The Financial Services Authority (FSA) has unveiled incentives for the capital market based on His Majesty Sultan Haitham bin Tarik’s directives to offer a package that contributes to developing the investment and business environment in the Sultanate of Oman.
Highlights
The incentives will focus on encouraging the establishment of new public joint-stock companies and converting private companies and family companies with a market value exceeding RO10 million into public joint-stock companies.
The Ministry of Finance will return two-thirds of the income tax paid by the company benefiting from the incentive program, for 5 years after the company is listed on the Muscat Stock Exchange.
The Tax Authority will grant an incentive to pay income tax in installments and an exemption from the additional tax due on the installment for a period not exceeding 6 months from the date the tax is due.
Companies listed on the Muscat Stock Exchange will enjoy a 10 percent price preference in awarding procurement contracts and tenders issued
by the Tender Board for 5 years, as per the regulations.
It also includes establishing a sub-market on the Muscat Stock Exchange called the “Promising Companies Market” with a package of incentives, in addition to providing incentives to transform limited liability companies into closed public joint stock companies.
The program aims to provide various options for developing the capital market and providing financing tools that suit the nature of different companies, including small and medium-sized companies.
This program is expected to contribute to achieving sustainable growth for the targeted companies and provide new financing opportunities that help them enhance their competitiveness and ability to expand.
Full details
The program aims to stimulate the role of the capital market in the national economy and enable it to play its desired role as a long-term financing tool for economic projects and provide investment opportunities for local and foreign investors. The program also aims to preserve existing companies and ensure their sustainability and growth by converting them into joint-stock companies that enjoy transparency and disclosure and adopt the best standards of governance and wise management that guarantee their continuance and sustainability.
The capital market incentive program will continue for five years from the beginning of the actual implementation of each of the three paths. The first path is to encourage the establishment or conversion of family and private companies whose market value exceeds RO 10 million into public joint stock companies, while the second path is to establish a sub-market in the Muscat Stock Exchange titled the “Promising Companies Market”, which is a customary practice in many financial markets, which targets private and family companies, small and medium enterprises and emerging companies whose market value is more than RO 500,000.
The third path is to encourage the conversion of limited liability companies into closed joint stock companies. It targets companies whose market value exceeds RO 500,000 and the number of Omani employees is not less than 20.
The market value of the companies in all three paths will be determined by the valuation prepared, for this purpose, by an FSA FSA-approved valuation firm.
The details of the capital market incentives program were announced in a press conference organized by the FSA with the participation of the Ministry of Finance, the Ministry of Commerce, Industry and Investment Promotion, Muscat Stock Exchange, and the National Program for Financial Sustainability and Financial Sector Development “Estidamah”, which are the entities that were involved with considering the options to develop the capital market and provide financing tools that suit the nature of different categories of companies, including small and medium enterprises.
The Executive President of the Financial Services Authority, Sheikh Abdullah Salem al Salmi, emphasized that the issuance of the HM’s blessing on the launch of the capital market incentives program is a step forward in the path of supporting economic growth through diversifying and enabling the private sector to play a greater role in leading business and commercial activities. The capital sector development paths come within the framework of the government’s interest and keenness to develop the business environment in the private sector and achieve the goals of Oman Vision 2040.
Al Salmi pointed out that the conversion of such companies into public joint stock companies will strengthen the position of the MSX and increase its liquidity and size, which will enhance the chances of upgrading the stock exchange to an emerging market and will provide investors with investment options and alternatives in different sectors, most importantly, it will ensure sustainability and continuity of the targeted companies to achieve the interests of their founders, ensure their growth and expansion of their business and their continued contribution to the economy in general.
“Promising Companies Market” as a sub-market
In the Muscat Stock Exchange, the Promising Companies Market will provide an appropriate environment for private companies, family businesses, and emerging, small and medium enterprises to grow and gain experience in dealing with the financial markets and experiment with the available alternatives to finance their projects and expansions, in addition to providing the opportunity to prepare to convert into public joint stock companies to be listed on the regular market after meeting the requirements, noting that the listing of companies in this market will be in accordance with flexible listing requirements and terms and conditions under the supervision and regulation of the FSA.
The FSA is currently working with MSX to prepare the regulations for the promising market and the procedures for listing companies therein. It is expected that this market will commence after the approval of the regulations before the end of this year.
The Secretary General of the Ministry of Finance, Mahmoud Abdullah al Awaini said that the capital market incentives program approved by His Majesty the Sultan achieves the goals sought by the National Program for Financial Sustainability and Financial Sector Development and the approved plan for developing the sector, including activating the role of the capital market and enhancing the attractiveness of foreign investments. It is hoped that it will achieve the set goals with the participation of relevant government entities.
The program will contribute to increasing the size and depth of the capital market, in addition to stimulating the listing of new companies and upgrading the rating of MSX from a frontier market to an emerging market. It is expected that this program will enhance attracting more internal and external investments, and will represent an important development stage for the stock exchange
First Path Incentives and Rules
The first path includes a package of incentives provided by various parties to encourage the establishment of new public joint stock companies and the conversion of private companies and family companies whose market value exceeds RO 10 million into public joint stock companies, where the Ministry of Finance will refund two-thirds of the income tax paid by the company benefiting from the incentives program for a period of 5 years after the company is listed on the MSX.
The Tax Authority will also give an incentive to pay income tax in installments and exemption from the additional tax resulting from the installments for a period not exceeding 6 months from the date the tax is due.
Companies listed on the Muscat Stock Exchange will also have a 10% price preference in awarding procurement contracts and tenders issued by the General Secretariat of the Tender Board for five years according to the rules in force in the Tender Board. The listing fees, public offering prospectus fees, and any other prospectuses charged by the FSA will also be exempted for 3 years from the beginning of the incentive program, and guidance and advice will be provided for a year on all legal and regulatory requirements that the company must comply with by providing a direct line of communication with one of the specified and qualified employees, to solve any difficulties or challenges that may face the offering in coordination with the relevant entities.
The FSA will also approve the prospectus within three working days of receiving the completed documents. Muscat Clearing and Depository Company will exempt the companies from the transfer agent’s fee for 3 years. The Development Bank will provide a fast track for public joint stock companies benefiting from the incentives program when submitting financing applications to the Development Bank. The Companies converting into public joint stock companies will also have preference in obtaining the incentives available from the relevant authorities, such as usufruct of lands and opportunities in concession areas according to specific rules that will be coordinated with the relevant authorities.
On the rules for benefiting from the incentives package linked to the main market for companies converting into public joint stock companies, it is required that the listing or establishment must be within the duration of the program, which is limited to five years from the date of announcing the program, and it is also required that the company’s capital or market value not be less than 10 million Omani Riyals. It is also required that the size of the offering not be less than 25% of the company’s capital, and the company will be prohibited from converting to any other legal form for five years after the end of the period of benefiting from the incentives program, save by exception from the FSA.
Second Path Incentives and Rules
Closed joint stock companies wishing to be listed on the Promising Companies Market will receive incentives provided by the Ministry of Finance in the form of a refund of two-thirds of the income tax paid by the company benefiting from the incentive program after listing the company in the Promising Companies Market.
The Tax Authority will also grant the incentive to pay income tax in installments and an exemption from the additional tax resulting from the installments for a period not exceeding 6 months from the date the tax is due. The Tender Board will also grant price preference at 10% in awarding procurement and tender contracts according to the rules in force in the Tender Board.
The listing fees and prospectus fees charged by the FSA will also be exempted for 3 years from the beginning of the incentive program, and guidance and advice will be provided to the companies wishing to list on the promising companies market. The FSA will also provide a training program to qualify entrepreneurs and company owners before listing on the stock exchange, in addition to providing simplified forms of prospectuses and mitigated financial disclosures by adopting a mitigated form of international accounting standards and in a manner appropriate to the companies targeted for the promising companies market.
On the part of Muscat Clearing and Depository Company, transfer agent’s fees will be exempted for 3 years, while the Development Bank will provide a fast track for companies benefiting from the incentives program when submitting financing applications. Furthermore, MSX will pay the costs of the issue manager for the first five companies listed on the Promising Companies Market and will provide marketing for the companies through media coverage of the new listings. Details of the requirements for listing companies in the Promising Companies Market will be announced when the legal procedures are completed.
Third Path Incentives and Rules
As for the incentives package that will be granted to companies wishing to convert from limited liability companies to closed joint stock companies in preparation for their qualification for listing in the promising market, they have been placed gradually in terms of the period to be compatible with the incentive package proposed for the promising companies market, which would allow the companies to adjust their situations and meet the requirements of governance before listing on the promising companies market or converting into public joint stock companies.
One-third of the income tax paid by the company benefiting from the incentive program will be refunded for two years from the date of conversion. It will also be given a 10% price preference in awarding procurement contracts and tenders issued by the Tender Board for two years from the date of conversion into a closed joint stock company according to the rules in force in the Tender Board. Companies converting into closed joint stock companies will also have a fast track as beneficiaries of the incentives program when submitting financing applications to the Development Bank.
About the rules of the process of converting companies into closed joint stock companies, the market value is required to be no less than RO 500,000, to be proven by valuation of the company conducted by an FSA-approved valuation firm. It is also required that the number of Omani citizens working for the company shall not be less than 20 employees. It is also required that the company wishing to convert shall be committed to paying the tax and does not have any outstanding obligations to the Tax Authority in addition to the company meeting the standards of local added value.
Oman Observer