Mainland vs. Free Zones vs. Industrial Estates – Where Should You Register?
Oman is rapidly becoming one of the most attractive investment destinations in the Middle East. With its strategic location, political stability, and business-friendly Vision 2040, investors are flocking to the Sultanate. However, for any business owner, the most critical question remains: “How much tax will I pay?”
The answer depends entirely on where and how you establish your company. The tax implications for a standard Mainland company differ vastly from those in a Free Zone or an Industrial Estate like Khazaen or Madayn.
At Oman Register, we believe in transparency. In this comprehensive guide, we break down the corporate tax rates, exemptions, and the upcoming personal income tax laws to help you make the most profitable decision for your business.
1. Corporate Income Tax (CIT): The Mainland Standard
If you register a standard LLC or a Foreign Branch in the “Mainland” (outside of special economic zones), you are subject to the standard tax laws of the Oman Tax Authority (OTA).
The Standard Rate: 15%
For the vast majority of companies operating within the Omani local market, the Corporate Income Tax is a flat 15% on net profit. This applies to:
- Standard LLCs
- Joint Stock Companies
- Branches of foreign companies
The SME Incentive: 3% (The “Riyada” Benefit)
To encourage small businesses and entrepreneurship, the government offers a significantly reduced rate. You only pay 3% tax if you meet the following criteria:
- Ownership: Owned by Omani citizens (holding a “Riyada” card).
- Capital: Registered capital is low (typically under 50,000–60,000 OMR).
- Staff: Fewer than 15 employees.
- Revenue: Annual gross income is under 100,000 OMR.
The Oil & Gas Sector: 55%
Companies involved in the exploration and production of oil and gas are taxed at a special rate of 55%.
2. The Tax Havens: Free Zones (Sohar, Duqm, Salalah)
If your business model focuses on international trade, re-exporting, or logistics and you do not need to sell directly to the local Omani market, a Free Zone is your best financial move.
Key Benefits:
- 0% Corporate Tax: Enjoy a full tax holiday for 10 to 30 years (depending on the zone and investment size).
- 100% Foreign Ownership: No local sponsor required.
- 0% Customs Duties: On imports and re-exports.
Best For: International trading companies, large-scale manufacturers for export, and logistics firms.
3. The Industrial Hubs: Madayn & Khazaen Economic City
Many investors confuse “Industrial Estates” with “Free Zones.” They are different. Zones like Madayn (Rusayl, Nizwa, Sohar Industrial) and Khazaen Economic City are designed for industries that want to manufacture goods and easily access the local Omani market.
The “5-Year Holiday” Rule
- Initial Exemption: Companies engaged in industrial (manufacturing) activities are typically exempt from corporate tax (0%) for the first 5 years of production.
- Post-Exemption Rate: Once the 5-year period ends, the tax rate reverts to the standard 15%.
- Note: Purely commercial or trading activities in these zones may not qualify for the 5-year exemption and could be taxed at 15% from day one.
Customs Benefits
- 0% Customs Duty: You are exempt from duties on imported machinery, equipment, and raw materials required for production.
Best For: Factories and producers who want to sell their products inside Oman without paying customs duties at the border (which Free Zone companies must pay if they sell locally).
4. Summary: Which Zone Fits Your Strategy?
| Feature | Mainland (Standard LLC) | Industrial Estates (Madayn/Khazaen) | Free Zones (Duqm/Sohar/Salalah) |
|---|---|---|---|
| Tax Rate | 15% (Standard) / 3% (SME) | 0% (First 5 Years for Industry) → then 15% | 0% (For 10–30 Years) |
| Market Access | Direct access to Local Market | Direct access to Local Market | Restricted (Customs duties apply on local sales) |
| Customs | 5% on imports | 0% on raw materials/machinery | 0% on everything |
| Best For | Retail, Services, Local B2B | Manufacturing, Local Distribution | Re-export, Global Trade, Heavy Industry |
5. Personal Income Tax: What You Need to Know (2025 Update)
For decades, Oman has been a tax-free haven for personal income. However, recent legislative changes have sparked questions. Here is the reality as of 2025.
Current Status (Until 2027)
- Rate: 0%
- There is currently NO personal income tax on salaries, dividends, or capital gains for individuals (expats or locals).
The Future (Starting Jan 1, 2028)
According to the Royal Decree No. 56/2025, Oman will introduce a Personal Income Tax starting in 2028.
- The Rate: A flat 5%.
- The Threshold: This only applies to high-net-worth individuals with a global annual income exceeding 42,000 OMR (approx. $109,000 USD).
- The Verdict: The vast majority of employees and small business owners will remain tax-exempt as they fall below this high threshold.
6. Other Financial Considerations
When planning your budget, don’t forget these additional levies:
- VAT (Value Added Tax): A standard rate of 5% applies to most goods and services. Mandatory registration is required if annual supplies exceed 38,500 OMR.
- Withholding Tax: A 10% tax applies to payments made to foreign entities (non-residents) for royalties, management fees, and technical services.
- Social Security:
- Omanis: ~17.5% contribution (employer + employee).
- Expats: 0% contribution (Employer pays End of Service Gratuity instead).
Final Thoughts: Strategic Planning is Key
Choosing between the Mainland, Khazaen, Madayn, or a Free Zone isn’t just about the tax rate—it’s about your business model.
- Choose a Free Zone if your eyes are on the global market.
- Choose Khazaen/Madayn if you are a manufacturer targeting the Omani population.
- Choose Mainland if you are a service provider, retailer, or restaurant.
Need help deciding?
At Oman Register, we specialize in business formation and financial structuring in Oman. We analyze your specific business model to ensure you pay the lowest legal tax rate while remaining fully compliant.
Ready to start your business in Oman?
Contact Us Today for a free consultation.
Disclaimer: Tax laws are subject to change. While this article provides accurate information as of early 2025, we recommend consulting with our experts for the latest updates specific to your business case.
