One law now governs the Sultanate's special economic zones and free zones. Here is what it covers, what it offers and what investors should check before choosing where to set up.
Oman has spent the last decade building the infrastructure for a more diversified economy: deep-water ports, industrial estates, logistics corridors and a growing technology base. Oman Vision 2040 places foreign investment at the centre of that plan. In April 2025 the Sultanate took an important legal step in the same direction by bringing all of its special economic zones and free zones under a single law.
The Law of Special Economic Zones and Free Zones was issued by Royal Decree 38/2025. It was published in the Official Gazette on 7 April 2025, came into force the following day and replaced the earlier free zones law. For investors, the result is one legal framework, one supervising authority and one set of incentives to compare against setting up on the mainland.
Which zones the law covers
The law names two special economic zones and three free zones. Each has a different purpose, and the right choice depends on what the company will make, move or sell.
- Duqm Special Economic Zone, on the Arabian Sea, built around a deep-water port and heavy industry.
- Knowledge Oasis Muscat, a special zone in the capital for technology and knowledge-based companies.
- Sohar Port and Free Zone, in the north, linked to one of the region's main industrial ports.
- Salalah Free Zone, in Dhofar, next to the Port of Salalah and its shipping routes.
- Al Mazunah Free Zone, also in Dhofar, focused on cross-border trade.
All five now report to one body, the Public Authority for Special Economic Zones and Free Zones (OPAZ). Having a single authority matters in practice: licensing, regulation and investor services follow one rulebook, which makes comparisons between zones more straightforward.
What a company gains inside a zone
Companies established in the zones can be fully foreign owned. Qualifying enterprises receive a ten-year exemption from income tax under the Oman Income Tax Law, and the exemption can be extended twice for activities of a special nature. For a manufacturer or a logistics operator planning a long-term presence, that period can shape the whole investment case.
The exemption is not universal. The law excludes banks and financial institutions, insurance and reinsurance companies, telecom operators, contracting companies, and road and maritime transport businesses. An investor in one of these sectors needs to build the business case without the tax holiday.
How the zones compare with the mainland
The zones are not the only route to full ownership. Since the Foreign Capital Investment Law (Royal Decree 50/2019) came into force, foreign investors can own companies outright in most sectors on the mainland as well. A list of activities remains reserved for Omani investors, and Ministerial Decision 435/2024 extended that list to 123 activities.
The real choice is therefore between two different sets of advantages. A zone offers tax incentives and an environment built for a specific kind of activity. The mainland offers direct access to the domestic market, government customers and the wider business community. Some groups use both: production or logistics inside a zone, and a mainland entity for local sales and tenders.
Five questions to answer before choosing
- Does the activity qualify for the zone's tax exemption, or does it fall in an excluded sector?
- Where are the customers? If most sales are inside Oman, check how goods and services move from the zone to the mainland.
- Which location fits the supply chain best: a port, an airport, a border crossing or a knowledge hub?
- Will the company bid for government or energy-sector tenders, where In-Country Value is scored?
- What do the latest executive regulations issued by OPAZ add to the law for this activity?
Common mistakes
The most frequent mistake is choosing a zone for the tax holiday alone. A company that needs to sell to ministries or national energy companies may find that its In-Country Value plan matters more to winning contracts than the tax rate. A second mistake is treating the licence as the end of the process. Governance between a foreign parent and its Omani entity, local hiring plans and partner agreements decide whether the investment works in the years after the licence is issued.
How Ordovexa helps
Ordovexa's Oman Gateway practice compares the mainland and the zones for a specific business before any licence is filed. The work covers the entry structure, partner due diligence, In-Country Value planning and the governance between head office and the Omani entity. Licensed legal and administrative partners then handle registration under Ordovexa's direction.
