Some months ago, I was in Oman for a period of several weeks. I had been in Oman before but only shorter stays in Muscat. This time I had a chance to see more of the country, and it’s a beautiful one.
It’s definitely one of the most open and tolerant countries in the region. I’d even put it ahead of UAE when it comes to ease of integration as a non-Arabic foreigner, although reports from expats might disagree with that sentiment.
But how does Oman do when it comes to financial services? Let’s find out, after a brief history lesson to set the right tone.
What today is Oman has some of the earliest signs of human settlement, some 100,000 years ago. Recorded history, however, starts quite late – not until the 7th century when Oman adopts Islam (during prophet Muhammad’s lifetime). The dominant sect became Ibadism, which is relatively moderate. Prior to the adoption of Islam, Oman was under various forms of Persian rule.
Oman was initially referred to as Muscat and Oman. The coastal city of Muscat, today Oman’s capital, was an important port in the Gulf of Oman which separates the Persian Gulf from the Arabian Sea and the Indian Ocean. It was also culturally different from the rest of Oman, being more cosmopolitan and secular.
The Portuguese took Oman in 1515 and held it until 1650, although Muscat was for several decades under Ottoman rule.
Rule of Oman shifted between different families and sultans, and the coastal areas were often under Iranian occupation.
In 1806, Said ibn Sultan Al Said came to power and under his rule, Oman established colonies across the African east coast and claimed Zanzibar. Oman profited greatly from the slave trade, until 1856 when Said ibn Sultan Al Said died and his two sons failed to agree on how to rule the sultanate. In the end, Oman and Zanzibar were split. (The Zanzibar Sultanate would later in 1896 engage in the shortest war in history, lasting less than an hour and mostly consisting of British bombardment of the palace.)
In 1868 Azzam ibn Qais Al-Busaid was appointed imam and he attempted to use his role to form strong, central leadership. However, British involvement supported Turki ibn Said Al-Busaid instead, who took power in the early 1870s.
The French and the British bickered over Oman throughout the 18th and 19th centuries. Oman was ultimately declared independent but British influence remained strong.
The southernmost governorate of Oman, Dhofar, attempted to declare independence in 1964 when oil was found. The insurgents were ultimately quenched by 1975, when Oman was under the rule of sultan Qaboos bin Said Al Said who came into power in 1970.
Qaboos bin Said Al Said made several reforms to Oman and modernized the society. Health care, education, and poverty were tackled and improved. Qaboos bin Said al Said remains in power in Oman and is overwhelmingly popular with the people. The 1990s saw social liberalisation and Oman enacted its first constitution.
Oman today enjoys relative peace, stability, and equality compared to many other countries in the region. It produces oil but not as vast quantities as most others. Nearlly 80% of Oman’s economy depends on oil and natural gas trade, with the remaining 20% being very diverse. In recent years and thanks to its diverse landscape, tourism has been an increasingly important source of income.
Full Name:;Sultanate of Oman (سلطنة عُمان)
Official language(s):;Arabic (Omani)
Other major languages:;English, Balochi, Urdu
Type of government:;Sultanate (absolute monarchy)
GDP per capita:;25,000 USD
Currency:;Omani Rial (OMR) pegged to 1 OMR = 2.6008 USD[/table]
There are essentially two types of companies in Oman: normal and FZ (Free Zone).
There is no concept of residency for companies in Oman. If a company is registered or operated in Oman, it owes tax in Oman on its global taxable income. The upside is that this makes paying tax in Oman extremely simple when running an international business and the 12% tax rate is perfectly reasonable. The first 30,000 OMR of taxable income is not subject to tax.
While this might sound attractive, forming a company in Oman is not at all as straight-forward as in neighbouring UAE. Incorporating requires a license, which most law firms can help you with, and a minimum of 150,000 OMR (circa 300,000 EUR or 390,000 USD) paid up share capital. Furthermore, companies are required to maintain a majority Omani ownership.
Companies incorporated in the Sohar FTZ have far more lenient requirements and are exempt from tax for a period of 10 to 25 years.
You are looking at around 2,500 OMR in government fees for formation, plus another 2,500 OMR in fees to a local agent. 5,000 OMR (circa 10,000 EUR/13,000 USD) is still quite high to form a company but a lot less than the 150,000 OMR otherwise required. Expect around 2,500 OMR minimum in annual renewal and maintenance fees, not including record keeping and related services.
FZ companies can have 100% foreign ownership.
However, even so, they are not suitable for entrepreneurs seeking to form a tax free non-resident company. Oman FZ companies are required to lease land on which their business will be conducted.
For larger companies seeking to establish a trading hub in the region and are looking for alternatives to UAE, Oman can definitely be worth a closer look.
Banking in Oman
The Omani banking sector is more developed than its customer base, to some degree comparable to Lebanon. Statistics are hard to come by but estimates say that somewhere between 10% to 20% of the Omani population is unbanked, instead relying on cash for day to day finances and alternative remittance methods such as hawala and remittance companies like Western Union to transfer money long distance and internationally.
There are seven banks licensed in Oman:
Non-resident banking is relatively new to Oman but with English being a common business language and recent initiatives to attract investment in Oman, banks are starting to open up.
Bank Muscat and NBO are this writer’s personal favourite among the local banks, with both Arab Bank and HSBC being excellent international banking partners in the country.
Banking secrecy is governed by Articles 24 and 70 of the Banking Law of Oman. The Omani banking secrecy is likely very strict, with the sultanate hitherto not having been able to sign a TIEA. The banking sector in Oman is however relatively small and has not yet drawn significant outside pressure.
Being an absolute monarchy, it’s very hard to say for sure what the sultan can and cannot do. Should sufficient pressure arise, the sultan has power to compel banks to do anything.
Living in Oman
Quality of Life
Oman is a peaceful and comparatively moderate country. Being moderate compared to many of its neighbours, expats even from non-Arabic or non-Muslim countries often find life in Oman to be enjoyable, relaxed, and safe. However, very few stay for a long time (more than five to ten years), usually because it’s difficult to fully integrate as an expat (unless from another country in the region) and the expat community is quite small.
The heat can be scorching with summer temperatures reaching well over 40°C (104°F), sometimes exceeding 50°C (122°F).
Costs of living is generally low compared to for example Dubai. Rents vary depending on location with good ones starting at around 600 to 800 OMR in central Muscat, going up to several thousand.
Personal liberty in Oman is hindered by tight restrictions on freedom of speech with criticism of the government and Islam being frowned upon and not rarely clamped down on.
Crime is extremely low.
None, except for a 6.5% of income in contribution to pension fund and social security.
Immigration and Residence
Oman is not typically a country to which people move to start an international business. Foreigners either move to Oman for work or to be with family.
Oman is attractive for banking and for living in for a couple of years on a work permit. While there are attractive tax benefits for businesses, there are no clear benefits compared to for example UAE or Bahrain, for running a business.
Oman’s banking sector is of high quality.