The Free Trade
Agreement (the “FTA”) between the Sultanate of Oman and the United States (the
“US”) and entered into force on 1 January 2009 governs, inter alia, the
establishment of legal entities in Oman by entities incorporated in the United
States and vice versa.
In a previous
article, we discussed the early stages of implementation of the FTA. The first
meeting of the FTA Joint Committee, chaired jointly by the MOCI and the Office
of US Trade Representative, took place in February 2010. Since then, officials
of the two governments have been meeting on a regular basis within that
framework to discuss various issues arising pursuant to the implementation of
the FTA.
Below is an outline
of three key issues that have been addressed concerning the establishment of
companies and branches of companies in Oman.
Establishment
Under the FTA, only
100% US-owned entities are permitted to establish a company in Oman without the
need for an Omani partner. However, the strict interpretation of this rule
affected large US corporations, including the ones listed on the stock market,
which, having a wide shareholder base that includes some non-US citizens, would
not qualify. Accordingly, the MOCI has taken the view that, provided that the
company which is seeking registration in Oman is a qualitatively “American”
entity, there should be no problems registering it under the US FTA in Oman.
The MOCI reviews whether a company should be considered as qualitatively
“American” on case-by-case basis, looking at a variety of factors such as the
activities and history of the company. In some cases, the MOCI will not delve
into the nationalities of its shareholders.
The minimum capital
requirement for a 100% US-owned entity to become established in Oman is OMR
20,000 as opposed to other foreign-owned companies, where the minimum share
capital requirement is OMR 150,000. The registration process for a US-owned
entity in Oman is straightforward and has been streamlined.
Equal
treatment
One of the benefits
for US companies under the FTA rule is that US companies shall be granted the
same treatment in Oman as a wholly owned Omani company. However, there is an
important exception to this rule. That is, an established US company is not
permitted to act as the “local partner” of another foreign company wishing to
set up a presence in Oman, i.e., a US company cannot be used to satisfy the
minimum 30% local ownership requirement for a foreign company looking to establish
in Oman. This requirement can only be satisfied by an Omani national or a 100%
Omani-owned company.
Registration
of a branch
As a general rule, a
foreign company can only establish a branch office in Oman for the purpose of
performing a contract with the Omani Government (including contracts with
companies partly owned by the Omani Government).
However, a US
company may register a branch office in Oman pursuant to Ministerial Decision
102/2008 and in accordance with the FTA prior to obtaining or entering into any
contract with the Omani Government (including contracts with companies partly
owned by the Omani government).
Benefits
for US FTA companies operating in Oman
Further to the
above, US companies established in Oman under the FTA have a number of other
significant benefits for example, benefits regarding tariffs for importing and
exporting, and in the way that US companies established in Oman are granted
non-discriminatory rights to bid on contracts to supply Omani Government
entities and Omani Government purchasers.
