Wednesday, August 19, 2020

Executive Regulations of the Foreign Capital Investment Law

The Ministry of Commerce and Industry issued Ministerial Decision 72/2020 (“MD 72/2020”) issuing the Executive Regulations of the Foreign Capital Investment Law (Sultani Decree 50/2019). The Executive Regulations repeal all that previously contradicts MD 72/2020 and will be published in the Official Gazette and come into effect from the day following its publication date, 14 June 2020.

Sultani Decree 50/2019 promulgating the new Foreign Capital Investment Law (“FCIL”) came into force six months after the date of its publication, removing the requirement of an Omani partner and reducing shareholding limitations on foreign investors, thus allowing 100% foreign investor-owned companies. The FCIL and the Executive Regulations bring emphasis to the Sultanate’s commitment to further economic progress through permitting the establishment of wholly owned non-Omani companies, exemptions and incentives. 

The Executive Regulations introduce us to the investment license, defined under MD 72/2020 Article 1 as the approval issued by the competent authority for the foreign investor to establish the investment project; the foreign investor may only establish the investment project after obtaining the investment license. In order to obtain the investment license, an application must be submitted to the electronic system detailing and consisting of: the name of the investor and its nationality, its place of residency, bank details of the investor, the activities that the investor wishes to practice, previous experience of the foreign investor (if any), the total number of employees that are expected to be employed in the investment project, the expected time frame of the project, the date of commencement of the project, an economic feasibility study of the investment project, a certificate of approval that is issued by the bank/office pursuant to Article 7 and any other information or documents that the competent authority may deem necessary. 

Upon the submission of the application, the competent authority is responsible for reviewing and examining the submitted application in regards to obtaining the license required for the establishment of the investment project, and is required to reach a decision within 14 working days from the date of submission. If there is no feedback/response within this period, this would indicate approval of the application. Following this, the competent authority will issue the license within a period of three days from the date of obtaining/satisfying all approvals, permits and licenses that are required for the investment project. 

In addition to the further clarifications that the Executive Regulations have provided of the FCIL application and submission process, they also provide incentives and benefits for foreign investors wishing to establish wholly owned non-Omani companies. Such incentives include exemptions that are permitted through a decision from the council of ministers for investment projects that are to be establishment in less-developed regions in Oman. The exceptions are as follows: 

(i) Exemption from the rental value or the return of the right to use the land and real estate that is necessary for the investment project, for a period not exceeding five years from the date of the operation of the project. 

(ii) An exemption from the current Omanisation requirements for a period of two years from the date of the operation of the project. 

(iii) Exemption from all or part of the fees. 

While the new FCIL and Executive Regulations aim to enhance and promote foreign investment in the Sultanate of Oman, there is a negative list of activities that restricts foreign investors from practising activities in those areas, typically small-scale industrial activities.