Business License Application in Muscat: Learn Steps, Cost, Tax & Types

Muscat Oman’s Tax and Labor Laws (Updated November 26, 2024)

Oman’s business environment is increasingly investor-friendly, with flexible tax and labor regulations designed to support new initiatives in Oman as they establish and grow. Understanding these regulations, especially around corporate tax and labor requirements, can help you make the most of Oman’s pro-business landscape.

Corporate Tax Rates

Oman’s corporate tax system is simple and favorable, particularly for new businesses:

• 3% Corporate Tax Rate: For companies with annual revenue below 100,000 OMR, a minimal 3% tax on profits applies. This low rate is especially beneficial for startups and small enterprises.
• 15% Corporate Tax Rate: Companies generating revenue above 100,000 OMR are subject to a 15% tax on profits, making it competitive compared to many other markets in the region.

These straightforward rates make tax planning easier for businesses of all sizes, allowing you to focus on growth and expansion.

Value-Added Tax (VAT)

VAT is set at a competitive rate from tax authority of Oman, applying only to local sales and certain services:

• 5% VAT on Domestic Sales: A 5% VAT applies to goods and services sold within Oman. This rate is relatively low, helping to keep operational costs down.
• Zero VAT on Exports: For companies with international clients, Oman offers a major advantage—exports are generally exempt from VAT. This makes it easier for businesses to maintain competitive pricing on the global market.

Labor Laws and Omanization Requirements

Oman’s labor laws are business-friendly from ministry of labor of Oman, particularly for new investors looking to establish a workforce:

• No Omanization Requirement in the First Year: New companies are exempt from hiring Omani nationals during their first year of operations. This allows you to focus on building your team and getting your business off the ground without immediate labor restrictions.
• Flexible Omanization from the Second Year: Starting in the second year, a requirement to employ just one Omani national is introduced. This minimal requirement supports the local economy while remaining manageable for foreign-owned businesses. As your business grows, additional Omani hires may be encouraged, depending on your industry, but requirements remain flexible.

This gradual approach to Omanization makes it easier for foreign businesses to adapt while fulfilling local employment initiatives at a comfortable pace.

Work Permits and Visas for Foreign Employees

• Straightforward Work Permit Process: Businesses in Oman can easily hire foreign employees to meet their specific talent needs. Work permits are issued for expatriates when there is a demonstrated need for specific skills not readily available locally.
• Simple Visa Management: Expat employees must have residence visas, which are typically handled by the employer. This straightforward visa process helps you attract global talent as you build your team in Oman.

Flexible Working Hours and Conditions

Oman offers a balanced workweek, with standard working hours that align with international norms:

• Standard Working Hours: The typical workweek in Oman is 48 hours, or nine hours per day, with reduced hours during Ramadan (six hours per day) for Muslim employees.
• Employee Rights: Oman’s labor laws protect both local and expatriate workers, ensuring fair treatment and a professional work environment. Employment contracts outline job responsibilities, working hours, benefits, and termination policies, giving employees and employers clear expectations.

Key Takeaways for Investors

• Ease of Hiring in Year One: The lack of Omanization requirements in your first year lets you focus on quickly establishing your team.
• Simple, Gradual Omanization: Adding only one Omani employee in your second year offers flexibility while aligning with Oman’s local employment goals.
• Favorable Tax and VAT Structure: With a 3% or 15% corporate tax and a 5% VAT on domestic sales, Oman’s tax environment supports sustainable business growth.