Al Busaidy Mansoor Jamal & Co.

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Oman Economy

AMJ advises on transport and logistics restructuring

Filed under AMJ Deals, AMJ News, Oman Economy

Oman transport and logisticss

AMJ has advised on the establishment of Oman Global Logistics Group SAOC (OGL), the government’s new transport and logistics development arm. OGL, which has a mandate to implement the nation’s long-term ‘Sultanate of Oman Logistics Strategy 2040’, will bring under one umbrella the 15 different transport and logistics-related undertakings operating in the Sultanate’s ports, free zones, rail, maritime and land transport sectors.

This represents the first restructuring of its kind in Oman undertaken jointly by the Ministry of Finance and Ministry of Transport and Communications. A complex deal, it involved transferring shares and assets held in logistics companies by the Ministry of Finance jointly or in partnership with other private or public sector entities, as well as management control, to the new group company. The hybrid nature of the transaction tested the application and interplay of special provisions and exemptions in Oman’s law relating to companies and capital markets.

AMJ acted as sole legal advisor on the restructuring. Managing partner Mansoor Malik, who led the team, commented, ‘We are pleased to have contributed to this important restructuring of a strategic sector which is key to the government’s diversification drive and future economic prosperity. The establishment of Oman Global Logistics Company SAOC will create economies of scale and efficiencies for government-run companies by consolidating managerial and technical expertise and integrating and streamlining operations.’

AMJ’s team included Nasar Ahmad, senior corporate associate and commercial transactions associate Ahmed Al Busaidy.

Oman introduces major tax reforms

Filed under Oman Business, Oman Economy, Tax Law

Oman corporate tax

Amendments to Oman’s corporate tax law have wide-ranging implications for companies doing business in Oman as well as foreign investors including those without a permanent establishment in the country. The reforms have been in the pipeline since they were presented to the Cabinet in January 2016. They are part of a package of fiscal measures announced in February 2017 aimed at diversifying revenue resources to offset Oman’s higher than forecast budgetary deficit for 2016 due to depressed oil prices.

The new rules introduced by Royal Decree 9/2017 and published in the Official Gazette on 26 February 2017, represent a radical overhaul of the previous tax regime under Royal Decree 28/2009. Changes include:

– removing the tax-free threshold of OMR 30,000 previously available to establishments, companies or foreign persons deemed to have a permanent establishment carrying on business in Oman;

– raising the corporate tax rate from 12 percent to 15 percent effective for all financial years beginning on or after 1 January 2017. A lower 3 percent micro tax rate is applicable to small tax payers who meet specific criteria;

– expanding the withholding tax net by imposing a 10 percent tax on dividends on shares and interests from 28 February 2017;

– extending the definition of ‘income’ to include fees for services paid to foreign persons who are based outside Oman. Whereas the amendments to the withholding tax provisions came into force on 28 February 2017, the amended definition of ‘income’ comes into effect only on 1 January 2018. It remains to be clarified whether withholding tax deductions on service fees payable to foreign persons take effect now or on 1 January 2018;

– applying withholding tax provisions to ministries and government bodies and other state administrative units; tax payers are required to deduct the withholding tax at source and remit to the government within 14 days of the month-end in which the fees are paid or credited to the account of the tax payer.

– introducing a requirement for all tax payers to obtain a tax card from the Department of Taxation of the Ministry of Finance. The tax card number must appear on all of the tax payer’s contracts, invoices and correspondence. Ministries, state administrative units and companies in which the Government has a 40 percent shareholding must obtain a copy of the tax card before undertaking any transaction with the tax payer; and

– removing tax exemptions previously available for a period of 10 years on income arising from operating hotels and tourism projects, agriculture, mining, export of local goods, fishing, health care and education. Only the manufacturing sector is now exempted from tax for a reduced period of up to 5 years.

In addition to the above, the tax regime has now moved on to a self-assessment regime with rules for increased fines and prison terms for officers of taxable entities for failure to comply with the provisions of the law.
For more information contact Mansoor Malik or Asad Qayyum Read More »

AMJ partners OER Business summit

Filed under AMJ News, Oman Business, Oman Economy

OERBusinessSummit2016

AMJ recently partnered the Oman Economic Review, a leading business publication, in staging a major business summit in Muscat on the theme of ‘The Diversification Imperative’. The event assembled 300 industry leaders and decision makers to discuss the opportunities and challenges in diversifying the Sultanate’s economy and to lay down a roadmap for the future.

The Summit comprised a number of key note addresses and panel discussions moderated by Nima Abu-Wardeh, former presenter of BBC World News, Middle East Business Report.

For more information, contact Bernadette Bhacker-Millard

AMJ advises on US$1 billion loan to the government of Oman

Filed under AMJ Deals, Banking and Finance, Oman Economy

Ministry of finance

AMJ acted as Oman Counsel for the lenders on a syndicated loan of US$1billion to government of Oman in mid-January. Eleven international and regional banks participated in the five-year loan sought to cover part of an OMR3.3 billion deficit in the state budget caused by the decline in oil revenues. The syndicate includes Citigroup, Gulf International Bank and Natixis, who were the initial book runners for the transaction. Other banks are National Bank of Abu Dhabi, Societe Generale, Sumitomo Mitsui Financial Group, Bank of Tokyo-Mitsubishi UFJ, JP Morgan, Credit Agricole, Standard Chartered and Europe Arab Bank.

Signing the agreement on behalf of the Sultanate’s government, Darwish bin Ismail Al Balushi, minister responsible for financial affairs, said the participation of such a large number of banks reflected the trust of global banking institutions in the strength and resilience of Oman’s economy and its positive outlook.

AMJ’s team was led by banking and finance partner, Marcus Pery assisted by William Barrie. Commenting on the deal, Pery said, ‘We are delighted to have acted on this very significant financing transaction which is one of several where AMJ has advised lenders on contracts with a sovereign entity.’ AMJ recently advised Bank Muscat as issue manager and joint lead arranger on Oman’s successful, maiden sovereign sukuk.

Oman’s 2016 state budget cuts spending

Filed under AMJ News, Oman Economy

Oman economy

Oman’s government published the 2016 General State Budget by royal decree 2/2016 on January 1. The government plans to cut subsidies on utility bills, housing loans, fuel and other goods by almost two thirds this year, trim government spending and develop non-oil revenues to help tackle a budget deficit caused by a fall of more than 50 per cent in revenues due to low oil prices, the finance ministry said in a statement to Oman New Agency.

The new budget projects a deficit of OMR3.3 billion for 2016 or 13 percent of gross domestic product (GDP), down from a deficit of OMR4.5 billion for 2015. Total state spending for 2016 is projected at OMR11.9 billion, down 11 percent from actual spending in 2015 and total revenues projected at OMR8.6 billion down 4 percent from 2015.

A package of austerity measures contained in the budget include postponing the award and execution of low priority projects and cut-backs on expenditure by ministries and government units such as limiting travel, entertainment and overseas training, cancelling family cars and tour vehicles allocated for ministers, undersecretaries and senior officials and prohibiting the use of government cars after office hours.

The government plans to cover OMR1.5 billion of the deficit from reserves, to raise OMR1.2 billion in borrowing from international and domestic markets, and the balance from GCC grant aid. The Budget also envisages the privatisation or disinvestment of government-owned companies in line with a programme under Oman’s 9th Five Year Plan 2016-2020 period also issued on January 1, 2016 under royal decree 1/2016. The programme is aimed at expanding the participation of private sector in acquisition, finance and management of projects through public private partnerships (PPP). The preparation of a PPP framework is currently underway.

(The item is compiled from media reports and does not represent advice, comment or commentary of AMJ)