendor, Machine Operator, Car Repair/Fitter

Employment for foreign employees

If you are planning to employ foreign employees, there are rules in place to follow. The following applies:

A foreigner must be sponsored through ownership or employment
Employing a foreign person in Oman requires a sponsorship license
Immigrants are required to hold a residency card/work permit issued by the Royal Oman Police
Companies are responsible for processing and obtaining visas and work permits

The process of obtaining the permit is as follows:

Online application with required documents is submitted to immigration offices
After approval, the employee should go for a medical test
The visa application requires legal qualifications and a non-conviction certificate which the employee should produce
If results are satisfactory, the permit is issued
A residency card is issued by the Royal Oman Police. It identifies the employee and place of work, and the visa is added to the passport
After arrival, your company will need to assist your foreign employee in obtaining a work permit/residency card
They can bring dependents i.e., children.

Permit processing time is one to two weeks if you have all the relevant documents completed, and costs OMR300. Other GCC nationals do not require this card but must obtain a permit from the Ministry of Manpower.

Nationals of certain countries can travel on a temporary visa that is issued on arrival. Typically, this can last for 30 days, but it can be extended for another 30 days for a fee.

Corporate tax

Corporate tax is 15% of the profits that your company makes. The tax applies to both companies formed by local and foreign investors. VAT in Oman is 5%, and the mandatory registration threshold is OMR 385,000. You will be required to register with the Ministry of Finance to pay tax. Corporate income tax applies to the following business structures:

Companies in Oman
Branch offices
Foreign entities undertaking business
The rate is lowered to 3% if the following applies:
- The company is an Omani entity
- Has share capital of OMR50,000 or less
- Employs less than 15 people
- Annual revenue of OMR100,000 or less
- Does not take part in business banking, financial institutions, public utility, resource extraction.

Income tax reporting is critical for all companies. You may be fined OMR2000 if you fail to report your tax on time. A list of other tax related info can be found here.

Dividends from profit

A company may have a duty to withhold tax in relation to dividends or royalties. This scope of withholding tax was changed in 2017. Currently, the following is applicable:

Withholding tax does not apply to dividends paid by LLC
Corporate entities paying dividends are subject to income tax of 15%
Interest paid is subject to withholding tax, 10%
IP royalties are subject to withholding tax, 10%

With regards to foreign subsidiary tax, there are no rules for the profits being imputed to the parent company. You should seek professional accounting help so that your accounts or transactions do not result in you paying the wrong taxable amount. Moreover, a common law applies for GCC with regards to Customers and Tariffs, and a standard duty rate of 5%, insurance and freight value, with a few exceptions such as alcohol or tobacco, subject to 100% customs duty.

IP

Royal Decree 67/2008 was issued to protect companies’ intellectual rights and designs such as trademarks, names, industrial designs, and patents. Like every other country, you can apply for a patent and trademark application that protects your design from being used by other companies. Patents are more applicable for designs such as hardware or circuits, whereas trademarks apply to logo design for your company.

Patents

Definition – You will be able to apply for a patent if:

Your invention is new,
It involves an inventive step,
It is susceptible to industrial application.

Registration – The inventor must submit the application to the Ministry’s Department of Agencies and IP.

Enforcement and Remedies – The registered right holder can sue for compensation within five years of infringement. The penalty could vary from OMR2,000 to OMR10,000 for deliberate infringement and jail time of three months to three years. In certain circumstances, it may be taken to court.

Length – Normally, the IP is protected for 20 years.

Trademarks

Definition and legal requirements – It can consist of any sign that will not be similar to any other designs and capable of distinguishing goods or services.

Protection – Trademark design and names can be registered with the Department of Agencies and IP. It can only be used by your company and will be protected from being used by anyone else.

Enforcement – Same as Patents.

Length of protection and renewability. It is normally protected for ten years, which can be renewed.

Registered designs

Definition – Registered or industrial designs are graphical representations or logos for your company, consisting of any composition of lines or colours or any 3D form.

Registration – Registration with the Department of Agencies and IP.

Enforcement and remedies – Same as patents.

Length of protection and renewability – The designs are normally protected for up to 15 years.

Copyright

Copyrights are protected by the Copyright and Related Rights Law, under the Royal Decree 65/2008.

Definition and legal requirement – It is automatically applied to any work you have produced, designs, videos or any other software that you own. It also includes artistic and scientific work.

Protection – Typically the registration with the Department of Agencies and IP.