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What a free zone gives you in Oman

A free zone is a fenced customs area outside Oman's normal customs territory. Goods come in without duty and leave for export without duty. Three zones matter most to foreign makers and traders: Salalah Free Zone, Sohar Free Zone and Duqm. Each was built for a different kind of business, so picking the wrong one costs time and money.

The headline package looks the same in all three: 100 percent foreign ownership, no minimum share capital, and free movement of profits. The 5 percent VAT charged on the mainland does not apply inside the zones, according to the Public Authority for Special Economic Zones and Free Zones (OPAZ).

The real differences sit underneath. Tax holiday length, the Omanisation rate, land terms and sector fit all vary by zone, and those four things should decide where you go.

The 2025 law and the 2026 regulations

The legal base under every zone changed recently. Royal Decree 38/2025 was issued on 7 April 2025 and took effect on 14 April 2025. It brought in a single Law of Special Economic Zones and Free Zones and repealed the Free Zones Law of 2002.

Article 27 sets the standard tax break at 10 years from the start of activity, issued by decision of the Minister of Finance. It can be renewed for two further periods of the same length, but only for activities of a special nature that the regulation defines. That is how the 30-year figure is built: 10 years plus two conditional renewals.

The same article excludes banks, financial firms, insurers, telecom providers, construction firms and land or sea transport companies. Article 28 frees machinery, equipment, vehicles, spare parts and raw materials from customs duty on entry. Article 13 requires work permits for foreign staff within five working days, and treats silence past that deadline as approval. The full text is on the official decree record.

Royal Decree 39/2026, issued on 1 March 2026, gave OPAZ a new statute with wider supervisory powers over every zone. Then on 20 September 2026 OPAZ issued Regulation 81/2026, the executive regulations of the law. Licences can now be issued and renewed automatically through the One-Stop Shop once digital checks pass, and the regulations set deadlines for decisions.

Salalah Free Zone built around a transhipment port

Salalah Free Zone was created by Royal Decree 62/2006 on 20 June 2006. OPAZ puts its area at 21.6 square kilometres, split across two blocks near Raysut in Dhofar, in the far south of the country.

Its reason for existing is the Port of Salalah next door, which handled about 3.3 million TEU in 2024 and now has capacity for 6.5 million TEU, per the Ministry of Foreign Affairs.

OPAZ states the incentives plainly: no tax on profits or dividends for 30 years, no customs duty on imports and exports, no minimum capital, no personal income tax, and no limit on sending money home.

Omanisation is the figure to confirm. The OPAZ FAQ places Salalah at the low end of its 10 to 35 percent range, around 10 percent. The zone company has quoted a higher rate, so ask for the current number in writing before you sign.

Salalah suits you if your cargo moves through Oman rather than into it: distribution centres, light assembly and re-export firms.

Sohar Free Zone for metals chemicals and the road north

Sohar Free Zone was established by Royal Decree 123/2010 on 45 square kilometres in Al Batinah North, between Muscat and the UAE border. The Port of Sohar beside it handled more than 942,000 TEU in 2024.

That position is the point. Sohar Free Zone is the only one of the three with fast road access to Dubai and Abu Dhabi, and for heavy, low-value cargo that road matters more than a shipping lane.

OPAZ lists a corporate tax holiday of up to 25 years, 0 percent import or re-export duty, 0 percent personal income tax, and a low capital requirement. The holiday is five years shorter than Salalah and Duqm offer, and it is tied to hiring.

The zone regulation, Ministerial Decision 35/2016, spells out the link. The first 10 years of tax exemption require Omanisation of at least 15 percent. Extensions then come in five-year blocks: 25 percent for years 11 to 15, 35 percent for years 16 to 20, and 50 percent for years 21 to 25. The same regulation exempts companies from the minimum capital rule in the Commercial Companies Law.

The industrial base is already built, with clusters in metals, petrochemicals, food processing and logistics. Choose Sohar if you need suppliers or utilities that already exist on site, and if part of your output goes north by truck.

Duqm has the most land and the longest holiday

The Special Economic Zone at Duqm was set up in late 2011 under Royal Decree 119/2011. It covers 2,000 square kilometres on the Arabian Sea, by far the largest of the three.

Duqm has the strongest terms on paper. Its published incentive list includes a tax exemption of 30 years from the start of business, renewable for another 30 years. Usufruct land agreements run up to 50 years and renew for similar periods. Companies are exempt from the minimum capital rule in the Commercial Companies Law, and foreign ownership can reach 100 percent.

Customs rules are loose by design. Goods may be imported without prior approval unless the law bans them, and finished or assembled products are treated as locally produced. Investors get three months to inspect an allocated site, and expatriate manpower applications must be handled within five working days.

The anchor tenant tells you who Duqm is for. The OQ8 refinery sits beside a commercial port and a drydock, and total cargo through Duqm port rose 152 percent in 2024.

Duqm rewards patience and scale rather than speed. Its Omanisation rate is set by the SEZAD board, so it is agreed case by case.

Salalah Sohar and Duqm compared

Salalah Free Zone. Tax holiday of 30 years. Omanisation around 10 percent per OPAZ, to be confirmed with the zone. Zero customs duty and no minimum capital. Best for transhipment, distribution, light manufacturing and chemicals that ship by sea.

Sohar Free Zone. Tax holiday of up to 25 years, the shortest of the three, in a 10-year base plus five-year extensions. Omanisation of 15 percent for the first 10 years, rising with each extension. Zero import and re-export duty, and no minimum capital. Best for metals, petrochemicals, food processing and anything trucked to the UAE.

Duqm Special Economic Zone. Tax exemption of 30 years, renewable for a further 30, with usufruct land for up to 50 years. No minimum capital, and an Omanisation rate set by the SEZAD board. Best for refining, heavy industry, marine services and projects that need very large plots.

Duqm wins on paper, but Sohar Free Zone usually wins on time to production, because its supply chain already exists.

Free zone or mainland the trade-off nobody advertises

Here is the catch. OPAZ is clear that the 100 percent customs exemption covers exported products and excludes the local market. When your goods leave the zone for the Omani market, they count as imports. They attract the standard customs duty, 5 percent on most goods under the GCC unified tariff, plus 5 percent VAT. Your customs advantage disappears at the fence line.

Mainland registration has its own maths. The standard corporate income tax rate is widely published at 15 percent; confirm it with the Tax Authority. Since the Foreign Capital Investment Law, Royal Decree 50/2019, foreign investors can hold 100 percent of a mainland company in most activities.

Some businesses should not use a zone at all. Retail shops, restaurants, clinics and contractors bidding for Omani government work belong on the mainland. Royal Decree 38/2025 also excludes banking, insurance, telecoms, construction and transport from the zone tax break, so for those sectors the main reason to be inside the fence has gone.

Our guide to the types of commercial companies in Oman explains which legal form suits each route.

What it costs and how to choose

Land and lease rates are the honest gap in any comparison. None of the three publishes a rate per square metre; pricing depends on plot size, sector, utility load and committed investment.

What is published is the shape of the deal. Article 30 of the 2025 law says land is allocated by lease or usufruct under rules set by the OPAZ board. Duqm grants usufruct for up to 50 years with renewal. Salalah and Sohar sign a usufruct agreement after allocation, with the term agreed per project.

Start with your customer, not the tax rate. If most revenue comes from outside Oman, a zone is right. If most comes from Omani buyers, the mainland is right and a zone only adds friction.

Then match the zone to your cargo. Sea freight to Asia, Africa and Europe points to Salalah. Road freight to the UAE points to Sohar. Very large plots and heavy process industry point to Duqm.

Finally, check the excluded sectors and the Omanisation rate before you commit to a plot, because both change over time. Our company formation service in Oman handles both the zone and mainland routes. Once you are licensed, our post company formation services cover visas, payroll and annual filings. The full sequence is set out in our note on the steps for establishing a company in Oman.

Frequently Asked Questions

Can a free zone company sell inside Oman?

Yes, but not free of duty. Goods leaving the zone for the Omani market count as imports and pay customs duty plus 5 percent VAT. Many investors set up a mainland entity or appoint a local distributor for domestic sales.

Is the tax holiday really 30 years?

It is built in stages. Royal Decree 38/2025 gives 10 years, renewable for two further periods of the same length for activities of a special nature. Duqm advertises 30 years renewable for another 30, and Sohar caps the total at 25 years. Renewal is not automatic, so treat the long figure as a ceiling.

Which zone has the lowest Omanisation requirement?

OPAZ says rates across its zones run from 10 to 35 percent, with Salalah and Duqm around 10 percent. Sohar Free Zone requires 15 percent for the first 10 years under Ministerial Decision 35/2016. Each zone reviews its own rate, so confirm the current figure when you apply.

Do I need a local Omani partner?

No. All three zones permit 100 percent foreign ownership, and Article 8 of Royal Decree 38/2025 confirms that zone capital may be wholly owned by non-Omanis. Since Royal Decree 50/2019, most mainland activities also allow full foreign ownership.

How much capital do I need to start?

None of the three zones imposes a minimum share capital. Duqm and Sohar both exempt companies from the minimum capital rule in the Commercial Companies Law. Your real commitment is the lease and the investment plan the zone approves.

City Squares is an authorised agent of the Ministry of Commerce, Industry and Investment Promotion, based in Muscat, and helps with company formation in Oman's free zones and on the mainland. Zone incentives, Omanisation rates and fees change by decision, so confirm current figures before committing.