The Sultanate of Oman, known primarily for its beautiful orchards, and elaborate mosques, is gaining quite a lot of attention from new businessmen and investors. The country, once extremely closed off and conservative, has constantly undergone positive reforms in terms of development in business and infrastructure. Since 1970, when Sultan Qaboos bin Said took to the throne of the Sultanate, the country started undergoing several social and economic reforms. Over the decades, the country has worked hard to become more and more inclusive.
For foreign nationals looking forward to starting a business in Oman, it will not be an easy task. Currently, Oman requires every business to have at least a local partner who owns the majority share of the company and is in the position to make important decisions and even shut the business down if so required. However, this policy may change in the near future to encourage foreign investment.
As a member of the Gulf Cooperation Council as well as the Arab League, the policies for conducting business in the Sultanate of Oman are quite similar to other Middle Eastern Countries. All of the policies are contained in and governed by the Commercial Laws in place in Oman.
Under the current paradigm, foreigners can have quite a hard time establishing and starting a business in Oman. However, it is not impossible. Thorough research and knowledge of the region, the market, and the kind of businesses that can flourish in the region is key. While the Sultanate of Oman is gradually expanding, it still has a long way to cover before becoming a lucrative business starting destination. There are a lot of regulations and procedures to follow in order to successfully even start a small business in Oman. The process can be broken down into various steps. Keep on reading to understand these steps.
Process of setting up a business in Oman
Starting a business in the Sultanate of Oman is no easy feat. It requires a lot of research and thorough knowledge of the region and the market. Even after doing these things, which can take a couple of years to be completed properly, you need a marketable idea and a strong business plan. The process of setting up a business in Oman consists of the following steps:
- Research: Starting a business in Oman stresses a lot on conducting research on the region. The Sultanate of Oman is a very conservative region and hence a very tricky market to conquer. As such, you need to have proper knowledge of this region. You need to be aware of the laws, policies as well as customs, and practical methods of conducting business. While the laws can be studied by oneself, researching the actual market and finding out the business-related customs is incredibly important.
- Business idea and plan: After you have conducted your research, you need to test your business idea. It can be a product, a solution to a common problem, or a service that is in demand in the market or for which you can create a demand. After finding a marketable idea, you also need to create a practical business plan. The plan must be carefully thought-out and must be made as per the research. It would contain details about how you plan on conducting business, how your competition is performing, and, based on that research, how big you suppose your market to be. What kind of profits do you hope to achieve, and how do you intend to expand.
- Legal Structure: The legal structure of a company determines the obligations and liabilities of the business owners, partners, and investors. Thus, before you can register your company, you need to decide on its legal structure. The Sultanate of Oman recognizes the following types of businesses:
- Sole Proprietorship
- Limited Partnership
- Joint Stock Company
- General Partnership
- Holding Company
- Branch Office
- Representative Office
All of these structures would define the roles of the parties forming the company and their liabilities, whether individual or joint.
- Company Registration: For starting a business in Oman, a company needs to be registered with the proper authorities as per the commercial laws of the land. The registration process requires the business owners and investors to complete quite a few steps. Here is what you need to complete your company’s registration:
- Company Name: You need to reserve a name for your business or company. This name must be carefully chosen as it will become the face of the business and its whole identity. It should be catchy and convey what the business is about.
- Company Seal: All companies in Oman are required to have an official seal that would be used in all documentation and every work that the company conducts.
- Premises: You need to establish an office or store from where the business will be carried out. You need to find a suitable spot where your business can expect maximum traffic and, thus, higher sales and turnovers. The premises need to be picked before the registration as it would be part of the information provided therein.
- Bank Account: A corporate bank account needs to be opened in a local bank in Oman, which will be associated with the company’s expenses. Details like account numbers may be required during the registration process. For foreigners looking to open a bank account, you need to show a minimum balance between $10,000 to $50,000.
- Incorporation Documents: Before registration, certain incorporation documents need to be submitted as part of the registration packet as well. These include:
- Application Form
- Memorandum of Association
- Documents of Shareholders
- Constitutive Contract
- Initial Deposit certificate
- Certificate from the Chamber of Commerce and Industry Affiliation
- Tax Residency Certificate
- Hiring: Hiring is the next and final step in starting a business in Oman. Finding the right people and the right number of people when starting out is necessary.
Hiring Employees in Oman
Hiring employees is one of the most important aspects of starting a business in Oman. The laws in the Sultanate of Oman are clear on workers’ rights and policies for hiring new employees. It contains all the detailed guidelines and minimum standards of employee treatment that all employers must follow. Apart from minimum wages defined for all workers, these laws contain all the major aspects of employment. Employers are required, as per the HR policies and procedures, to maintain payroll and register for tax and social security. This is where availing the services of experienced HR experts of Zimyo will ensure a hassle-free functioning for you.
Some more extremely important guidelines are related to the following aspects of employment:
- Trial Period/Probation Period: Probation periods are different available for different workers. Those who receive monthly wages are entitled to 3 months of probation period, whereas those employees who receive their wages in other intervals are only entitled to 1 month of probationary period.
- Leave and Holidays: Every employee who has been associated with a business for over 6 months is entitled to 30 days of paid annual leave. These can be carried forward if the employer so allows. The employer can also choose to schedule his employees’ leave as per the requirements of the business. In the event that an employee is terminated, he is entitled to be paid for the number of annual leaves left for that particular year.
If an employee is asked to work on a public holiday, they are entitled to an alternative day off or to receive full payment with an increment not less than 25% of the basic pay.
Sick leave provisions are allowed for a maximum period of ten weeks per year, but employees need to show a note from their doctor.
There are certain special leaves also allowed in certain conditions like weddings, Hajj, exams, death of an immediate relative or spouse. The durations for all of these are different.
- Maternity Leave: Pregnant employees are entitled to 12 weeks of paid maternity leave. However, they need to produce a valid medical certificate in order that must indicate the date of delivery.
- Termination of Services: If an employer is terminating the services of an employee, they need to give notice of either 30 days to n employee who receives monthly wages or 15 days to an employee who receives wages at other intervals. They also need to pay a severance package to the terminated employees. Employers do not need to pay severance or give notice to those employees who show misconduct towards the company or employers.
- Pension: Pension is provided to male employees when they turn 60 years of age and to female employees when they turn 55 years of age and choose to retire from the company that they are associated with. Some employees also qualify for the Death Pension allowance, which means that their spouse would get a pension either monthly or lump sum even after they expire.
- Work Hour Norms: The maximum working hour norms in Oman allow employees to work a maximum of 9 hours a day and up to 45 hours a week. In case the employer requires an employee to work overtime, they must pay the employee in full for the extra hours and additionally, 25 percent more in case of day-time overtime work and 50 percent extra wages in case of night-time overtime work.
How easy is it to conduct business in Oman?
How easy it is to conduct business in the Sultanate of Oman is determined with the help of an international index known as the Ease of Doing Business Index. As per the latest reports, Oman has improved quite a bit in terms of making it simpler and more inclusive for new businesses to be able to establish themselves and for all businesses to grow and flourish successfully. This index compares about 190 countries across multiple fields and parameters.
All of these criteria are essential factors that help in establishing and running a business smoothly. In the latest report, the Sultanate of Oman ranked 68 with an overall score of 70 in ease of doing business. A country’s policies and procedures play a major role in making it simple or difficult for businesses to grow. Some of these factors are: –
- Starting a Business: Ranking at the 32nd position, the Sultanate of Oman performed better than some major Middle Eastern countries in terms of ease of starting a business. There are about 4.5 procedures to undertake, and it takes roughly 5 days to complete these procedures successfully. With such a short duration to complete basic processes and get the business going, Oman is already leaping ahead of many other Middle Eastern countries.
- Managing Permits: When starting or conducting business in any part of the world, you require several permits, licenses, and registrations to be completed. Foreign nationals also require permits to even start a business. As such, permits are an important factor for all businesses. In this regard, Oman ranked 47 in managing construction permits. The score is quite low because there are about 15 procedures, and it can take over 120 days to receive a permit.
- Getting Electricity: Electricity is one of the most important parts of any business. Without electricity, it is impossible to conduct any business. Seeing how important electricity is, the government of Oman has made the process of getting electricity very quick. The country ranked 35 as there are just 5 processes, and it takes just about a month to get electricity for your business.
- Getting Credit: To start a business, you need funds. While a certain amount needs to be available with you in liquid form, credit is also often required, especially by new businesses, to ensure that they can fund all their needs. Despite being an essential factor, Oman ranked quite low, coming at the 144th position. This shows how difficult it is to get credit in Oman.
- Managing Payroll: Managing payroll is an important part of running a business. Having a dedicated department and a comprehensive set of HR policies is important in Oman. This is where hiring the payroll management services of Zimyo could make the entire process hassle-free for your organization.
- Paying Taxes: Oman ranked 11th in terms of paying taxes. This is because the tax-paying process is quite streamlined in the country. Because of this, though there are 15 taxes that need to be paid annually, it only takes 68 hours to complete the tax filing process.
- Enforcing Contracts: In terms of enforcing contracts, Oman ranked 69 and scored a mere 61.9. It can take nearly 600 days which is the primary cause of the low rank.
- Resolving Insolvency: In the area of resolving insolvency, Oman ranked 97th. The reason behind the low rank of the country is that it takes about 3 years to resolve insolvency issues and has a low rate of recovery.
There are a lot of procedures to understand and a lot of legal and compliance details to undertake when starting a business in Oman. While it’s time-consuming, the results can be incredibly rewarding. By putting focused efforts into researching the market, region, and business regulations, it is possible to establish a successful business in Oman. Oman stays an untapped market, full of entrepreneurial potential for the most part because of its requirements of having a local majority partner, but if an aspiring entrepreneur or investor is able to find a trustworthy partner, they can successfully establish a business and market in the country.
Zimyo is a leading HR and Payroll management services provider in Oman with multiple years of experience. The company helps businesses hire the best talent and takes care of the financial requirements of employees, such as advances or credit for a hassle-free work experience.