Royal Decree 38/2025 created a unified tax-exemption framework for enterprises and operators in Oman’s Special Economic Zones and Free Zones. The headline rule is a 10-year exemption from taxes imposed by the Income Tax Law, starting from commencement of the activity.
That does not mean every zone company automatically receives 30 tax-free years. Two additional 10-year periods are available only for activities of a special nature and through the process set by the Executive Regulation. The exemption itself must be issued by a decision of the Minister of Finance.
Income tax, VAT and customs are also separate legal systems. A company can have an income-tax exemption and still need VAT registration, customs declarations, tax returns and detailed records.
Core rule: 10 years is the initial Article 27 period. A 20- or 30-year position must be supported by the renewal rules for an activity of a special nature and the required approval. Do not treat the maximum period as automatic.
1. What Royal Decree 38/2025 changed
Royal Decree 38/2025 issued the Special Economic Zones and Free Zones Law and replaced the old general Free Zones Law. It created one framework covering Special Economic Zones and Free Zones under OPAZ.
The law also protects benefits already granted to existing operators, working companies and Duqm enterprises when the new law entered into force. Those existing benefits continue until their own approved periods expire.
| Situation | What to rely on | Main caution |
|---|---|---|
| New enterprise after the 2025 law | Royal Decree 38/2025, Regulation 81/2026, the establishing decree of the zone and live authority procedures. | Do not copy an old 15-year or 20-year marketing package into a new-company budget. |
| Existing company with a pre-2025 granted exemption | Its existing granted benefit continues until the end of its own period. | Confirm the actual exemption decision and expiry date. |
| Renewal beyond the first 10 years under Article 27 | Special-nature activity rules and the current application/approval process. | The 10+10 renewal is not automatic. |
| Company in an excluded Article 27 sector | Normal tax rules or any other separately available legal exemption. | Article 27 exclusion does not decide every other exemption in the Income Tax Law. |
2. Article 27: the 10-year income-tax exemption
Article 27 states that an enterprise and the operator are exempt from all types of taxes imposed by the Income Tax Law for 10 years from the date they commence the activity.
The same Article says the exemption must be issued by a decision of the Minister of Finance. A company should therefore not treat the zone licence, lease or Commercial Registration as the tax-exemption decision itself.
| Article 27 point | What it means for an investor |
|---|---|
| Initial period | 10 years from the date of commencing the activity. |
| Possible renewal | Two further periods of 10 years each, only for activities of a special nature and under the Regulation. |
| Maximum theoretical period | Up to 30 years where the renewal conditions and approvals are actually met. |
| Approving decision | The exemption is issued by decision of the Minister of Finance. |
| Tax return | The enterprise/operator must still submit tax returns and attached documents under the Income Tax Law. |
| Excluded activities | Certain sectors do not receive the Article 27 exemption. |
3. Which sectors are excluded from Article 27?
The law expressly excludes several sectors from this particular zone exemption.
- banks;
- financial institutions;
- insurance and reinsurance companies;
- enterprises providing telecommunications services;
- construction companies;
- land-transport companies and establishments;
- maritime-transport companies and establishments.
Important: exclusion from Article 27 does not automatically mean that every income stream in that sector is taxable under every circumstance. A separate exemption may exist elsewhere in the Income Tax Law. For example, the Tax Authority publishes separate maritime-transport exemptions. Check the exact legal basis instead of mixing different exemption regimes.
4. Do not assume 30 years from the start
The wording of Article 27 is often simplified into “up to 30 years tax free.” That is incomplete. The first 10 years and the possible renewals are legally different.
| Period | Legal position | What must be checked |
|---|---|---|
| Years 1–10 | Initial Article 27 exemption period, subject to the required exemption decision. | Commencement date, entity/activity eligibility and the issued exemption decision. |
| Years 11–20 | Possible first renewal for an activity of a special nature. | Current Regulation criteria, One-Stop Shop procedure and approval. |
| Years 21–30 | Possible second renewal for an activity of a special nature. | Renewal eligibility and approval again under the applicable process. |
| Beyond the approved period | No Article 27 exemption should be assumed. | Apply the live Income Tax Law and any other valid relief. |
Regulation 81/2026 was issued in September 2026. OPAZ says the Regulation defines activities of a special nature more clearly and regulates applications for the related tax benefit through the One-Stop Shop.
OPAZ’s public summary links the wider incentive framework to economic impact, value addition, local content, knowledge and technology transfer, export development and high-quality activities. The live Regulation and One-Stop Shop should be checked before claiming that a specific activity qualifies for renewal.
5. Strategic project status is not the same as special-nature renewal
Regulation 81/2026 also defines strategic projects. OPAZ states that a strategic project must have an investment cost of at least OMR 10 million and meet at least one qualitative criterion, such as technology transfer, local content, food or pharmaceutical security, or export development.
This strategic-project test relates to special project treatment and possible additional incentives. It should not be used as a substitute for the separate Article 27 test for an activity of a special nature.
Do not merge the tests: “strategic project” and “activity of a special nature” are different regulatory concepts. Verify the correct route for the benefit being requested.
6. Existing companies may keep older granted benefits
Article II of Royal Decree 38/2025 protects incentives and exemptions already granted to existing operators, working companies in free zones and enterprises in the Special Economic Zone at Duqm when the new law came into force.
Those rights continue until the expiry of their respective periods under the legislation or agreements that created them.
This is why two companies in the same zone can sometimes have different remaining exemption periods. One may be operating under a grandfathered legacy decision, while a newer enterprise follows the unified 2025 framework.
| Do not do this | Do this instead |
|---|---|
| Quote an old zone decree as the package for every new investor. | Check whether the investor is an existing grandfathered enterprise or a new applicant. |
| Assume an old 15-year period has automatically restarted under the new law. | Read the actual exemption decision and remaining period. |
| Assume the new 10+10+10 framework cancels an existing granted right immediately. | Article II preserves existing benefits until their own expiry. |
| Assume a legacy company automatically gets another 30 years after expiry. | Check the legal position and current application route at that time. |
7. Tax exemption does not remove tax returns
Article 27 is explicit: the enterprise and operator must submit tax returns and the attached documents in accordance with the Income Tax Law.
This point matters because “tax exempt” is sometimes incorrectly treated as “no Tax Authority work.” A company still needs records, calculations and compliance evidence.
Article 16 of the zone law also requires enterprises, operators and real-estate developers to provide required records, documents, data and information and to keep records and documents for at least 10 years.
| Compliance item | Why an exempt company still needs it |
|---|---|
| Tax registration / authority file | The exemption needs to sit inside the legal tax system, not outside it. |
| Income-tax return | Article 27 expressly requires returns and attached documents. |
| Accounting records | The company must be able to determine and support its income and activity. |
| Exemption decision | Evidence that Article 27 actually applies to the enterprise. |
| Commencement evidence | The initial period starts from commencement of the activity. |
| Activity records | The company should be able to show that its actual work matches the licensed and exempt activity. |
| Long-term records | The zone law requires at least 10 years of record/document retention. |
8. Income tax is separate from VAT
Article 27 is an Income Tax Law exemption. It is not a blanket exemption from VAT.
The Tax Authority has a separate Special Zone VAT regime. Supplies to, from or within a qualifying Special Zone may be zero-rated only when the VAT Law and Executive Regulation conditions are met.
The Tax Authority’s current published Special Zone guidance identifies four locations for this VAT treatment: Al Mazunah Free Zone, Sohar Free Zone, Salalah Free Zone and the Duqm Special Economic Zone.
Current VAT caution: do not assume that every location called a free zone is automatically a VAT “Special Zone.” The Tax Authority classification and transaction conditions must be checked.
| VAT question | What to verify |
|---|---|
| Is the location a VAT Special Zone? | Current Tax Authority classification, not only the zone’s commercial name. |
| Is the business registered/authorised correctly? | The Tax Authority guidance requires valid zone licensing and VAT administration conditions. |
| Are the goods/services within the zero-rating rules? | Articles 101–107 conditions and the nature of the transaction. |
| Are goods entering mainland Oman? | Mainland entry has its own customs and VAT consequences. |
| Is the supply outside the Special Zone rules? | The standard VAT rate is generally 5% unless another rule applies. |
For the detailed mainland-entry route, read Can an Oman Free Zone Company Sell in Mainland Oman?.
9. Customs incentives are also separate
Royal Decree 38/2025 gives specific customs treatment in Articles 28 and 29. This is legally separate from the Article 27 income-tax exemption.
Article 28 says specified machinery, equipment, transport means, spare parts, important supplies, raw materials and other materials used to construct, prepare or operate the enterprise, or necessary for its licensed activity, are not subject to customs taxes when introduced into the zone.
The same Article restricts disposal of those items for another purpose unless the Authority approves and the customs taxes due are paid. Article 29 states that products exported from the zone outside Oman are not subject to customs tax.
| Customs situation | Do not assume | Correct check |
|---|---|---|
| Machinery/raw materials entering zone | Every import is automatically exempt forever. | Confirm the item, licensed purpose and Article 28 conditions. |
| Equipment later sold or repurposed | The original zone treatment follows it automatically. | Authority approval and customs payment may be required. |
| Product exported outside Oman | Income-tax exemption is the reason for zero customs. | Article 29 is a separate customs rule. |
| Product sold into mainland Oman | Zone customs benefit continues unchanged. | Use the applicable mainland customs/Bayan route. |
10. Locally produced is not the same as FTA origin
Article 35 states that goods manufactured, assembled or prepared in a zone and exported outside Oman are treated as locally produced goods, while taking into account international agreements ratified by Oman.
That final qualification is important. A trade agreement can impose its own product-specific Rule of Origin. A free-zone product does not obtain an FTA tariff preference simply because Article 35 calls it locally produced.
For preferential tariff claims, use the product-specific origin test in Oman Trade Agreements and Rules of Origin.
11. Withholding tax and other Income Tax Law questions
Article 27 uses broad wording: exemption from all types of taxes imposed by the Income Tax Law. Even so, a company should not make an unsourced assumption about every payment or withholding-tax scenario.
The exemption decision, the actual activity, the payment, the recipient and current Tax Authority treatment should be checked. This is especially important for cross-border payments, mixed activities and payments that may sit outside the exempt activity.
The purpose of this guide is to explain the zone framework. It is not an investor-specific tax opinion.
12. Eligibility checklist before putting the exemption in a budget
| Check | Evidence or question |
|---|---|
| Zone status | Is the enterprise actually licensed in a zone covered by the law? |
| Activity | Is the licensed and actual activity eligible and outside the Article 27 exclusions? |
| Commencement date | When did the enterprise actually commence the activity? |
| Exemption decision | Has the required exemption decision been issued? |
| Initial period | What are the exact start and expiry dates of the first 10 years? |
| Renewal assumption | Is the activity formally eligible as an activity of a special nature? |
| One-Stop Shop process | What current documents and approvals are required under Regulation 81/2026? |
| Tax filings | Are returns and attached documents being filed? |
| Record retention | Are accounting, activity and exemption records kept for at least 10 years? |
| VAT | Is the zone a VAT Special Zone and does the transaction meet zero-rating conditions? |
| Customs | Does the item/movement meet the specific customs rule? |
| Mainland sales | Has the customs/VAT/importer route been mapped separately? |
| Legacy benefit | If relying on an older package, is the company actually grandfathered and what is the expiry date? |
13. Common mistakes
- Advertising 30 years as automatic. Only the initial 10-year period is the base Article 27 period; renewals have their own eligibility and process.
- Using an old zone decree for a new investor. Legacy benefits are preserved for existing granted rights, not automatically copied to every new enterprise.
- Stopping tax returns because tax payable is zero. Article 27 expressly requires returns and attached documents.
- Mixing income tax with VAT. VAT has a separate Special Zone regime and conditions.
- Mixing income tax with customs. Machinery/raw-material treatment and exports are governed by separate customs provisions.
- Assuming every free zone is a VAT Special Zone. Check the current Tax Authority classification.
- Assuming locally produced means FTA-originating. Trade-agreement origin rules still control preferential tariff claims.
- Ignoring excluded sectors. Banks, financial institutions, insurance/reinsurance, telecom, construction, land transport and maritime transport are excluded from Article 27.
- Confusing strategic-project criteria with special-nature tax-renewal criteria. They are different regulatory concepts.
14. Frequently asked questions
Do Oman free-zone companies automatically receive 30 years of income-tax exemption?
No. Article 27 provides an initial 10-year period. Two additional 10-year periods are possible for activities of a special nature under the Regulation and approval process.
When does the first 10-year period start?
Article 27 says it starts from the date of commencing the practice of the activity. The commencement date should therefore be documented.
Who issues the exemption?
Article 27 says the exemption must be issued by a decision of the Minister of Finance. A zone licence alone should not be treated as the tax-exemption decision.
Does a tax-exempt zone company still file income-tax returns?
Yes. Article 27 expressly requires the enterprise and operator to submit tax returns and attached documents under the Income Tax Law.
Are all business sectors eligible?
No. Article 27 excludes banks, financial institutions, insurance and reinsurance, telecommunications services, construction, land transport and maritime transport. Another separate exemption under the Income Tax Law may still need to be checked for a particular sector or income.
Does income-tax exemption mean 0% VAT?
No. VAT is a separate regime. Special Zone zero-rating applies only when the Tax Authority’s classification and transaction conditions are met.
Does a free-zone company pay customs duty on machinery and raw materials?
Article 28 provides specific customs relief for qualifying items introduced into the zone for construction, preparation, operation or the licensed activity. The exact item and later use still matter.
What happens when goods are sold into mainland Oman?
The mainland transaction needs a separate customs, VAT, importer and product-regulation analysis. The zone income-tax exemption does not remove that process.
Do old free-zone exemptions disappear because of Royal Decree 38/2025?
Not immediately. Article II protects incentives and exemptions already granted to existing companies and enterprises until their respective periods expire.
Is a strategic project automatically eligible for a 30-year Article 27 exemption?
No. Strategic-project classification and the special-nature activity test for tax-renewal purposes are separate concepts. The correct process must be checked.
15. Related Oman Verified guides
For zone selection and location context, use the Oman Free Zones guide.
For standard corporate tax, VAT and filing context outside this exemption, use Oman Tax 2026.
16. Investor implementation note
Oman Verified works with international investors and companies across Oman company formation, free-zone and industrial projects, tax and customs planning, compliance, structuring and ongoing business requirements. Tax-exemption, VAT, customs and filing positions are checked against the current law, the enterprise, its approvals and the transaction.
17. Official sources
- OPAZ: Royal Decree 38/2025 and Special Economic Zones and Free Zones Law
- OPAZ: Regulation 81/2026 implementation summary, 20 September 2026
- Oman Tax Authority: VAT guidelines and Special Zones guidance
- Oman Tax Authority: current tax rates
- Oman Tax Authority: Income Tax guidelines
- Oman Tax Authority: tax exemption information
Official public information reviewed on September 29, 2026. Confirm the current requirements in the OPAZ One-Stop Shop, Tax Authority systems and the applicable zone before submission or commitment.
