International Practice

# India-Oman Cross-Border
Legal Advisory

Oman

## Oman Legal Services

The Sultanate of Oman is one of India's oldest and most trusted trading partners in the Gulf region, with commercial ties stretching back centuries through the maritime routes connecting Mumbai and Muscat. Bilateral trade between India and Oman exceeds $12 billion annually, encompassing petroleum products, iron and steel, textiles, machinery, agricultural commodities, and a growing services sector. Muscat, the capital and principal commercial hub of Oman, serves as the gateway for Indian businesses seeking to establish a strategic presence in the Sultanate and the broader Gulf Cooperation Council (GCC) market. The Indian diaspora in Oman numbers approximately 700,000, making it one of the largest expatriate communities in the country and a significant contributor to the Omani economy across construction, healthcare, education, retail, and professional services.

At ESB Global Law Advisory, we provide comprehensive cross-border legal counsel from our Mumbai office for Indian companies, investors, and professionals engaging with the Omani market. Oman's legal system is based on civil law principles derived from Islamic jurisprudence, supplemented by a growing body of commercial legislation that reflects the Sultanate's Vision 2040 economic diversification agenda. Our practice draws on a thorough understanding of both Indian and Omani legal frameworks, enabling us to deliver commercially pragmatic advice that addresses the regulatory requirements of both jurisdictions. Whether you are establishing operations in a Muscat free zone, navigating the Foreign Capital Investment Law, structuring construction contracts, or resolving a commercial dispute, our team is equipped to guide you through every stage of the process.

### Free Zone Company Formation

Oman's free zones offer Indian businesses strategically located platforms for manufacturing, logistics, and international trade with significant incentives. SOHAR Free Zone, situated adjacent to SOHAR Port on the Batinah coast approximately 200 kilometres north of Muscat, has emerged as a major industrial and logistics hub attracting Indian companies in metals processing, petrochemicals, food processing, and manufacturing. The Special Economic Zone at Duqm (SEZAD), located on the Al Wusta coast, is one of the largest special economic zones in the Middle East spanning over 2,000 square kilometres, offering opportunities in heavy industries, oil refining, dry dock operations, fisheries, and tourism infrastructure development. Salalah Free Zone in the Dhofar region provides excellent connectivity to East African and Indian Ocean markets through the Port of Salalah, one of the top container transhipment ports in the region.

Free zone entities in Oman benefit from 100% foreign ownership without the need for an Omani partner, corporate tax exemptions for periods of up to 25 years with the possibility of extension, customs duty waivers on imports of raw materials, equipment, and re-exports, and full repatriation of capital and profits. We advise Indian businesses on selecting the optimal free zone based on their industry, operational scale, proximity to raw materials or target markets, and long-term expansion strategy. Our services encompass the complete formation process including free zone authority applications, trade licence procurement, lease negotiations for industrial plots and facilities, corporate governance documentation, employment visa allocation, and ongoing compliance with free zone regulations. For businesses operating from Muscat with free zone manufacturing or logistics operations, we also structure dual-presence arrangements that maximise operational flexibility.

### Foreign Capital Investment & Mainland Companies

The Omani Foreign Capital Investment Law (Royal Decree 50/2019) represents a significant liberalisation of the foreign investment regime in the Sultanate. Under this legislation, foreign investors can own up to 100% of an Omani limited liability company (LLC) in most commercial and industrial sectors, subject to registration with the Ministry of Commerce, Industry, and Investment Promotion (MoCIIP) in Muscat. This reform removed the previous requirement for a minimum 30% Omani shareholding in most sectors, opening substantial new opportunities for Indian businesses seeking to operate directly in the Omani mainland market. The minimum capital requirements have been reduced, and the law provides robust protections against expropriation, nationalisation, and the compulsory sequestration of foreign-owned assets.

Certain sectors remain restricted to Omani nationals or require special authorisation for foreign participation, including upstream oil and gas exploration, banking and insurance (which require Central Bank of Oman approval), defence contracting, and specific retail activities. We advise Indian companies on navigating the foreign investment approval process, structuring mainland LLC formations, drafting memoranda and articles of association compliant with Omani commercial law, and obtaining the necessary municipal and sector-specific licences. For projects that benefit from local partnership, we structure joint ventures with Omani counterparts that align commercial objectives with regulatory requirements, particularly for government procurement and public-private partnership opportunities where Omani participation enhances competitive positioning.

### Omanisation & Employment Law

Omanisation is a cornerstone of the Sultanate's national employment policy, requiring companies operating in Oman to employ minimum percentages of Omani nationals across their workforce. The required Omanisation ratios vary by sector and are periodically updated by the Ministry of Labour, with higher targets in sectors such as banking (90% or above), insurance, telecommunications, human resources, and government contracting. Indian companies establishing operations in Oman must carefully plan their workforce composition to balance the deployment of specialised Indian personnel with compliance obligations under the Omanisation programme. Non-compliance can result in significant penalties including restrictions on obtaining new work permits for foreign employees, financial fines, and in severe cases, suspension of commercial registration.

The Omani Labour Law (Royal Decree 35/2003, as amended) governs employment relationships in the private sector, establishing rules on employment contracts, working hours, leave entitlements, end-of-service gratuity, termination procedures, and workplace safety. We advise Indian companies on structuring their Omani operations to satisfy Omanisation targets while maintaining operational effectiveness, including the design of training and development programmes for Omani employees, secondment arrangements for Indian technical specialists, and compliance with the Ministry of Labour's In-Country Value (ICV) requirements that incentivise local employment and procurement. Our employment practice also covers work permit and residency visa processing for Indian employees, employment contract drafting under Omani law, and dispute resolution before the Labour Courts in Muscat and other Governorates.

### Construction & EPC Contracts

Oman's Vision 2040 economic diversification programme has generated substantial infrastructure and construction activity across the Sultanate, creating significant opportunities for Indian construction, engineering, and project management companies. Major projects span transportation infrastructure including highways, airports, and the planned Oman National Railway, urban development in Muscat and other growing cities, industrial facilities in SOHAR and Duqm, hospitality and tourism developments along the coastline, and social infrastructure including hospitals, schools, and universities. Indian EPC (Engineering, Procurement, and Construction) contractors have a strong track record in Oman and continue to win significant contracts in both public and private sector projects.

Construction contracts in Oman are typically structured under FIDIC standard forms, with the Red Book (for employer-designed works) and the Yellow Book (for design-build projects) being the most commonly used templates, often with Oman-specific particular conditions. We advise Indian contractors and subcontractors on the full lifecycle of construction projects, from tender stage contract review and risk assessment through to claims management, variation orders, extension of time disputes, and final account settlement. Our practice covers contract drafting and negotiation, performance bond and guarantee arrangements, insurance requirements under Omani law, subcontract administration, and dispute resolution through the mechanisms specified in the contract, whether that be engineer's determination, dispute adjudication boards, mediation, or arbitration. We also address the regulatory requirements specific to construction in Oman including contractor classification and registration with Tender Board Oman.

### Bilateral Investment Treaty & Investment Protection

The India-Oman Bilateral Investment Treaty (BIT) provides a framework of legal protections for Indian investments in the Sultanate, offering safeguards that go beyond those available under Omani domestic law alone. The treaty guarantees fair and equitable treatment of Indian investments, protection against unlawful expropriation and nationalisation with provisions for prompt and adequate compensation, free transfer of investment-related payments including profits, dividends, and capital proceeds, and most-favoured-nation treatment ensuring Indian investors receive treatment no less favourable than that accorded to investors from other treaty partner countries.

Critically, the India-Oman BIT provides for investor-state dispute settlement (ISDS), allowing Indian investors to bring claims directly against the Sultanate of Oman before international arbitration tribunals in the event of treaty breaches. We advise Indian businesses on structuring their Omani investments to maximise the protections available under the BIT, including corporate structuring, investment documentation, and notification procedures. In the event of disputes with Omani government entities or regulatory authorities, we assess claims under the BIT framework and advise on the most effective enforcement strategy, whether through diplomatic channels, negotiation, or formal arbitration proceedings under the ICSID or UNCITRAL frameworks.

### Tax & Cross-Border Structuring

Cross-border operations between India and Oman engage tax obligations in both jurisdictions that must be carefully managed to avoid double taxation and ensure compliance. The India-Oman Double Taxation Avoidance Agreement (DTAA) governs the allocation of taxing rights on income including business profits, dividends, interest, royalties, capital gains, and fees for technical services. Oman imposes corporate income tax at a rate of 15% on taxable income of entities operating in the Sultanate, with certain exemptions available for free zone companies and small enterprises. There is no personal income tax in Oman, which is a significant consideration for Indian professionals and entrepreneurs establishing residency in Muscat or other Omani cities.

We advise Indian businesses on structuring their Omani operations to optimise their position under the India-Oman DTAA while maintaining full compliance with the tax laws of both countries. Key issues we address include Permanent Establishment (PE) risk assessment for Indian companies with project-based activities in Oman, withholding tax obligations on cross-border payments of dividends, interest, and royalties, transfer pricing compliance for related-party transactions between Indian parent companies and Omani subsidiaries, VAT compliance under Oman's Value Added Tax system implemented in 2021, and the interaction between Omani tax exemptions for free zone entities and Indian controlled foreign company provisions. Our integrated approach ensures that tax structuring aligns with commercial objectives and withstands scrutiny from both the Oman Tax Authority and the Indian income tax authorities.

### Our India-Oman Legal Services Include

- Free zone company formation in SOHAR, Duqm (SEZAD), and Salalah Free Zone
- Mainland LLC incorporation under the Foreign Capital Investment Law
- Foreign investment approvals and MoCIIP registration
- Joint venture structuring with Omani partners for government and private sector projects
- Omanisation compliance advisory and workforce planning
- Employment contracts, work permits, and labour law compliance
- FIDIC-based construction and EPC contract drafting and negotiation
- Construction claims management and dispute resolution
- India-Oman Bilateral Investment Treaty advisory and investment protection
- Real estate acquisition in Integrated Tourism Complexes and residency visa advisory
- Commercial arbitration before OCAC and international arbitral institutions
- India-Oman DTAA advisory, transfer pricing, and cross-border tax structuring
- Omani VAT registration, compliance, and Tax Authority advisory
- FEMA and RBI compliance for outward investments from India to Oman
- Regulatory approvals, sector-specific licensing, and Tender Board registration

FAQ

## Frequently Asked Questions

### What are the main free zone options for Indian companies in Oman?

Oman offers several strategically located free zones for Indian businesses. SOHAR Free Zone and SOHAR Port, situated on the Batinah coast, are ideal for manufacturing, metals processing, petrochemicals, and logistics operations with direct access to international shipping routes. The Special Economic Zone at Duqm (SEZAD) is one of the largest special economic zones in the Middle East, offering opportunities in heavy industries, oil refining, dry dock operations, and tourism infrastructure. Salalah Free Zone in the Dhofar region provides a gateway to East African and Indian Ocean markets with strong infrastructure for food processing, warehousing, and light manufacturing. Free zone entities benefit from 100% foreign ownership, tax exemptions for up to 25 years, customs duty waivers, and full repatriation of capital and profits. ESB Global advises Indian businesses on selecting the optimal free zone based on their industry, operational scale, and target markets.

### What is the Foreign Capital Investment Law and how does it affect Indian businesses in Oman?

The Omani Foreign Capital Investment Law (Royal Decree 50/2019) governs foreign investment in the Sultanate outside of free zones. Under this law, foreign investors can own up to 100% of an Omani LLC in most sectors, subject to approval from the Ministry of Commerce, Industry, and Investment Promotion. Certain sectors including oil exploration, banking, and defence remain restricted or require special authorisation. The minimum capital requirement for a foreign-owned LLC has been substantially reduced, and the law provides guarantees against expropriation and nationalisation. Indian businesses must also comply with Omanisation requirements, which mandate minimum percentages of Omani nationals in the workforce. ESB Global assists Indian companies with foreign investment approvals, company formation, and ongoing compliance with Omani commercial regulations.

### What are the Omanisation requirements for Indian companies operating in Oman?

Omanisation is the Sultanate's workforce nationalisation programme that requires companies operating in Oman to employ a minimum percentage of Omani nationals. The required percentages vary by sector and are set by the Ministry of Labour, with higher targets for sectors such as banking, insurance, telecommunications, and government contracting. Companies that fail to meet Omanisation targets face penalties including restrictions on obtaining new work permits for foreign employees, fines, and potential suspension of commercial registration. Indian companies must carefully plan their workforce composition when establishing operations in Oman, balancing the need for specialised Indian personnel with Omanisation compliance. ESB Global advises on structuring employment arrangements, secondment agreements, and training programmes that satisfy Omanisation obligations while maintaining operational effectiveness.

### Can Indian nationals purchase property in Oman?

Indian nationals can purchase property in Oman within designated Integrated Tourism Complexes (ITCs), which are purpose-built developments approved by the government for foreign ownership. Prominent ITCs include The Wave Muscat (Al Mouj), Muscat Hills, Jebel Sifah, Salalah Beach, and Hawana Salalah. Property ownership within an ITC entitles the buyer to a renewable residency visa for themselves and their immediate family, provided the property value meets the minimum threshold. Outside of ITCs, foreign nationals generally cannot own freehold property in Oman, though long-term usufruct rights of up to 99 years may be available in certain circumstances. ESB Global assists Indian investors with due diligence, purchase agreements, registration with the Ministry of Housing, and residency visa applications linked to property ownership.

### How are India-Oman commercial disputes resolved?

India-Oman commercial disputes can be resolved through the Omani courts, arbitration, or alternative dispute resolution mechanisms. The Oman Commercial Court, established in Muscat, handles complex commercial cases with specialised judges. For arbitration, the Oman Commercial Arbitration Centre (OCAC) provides institutional arbitration services under rules aligned with international best practices. Parties may also opt for ad hoc arbitration under UNCITRAL Rules or institutional arbitration under ICC or other international rules with Muscat as the seat. Both India and Oman are signatories to the New York Convention, ensuring that arbitral awards rendered in either country are enforceable in the other. Additionally, the India-Oman Bilateral Investment Treaty provides investment protection mechanisms including investor-state dispute resolution. ESB Global advises on dispute resolution clause drafting, represents clients in arbitration proceedings, and assists with cross-border enforcement of awards.

Explore More

## Other International Jurisdictions

🇬🇧

### United Kingdom

Company incorporation, commercial contracts, immigration advisory, and London-seated arbitration for Indian businesses in the UK.

Explore
🇩🇪

### Germany

GmbH formation, employment law, EU trade compliance, and IP protection for Indian businesses in Europe's largest economy.

Explore
🇦🇪

### United Arab Emirates

Free zone company formation, Golden Visa advisory, CEPA compliance, real estate investment, and DIFC arbitration for Indian businesses.

Explore
🇨🇳

### China

WFOE formation, joint ventures, Chinese commercial contracts, IP enforcement, and cross-border trade compliance for Indian businesses.

Explore
🇯🇵

### Japan

KK and GK formation, technology licensing, Japanese regulatory compliance, and investment structuring for Indian enterprises in Japan.

Explore
🇺🇸

### United States

LLC and C-Corp formation, US immigration, technology contracts, IP protection, and cross-border M&A for Indian businesses in America.

Explore
🇱🇰

### Sri Lanka

BOI approvals, company formation, bilateral trade compliance, and investment structuring for Indian businesses in Sri Lanka.

Explore
Oman Operations?

## Expert India-Oman
Legal Counsel

Navigate the Omani legal landscape with confidence. Our cross-border team provides strategic counsel for Indian businesses at every stage of their Sultanate of Oman operations.

Book Consultation
All International Services