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.

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

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 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 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)

AMJ has been appointed together with Ernst & Young and Squire Patton Boggs in a consortium to advise the Omani government in setting up a public private partnership (PPP) unit, developing a regulatory framework and exploring options for PPP procurement.The consortium is tasked with exploring a range of PPP models and developing a first draft of a PPP framework by the first quarter of 2016.

Oman’s past experience in unbundling and privatising its electricity market over the past decade as well as a successful track record in procuring independent power and water producer (IWPP) projects using a PPP approach will stand it in good stead as it seeks to attract private sector funding and expertise for sectors other than power and water.

Commenting on the appointment, AMJ managing partner, Mansoor Malik, said: “While a PPP framework is a natural progression of Oman’s privatisation successes in the utilities sector over the past two decades, the process has gained extra momentum due to continuing depressed oil prices. We are privileged to assist the government in developing a robust legal PPP framework to enable it to push ahead with strategic infrastructure projects under Oman’s new five-year development plan and to meet the challenges of the current fiscal climate.”

Oman’s ruler, Sultan Qaboos bin Said, has put on hold the government’s decision to scrap price controls after the new rules caused an unusual public backlash on social media and triggered an intervention by the Majlis Ash’shura, the elected lower chamber of the Council of Oman, the country’s bicameral parliament.

Under rules dating back to 2011 in the wake of the street protests when inflation was a major concern, retailers and traders needed to seek the approval of the Public Authority for Consumer Protection (PACP) to raise the prices of all goods. The authorities have acknowledged for some time that these controls are not compatible with a free-market economy and sought to deregulate prices on all but twenty three staple items such as rice, cooking oil, sugar, powdered milk and fresh and other dairy products.

The lifting of price controls announced by PACP in mid-June had been sanctioned by the Council of Ministers during their deliberations on a new consumer protection law back in March. However, in late June the Majlis Ash’shura unanimously rejected the controversial decision and successfully appealed to Sultan Qaboos to postpone its adoption until new competition and anti-monopoly legislation is in place to protect consumers. The Sultan’s decision puts pressure on the Council of Oman to speed up its deliberations on the draft laws in question, the revised Commercial Agencies Law and the new Competition and Anti-Monopoly Law. The third law on consumer protection was forwarded to the sultan in late May following an unusual joint session of the Majlis Ash’shura and the appointed upper house, Majlis al‑Dawla (State Council) aimed at resolving the councils’ differences on the draft law. The session discussed eleven articles, agreeing on seven and voting on a further four.

These episodes illustrate the challenges facing Oman in balancing the competing demands of stakeholders when introducing key market reforms. They also mark the growing confidence and role of the Majlis Ash’shura in the legislative process as well as the success of Oman’s constitutional framework for achieving consensus in the event of disagreement within the Council of Oman.

The long-debated adjustment change to the working week in Oman became effective on May 1, 2013 when the country adopted Friday and Saturday as the official weekend for both public and private sectors. The change is expected to boost the Omani economy by aligning government and business with the regional work week and with Oman’s banking sector which has operated a Friday/Saturday weekend since July 2008. Oman also stands to benefit from the closer alignment with international trade norms, in particular for the import-export industry, ports, free trade zones and tourism sector.

Policy makers were keen for broader socio-political reasons to eliminate the discrepancy between public and private sector working conditions as the government seeks to Omanise the private sector, reduce dependency on expatriate labour and to diversify the country’s economy.