Oman issues Executive Regulations for Special Economic Zones and Free Zones

Topic

Summary

Income tax exemption

1. Enterprises and operators can apply for a 10 year income tax exemption through a one-stop shop. The exemption, granted by decision of the Minister of Finance, begins from the date of commencement of activity.
2. Qualifying special nature activities are eligible for two extensions of 10 years each, subject to application, conditions and approvals.

Special nature activities eligible for exemption beyond 10 years

1. Heavy manufacturing industries such as petrochemicals, minerals, and basic metal industries.
2. Green industries that are part of national plans for the transition to clean energy, net-zero carbon emissions, renewable energy projects, green hydrogen and its derivatives, and associated industries.
3. Logistics and handling in ports.
4. Advanced technical industries, data centers, artificial intelligence technologies, and innovation.
5. Strategic infrastructure projects.
6. Food security projects.
7. Pharmaceutical, medical, biotechnology, and recycling projects.
8. Administrative offices, import and export, or similar activities, provided they add value to the economy.
9. Activities of service providers provided the contract period is not less than 15 months at the time of submitting the exemption application.
10. Any other projects decided by the board, provided they add economic or strategic value to the Special Economic Zone, Free Zone or the economy.

Excluded activities

1. Banks, financial institutions, insurance and reinsurance companies, telecommunications service enterprises, construction companies and businesses engaged in land or maritime transportation are ineligible for the income tax exemption.
2. The ERs also empower OPAZ to determine the list of activities prohibited in a Special Economic Zone or Free Zone depending on the nature of each zone.

Strategic enterprises

1. An enterprise investing at least OMR 10 million may be considered as strategic (within approved national plans and strategies) and eligible for a single approval process provided it contributes to one of the following:
   a. Transfer of modern knowledge and technology.
   b. Enhancing local content within Oman.
   c. Enhancing self-sufficiency or achieving economic security for Oman.
   d.Development of annual exports outside Oman.
2. The board is empowered to waive the investment threshold of OMR 10 million depending on a project’s nature or strategic importance.

Additional advantages, incentives or facilities

1. Exemption from the lease value or consideration for the usufruct of land and real estate necessary for the enterprise for up to 10 years from the date of the actual operation of the enterprise.
2. Exception from the prescribed Omanization requirements for up to 4 years from the date of the actual operation of the enterprise.
3. Exemption from all or certain fees.
4. Any other advantages proposed by the board depending on the nature of each enterprise.

Tax compliance

1. Enterprises must submit income tax returns despite exemption.
2. Enterprises and operators must maintain regular accounts approved by a licensed auditor and provide financial statements to OPAZ on request.
3. Enterprises, operators and real estate developers must retain supporting records for at least 10 years.

Licensing and administration

1. Standard licenses are valid for three years and can be renewed for similar periods. Renewal applications are required to be submitted at least 30 days before expiry.
2. Automatic renewal of a license is permitted if the details of the licensee meet the conditions prescribed in the ERs.
3. Licensees must keep the registered information updated and comply with the prescribed notification timelines for any changes.

Real estate

The ERs introduce detailed requirements for real estate development, off-plan sales, freehold ownership by non-Omanis and investor residency.

Penalties

Non-compliance can result in administrative fines of up to OMR 50,000 per violation, license suspension or cancellation, and other administrative measures. This fine can be doubled where a violation is repeated within two years.