Al Mazyounah Free Zone (the “Free Zone”) was established pursuant to the Royal Decree 103 of 2005 promulgating the establishment of the zone (the “Free Zone Law”). The Free Zone is located in Oman’s Dhofar region. It focuses on the processing, storage and shipment of products from Dhofari agricultural land, along with the automobile and industrial vehicle trade.
Pursuant to Public Establishment for Industrial Estate’s Decision No 22 of 2010 (the “Decision”) a Free Zone committee is established to manage, develop and supervise the activities of the Free Zone, and in particular:
- plan, develop and promote the Free Zone;
- facilitate provision of loans and execute agreements and accept subsidies;
- provide infrastructure, lands, warehouses and offices within the available limits; and
- provide security, safety and emergency services in the zone.
To attract foreign investments, the following exemptions and incentives are offered at Al Mazyunah Free Zone to foreign entities:
- ability to import goods without a permit;
- waiver of minimum capital requirement stipulated in the Commercial Companies Law or any other law but after the fifth year of operation, the invested capital must be increased by 10% to remain tax exempt;
- ability to use Yemeni manpower without obtaining work visas;
- Omanisation percentage for the operating companies is limited to 10%. This will grant the investors more freedom in the choice of manpower, in compliance with the commercial, investment, industrial or touristic activity that they assume. This percentage must be raised by one per cent per annum after the fifth year of operation to remain tax exempt;
- tax exemption for the duration of the lease contract, or investment agreement or for thirty (30) years, whichever is earlier, from the date of obtaining the licence required for practicing economic activities in the Free Zone;
- customs duties exemption from Al Mazyounah Customs provided custom statements have been issued by the Yemeni customs regarding goods imported from Yemen;
- manufacturing units at the Free Zone are granted national certificate of origin;
- facilitating the process of granting employment and investor visas for non-Omani investors through the One-Stop-Shop;
- providing, circulating and transferring foreign currencies;
- no restrictions on repatriation of capital, profits and investments;
- allowing the establishment of a representative office inside the Omani customs zone;
- exemption from the Commercial Agency Law;
- any currency recognised by the Free Zone can be used;
- 100% foreign ownership as per the Executive Regulations; and
- utility connections (e.g. electricity, water, gas) are often pre-arranged.
Although the incentives outnumber the limitations of registering a company in a free zone, it is important to point out a few limitations, which an investor may come across:
- The permitted activities within the Free Zone are limited to those specified in the relevant Royal Decrees and Executive Regulations establishing each of the free zones in Oman.
- Although importation into the Free Zone itself is duty free, the normal 5% customs duty is payable on any product sold by a free zone into the customs territory of Oman.
- Free Zone Operators often have the right to change the utility tariffs.
- The incentives are available only if the entity is operating within the Free Zone.
- To enjoy the incentives, privileges and facilities provided by the Free Zone, Article 8 of the Decision provides that the company should meet the following conditions:
- the percentage of products exported by the company from the zone should not be less than 5% per annum; and
- to comply with the rules and regulations stated in the Decision.
- To exempt a company operating at the Free Zone from taxation and submission of income return, Article 9 of the Decision also provides that the company should meet to the following conditions:
- have a lease contract or investment agreement with the Free Zone;
- be registered with the Ministry of Commerce and Industry in the register of companies operating in the Free Zone; and
- have a license for practicing the economic activities at the Zone and in accordance with the laws regulating the practice of the activity.
The incentives granted to the Free Zone are especially beneficial to the entities operating in the Oman-Yemen border given the proximity to Yemen and the ability to utilise Yemeni manpower without specific approval.