Modern Law Enacted for Oman’s Special Economic and Free Zones

Oman's New Law of Special Economic Zones and Free Zones

Royal Decree No. 38 of 2025, issued by His Majesty Sultan Haitham bin Tarik on April 7, 2025, signals the beginning of a transformative new phase in Oman’s economic development. This pioneering legislation, named the Law of Special Economic Zones and Free Zones, supersedes the existing Free Zones Law issued under Royal Decree 56 of 2002, and is a strategic step toward the modernization of the Sultanate's investment regime.

As the global economy continues to grow more competitive, Oman is moving forward in its efforts to enhance its appeal to foreign investors, foster domestic entrepreneurship, and establish a viable environment for high-value projects. The new law not only achieves legal certainty and regulatory effectiveness but also sets out a series of incentives to support innovation, industrial development, and regional competitiveness.

In this article, we discuss the major attributes, regulatory issues, and opportunities for business ensuing from Royal Decree 38/2025 and how Oman's law locates the Sultanate as a strong economic center in the Gulf region.

1. Legal Framework and Background

Royal Decree 38/2025 represents a major legislative overhaul, essentially replacing Royal Decree 56/2002, which once regulated the workings of Oman's free zones. The economy of Oman over the last two decades has undergone development, with rising focus on diversification, private sector growth, and world investment attractiveness. The previous law, though useful in its day, no longer reflected the ambitions of Oman's Vision 2040 plan.

Through the introduction of a common legal framework, the new decree harmonizes regulatory practice between all Special Economic Zones (SEZs) and free zones, including the flagship Special Economic Zone at Duqm (SEZAD), which has become the backbone of Oman's industrial development and international trade participation.

2. Effective Date and Transition Measures

The decree was formally published in the Official Gazette on April 7, 2025, and took effect the next day, April 8, 2025. Significantly, this grants immediate legal effect, enabling OPAZ (the Public Authority for Special Economic Zones and Free Zones) to commence the transition to the new framework without delay.

3. Continuity and Legal Certainty

For established companies, stability is of paramount importance. The law directly protects the rights, incentives, exemptions, and guarantees of firms and operators that are already incorporated in SEZs or free zones. The rights will continue to be effective until the agreements or contractual periods expire. Such a transitional measure provides regulatory continuity, assuring investors and stakeholders that their active projects will not experience sudden alterations or legal uncertainty.

4. Transitional Framework and Executive Regulations

The law allows OPAZ's Chairman one year (until April 7, 2026) to promulgate the executive regulations required for the complete implementation of the decree. Throughout this timeframe, the current regulations remain in force subject to not being contrary to the new provisions. This interim arrangement provides a formalized and flexible adjustment phase, where firms and regulators have time to align operations to the new structure without interruption.

5. Main Features and Advances of the New Legislation

1.  Integrated Legislative Framework

One of the significant merits of Royal Decree 38/2025 is the grouping of laws regulating SEZs and free zones under one legislative framework. This ease the regulatory landscape and encourages harmonized practices, which are particularly advantageous to multinational corporations dealing with diverse zones in Oman.

2. Enhanced Incentives and Privileges

The law brings about advanced incentives and exemptions, complementing Oman's competitive edge. These comprise:

1. Exemptions from corporate taxes for specific durations.
2. Customs and import duty free exemptions on goods imported into the zones.
3. Diluted foreign ownership restrictions and streamlined visa procedures.
4. Incentives for strategic projects, including fast-track approvals and longer tax holidays.

3. One-Stop-Shop for Licensing and Permits

One of the important innovations is the one-stop-shop system created under legislation. All permits, licenses, and approvals pertaining to activities in SEZs and free zones will now be handled on a centralized platform operated by OPAZ. This minimizes administrative burden, shortens project timelines, and improves the investor experience.

4.  Incentives Linked to Employment and Value Addition

The law provides a visionary mechanism by correlating tax incentives and exemptions with the generation of employment at the local level, technology transfer, and local content development. This is in line with Oman's overall ambitions under Vision 2040 to increase human capital, minimize unemployment, and establish knowledge-based industries.

5. Real Estate Development and Freehold Ownership

In a bold and progressive move, the law allows real estate developers to sell residential units on the freehold system within SEZs. This not only promotes more urban development within such zones but also makes them more livable and desirable to long-term residents and foreign professionals.

6. Business and Investor Implications

1.  Legal Certainty and Continuity

Firms doing business in Oman's SEZs and free zones can be confident that their existing contractual rights and incentives are safeguarded. The continuity of benefits provides for unbroken operations while providing firms with time to adjust to the new framework.

2.  Greater Access to Global Markets

Oman's strategic position, combined with its Free Trade Agreements (FTAs) including with the United States and the Gulf Cooperation Council (GCC) gives companies tariff-free access to major markets worldwide. Working from Oman's economic zones gives companies a prime location to maximize supply chains, reduce costs, and grow regionally and globally.

3.  Sector-Specific Opportunities

The new law is especially advantageous for industries like:

1. Manufacturing and industrial processing
2. Logistics and warehousing
3. Technology and innovation
4. Green energy and sustainable industries
5. Tourism and real estate development

In providing a contemporary legal framework, Oman is making it obvious that it is going after high-value, high-impact industries that will help drive its diversification strategy.

4.  Enhanced Regulatory Efficiency

With its centralized licensing system in OPAZ, companies can anticipate quicker approvals, more transparent processes, and fewer bureaucratic obstacles factors that are important for project viability and investor trust.

7. Competitive Advantage of Oman's Economic Zones

Oman's free zones and SEZs provide an attractive value proposition to businesses:

1. Strategic proximity to significant shipping routes and international trade markets.
2. Political stability with investor-friendly policies.
3. World-class infrastructure, especially in areas such as Duqm and Salalah.
4. Competent labor pool fueled by Omanization and skill-enhancement programs.
5. Investor protection and mechanisms to resolve disputes.

Royal Decree 38/2025 reinforces Oman’s position as a premier investment hub in the Middle East by streamlining its legal framework and aligning it with international best practices.

8. Future Prospect and Strategic Potential

1. Digitalization and Innovation

With the expected release of executive regulations, OPAZ will integrate digital platforms, intelligent zone management, and e-governance systems that further optimize zone operations. These technologies will facilitate real-time monitoring of permits, expedited customs clearance, and automated compliance management.

2. Green Growth and Sustainable Development

The legislation opens the door to green investment projects in SEZs, especially in Duqm, which is being developed as a clean energy center. Solar, hydrogen, and circular economy investors will be particularly welcome in Oman's revised structure.

3. Integration with Global Supply Chains

With the existing global supply chain disruption, Oman's highly developed ports and economic free zones provide an alternative for companies looking to restructure and de-risk their supply chains. Oman's stable logistics, free trade access, and infrastructure readiness enable this shift.

Conclusion

Royal Decree 38 of 2025 represents a transformative step in positioning Oman as a leading regional hub for investment, innovation, and economic diversification. Through the replacement of legacy regulations with a single, investor-oriented, and forward-looking legal framework, the Sultanate has established a platform for long-term growth and engagement with the world. Whether you are a multinational company, a regional investor, or a local entrepreneur, Oman’s revamped SEZ and free zone regime offers legal stability, operational efficiency, and strategic opportunities. As the executive regulations are rolled out over the next year, investors would do well to monitor developments closely and align their expansion strategies with this dynamic and evolving legal landscape.