Monday, May 4, 2009

Focus on: the Salalah Free Zone

On June 20, 2006, the Sultan of Oman, Qaboos bin Said, promulgated Royal Decree No. 62/2006 creating the Salalah Free Zone (SFZ), furthering progress toward the Sultanate’s goal of being a desirable and advantageous place to do business. A ‘Free Zone’ is a territorial carve-out in which business-friendly laws may be instituted to promote foreign direct investment, trade, entrepreneurship and business development.

The 19 million square metre SFZ is endowed by the government with world-class infrastructure and support services providing start-to-end-function facilities for both multinationals and start-ups. Other advantages include close proximity to the ‘Super Hub’ port at Salalah, one of the world’s largest container terminals. Strategically positioned on the Indian Ocean, the port at Salalah accommodates the world’s largest container ships, is equipped with the world’s largest container-handling cranes, and can handle up to 4.4 million TEU/year.

Apart from its strategic location and well-developed infrastructure, a whole host of other investment-friendly incentives are available to businesses operating at SFZ, including a competitively low initial cost of setting up, and a one-stop-shop arrangement for licenses, permits, visas, customs clearances, etc. Businesses at SFZ will even be able to participate in existing export guarantee arrangements provided to Omani companies by Omani financial institutions.

The specific activities permitted in the free zone are:

  • • Trading
  • • Distribution and Warehousing
  • • Manufacturing and Assembling
  • • Processing and Packaging
  • • Logistics
The array of special incentives offered includes:
  • • A lease for 50 years (renewable for another 50 years)
  • • 100% foreign ownership
  • • Zero customs duties on imports and exports
  • • No minimum capital investment requirement
  • • No taxes on profits or dividends for 30 years and no taxes on personal income
  • • No restrictions on repatriation of capital, profits and investments
  • • Citizen employment requirement level of only 10%
  • • Flexible customs procedures
Businesses may apply for the following kinds of licenses from the SFZ:
  • General Trading License. Allows the holder to import, export, distribute, and store all items as per the Free Zone rules and regulations;

  • Trading License. Allows the holder to import, export, distribute, and store items specified on the license;

  • Industrial License. Allows the holder to import raw materials, carry out the manufacture of specified products, and export the finished product to any country;

  • National Industrial License. Allows the holder the same status as an Arabian Gulf Cooperation Council (AGCC) company inside Oman. This license is designed for manufacturing companies with at least 51% AGCC ownership or shareholding. The value added to the product in the Free Zone must amount to a minimum of 40%; and

  • Service License. Allows the holder to carry out the services specified in the License, within the Free Zone. The type of service must conform to the parent company’s License, issued by the economic department or municipality of the relevant region.
It should be noted that for all types of businesses located in SFZ, sales in Oman must be carried out through a distributor or any company based in Oman that holds a valid trade license with the same business activity.