On April 7, 2025, His Majesty Sultan Haitham bin Tarik issued Royal Decree No. 38 of 2025, promulgating the new Law of Special Economic Zones and Free Zones in Oman. This decree introduces significant changes to the legal framework governing special economic zones (SEZs) and free zones, repealing the earlier Free Zones Law issued under Royal Decree 56 of 2002. The new law aims to enhance economic development, attract foreign investment, and streamline regulatory processes within these zones.
Key Provisions:
- Effective Date: The decree was published in the Official Gazette on April 7, 2025, and came into force on April 8, 2025.
- Protection of Existing Rights: Existing operators and companies within free zones and the Special Economic Zone at Duqm will retain their current advantages, incentives, exemptions, and guarantees until their respective agreements or terms expire. This ensures continuity and stability for ongoing operations.
- Executive Regulations: It's crucial to understand that the Chairman of the Public Authority for Special Economic Zones and Free Zones (OPAZ) has one year from April 7, 2025, to issue the executive regulations. During this transitional period, the current regulations will remain in force, provided they do not conflict with the new legal framework.
- Repeal of Previous Legislation: Royal Decree 38 of 2025 also signifies the repeal of the Free Zones Law issued under Royal Decree 56 of 2002. Furthermore, any other existing legal provisions that are inconsistent with the new decree are also superseded.
Implications for Businesses:
Companies currently operating in free zones or Special Economic Zones (SEZs) can expect continuity of their existing privileges until their agreements or designated periods conclude, providing stability for current projects. This stability is crucial as Oman looks to the future, where the new legal framework is anticipated to modernize its SEZs and free zones. The framework is expected to offer enhanced incentives designed to attract greater foreign direct investment and support economic diversification.
Competitive Advantage of Oman:
Oman maintains a competitive edge in the region due to its strategic location and favorable trade agreements, including Free Trade Agreements (FTAs). While the general corporate tax rate in Oman is 15%, the country's participation in FTAs offer significant advantages to businesses operating within its economic zones. These benefits include reduced tariffs and streamlined trade processes, making Oman an attractive destination for international companies seeking to optimize their supply chains and reduce costs. Oman's existing trade benefits and strategic position continue to make it an appealing location for multinational corporations looking to establish operations in the Middle East, particularly those seeking to leverage Oman's proximity to key markets and its role in regional trade networks.
Royal Decree 38/2025 is an important development in the modernization of Oman's legal framework governing special economic and free zones.
How can we help?
For a comprehensive understanding of these regulations and to explore their strategic application for optimal benefit, we encourage you to contact our offices. With a significant presence across ten jurisdictions in the Middle East and North Africa, our dedicated team of specialist corporate lawyers are able to simplify the complexities of business structuring.
Our team has extensive experience in providing government authorities with regulatory advice in connection with the establishment of free zones and drafting implementing regulations to provide the legislative framework for setting up and regulating corporate entities in such free zones and we could leverage such experience in assisting you to navigate through the transition period.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
