Sohar Free Trade Zone and the Establishment of a Sohar Free Zone Company

Guiding Principle

Sohar Free Trade Zone is a location with distinct strategic advantages. The Sohar Free Zone has considerable benefits in terms of wide market access and smooth global logistics. Moreover, the Sultanate nowadays enjoys a basic complementary infrastructure due to the availability of industrial regions, lands, utilities of electricity, water, gas, post, communication services and different transport means. Oman encourages the setup and operation of foreign business in its Free Trade Zone which entitle such business with special incentives, merits and facilities according to the Free Zones Law.

I. Strategically Located

Sohar Free Trade Zone lies at the gateway of the booming markets of the Gulf and sub-continent. Excellent road systems, international airports and key rail links offer unlimited growth potential. Sohar lies on the crossroads of east and west offering easy access to global markets. Its location and relationship with thePort ofSohar present significant benefits. Furthermore, its position before theStrait of Hormuz avoids increased insurance premiums associated with passing through this waterway and ensures immediate access to the world’s shipping lanes.

Sohar Industrial Area which is considered the second industrial area inOmanwas founded in November 1992. It is situated in Batinah Region which is 200 km fromMuscat and 180 km from Dubai. The Sohar Free Trade Zone is connected to a state of the art transport network which includes current highways Muscat-Al Ain-Dubai road and planned expressways such as the new 275 kilometre Southern Batinah super-highway with rapid links to Muscat and other GCC countries. Plans include the Batinah rail system connecting directly with the dry bulk port in Barka and running up the Batinah coastline. The international airports of Muscat and Dubai are less than 220 km away and the construction ofSoharInternationalAirportis already underway.

SoharPort, which is located nearby the industrial area, is a deep sea port in the Middle East, 220km northwest of Omani capital Muscat, which encompasses the fifth generation of containers. The management of this industrial port lies with Sohar Industrial Port Company SAOC (SIPC), a 50/50 joint venture between the Government of Oman and thePortofRotterdam. With current investments exceeding $14billion it is one of the world’s largest port development projects.

The first phase of Sohar Free Trade Zone covers an area of 500 hectares and forms part of the 4,500 hectare Sohar Free Trade Zone master plan. Sohar offers modern infrastructure and is operated on the basis of the Landlord model. Phase One includes a number of downstream industrial and petrochemical ventures (to mention only a few: trading and logistics – 121 hectares, light manufacturing – 68 hectares, petrochemicals – 26 hectares, aluminium related activities – 18 hectares, iron and steel – 100 hectares, cement grinding – 7 hectares, education and services – 20 hectares).

II. The Procedure of the Registration of a Company at Sohar Free Trade Zone

The following documents shall be prepared and are required in order to start with the registration of a Free Zone Company at Sohar Free Trade Zone:

  • Name of the main investors with country of origin,
  • Plot size required,
  • Project summery,
  • Total capital investment,
  • Feedstock details,
  • Aimed market,
  • Projected cargo volume,
  • Total Electricity requirement,
  • Total Water requirement,
  • Total Employment generation,
  • Feasibility study / business plan (if available),
  • Address details of main investor,
  • Contact person for this project,
  • Oman based representative (not mandatory)

Step 1: Submit a complete Plot Application Form (PAF)

Submitting a complete and correct Plot Application (including the requested annexes) is very important. SIPC (Sohar Industrial Port Company L.L.C) requires the PAF for several approvals, commercial proposal and due diligence. A reference to the PAF is made in the eventual Land Lease Agreement.

Step 2: Agreement on the Commercial terms

Before SIPC’s “One Stop Shop” department starts obtaining the required pre-contract clearances. SIPC requires an agreement on the Commercial terms, basically the land lease price (USD/m2/year) and the contract term. The reason for this is to avoid unnecessary deployment of resources with all parties involved.

Step 3: Pre contract clearances

For Industrial projects SIPC always seeks a “No Objection Letter” (NOL) from the Ministry of Environment and Climate Affairs (MECA) in the pre-contract phase. This NOL is not the final clearance for the project but it is a statement from MECA that there is no principal objection to the project and that the project can be realized under good management and international best practices. Process time is expected to be one week. For large power and/or water consumers SIPC seeks principal acceptance from the utility companies. Although Sohar Free Trade Zone has secured large quantities of power and water, SIPC introduces large consumers to the utility companies in the pre-contract phase (the utility companies will bill directly to Free Zone Sohar Companies).

Step 4: Due Diligence

Due diligence will be performed on the main shareholders/promoters of the proposed Free Zone Working Company. For stock listed companies it will be quit basic and therefore quick. For individual promoters SIPC looks for background, past projects and clients. Maximum process time is one month.

Step 5: Plot Selection and Approval of the Plot Application

Even though plot options will have been discussed before, at this stage SIPC requires to select the definitive plot size and location. Once selected, SIPC’s technical department will issue the final plot plan with all technical data of the plot and the surrounding infrastructure.

Step 6: Payment of first Quarter Lease, Incorporation and License Fees

SIPC requests payment of the first Quarter lease (regardless of the effective date of the contract), as well as the Incorporation and License Fees.

Step 7: Incorporation of the Free Zone Company

The Land Lease Agreement will be signed between the Sohar Free Trade Zone Authority and the new Free Zone Company. Incorporation of this new company prior to contract execution is therefore a must. Incorporation includes registration with the Ministry of Commerce and Industry (MoCI), membership in the Oman Chamber of Commerce and Industry and the issuance of the Free Zone license.

Step 8: Signing of the Land Lease Agreement

A draft of the very comprehensive Land Lease Agreement (LLA) will have been circulated in an earlier phase, including the separate terms and conditions. Normally SIPC will aim to organize a signing event to commemorate this important moment. However if a joint signing is difficult the document can be signed by circulation. Once signed, you are officially a Free Zone Company and we will be able to proceed with the various pre-construction clearances.

III. Fees and Expenses for the Formation of a Free Zone Company

Official Fees for Registration

  • OMR 1050 – OMR 1550 (one time only) business registration,
  • OMR 385 p/a commercial / logistics licence,
  • OMR 385 p/a industrial / manufacturing license,
  • OMR 201 for 2 years- visa for expatriate workers,
  • 10-25 years tax emption,
  • 5 years minimum lease,
  • 100 % ownership possible.

Further initial costs depend on the license(s) for which you intend to apply. In addition to these official fees costs as for maintenance, annual service, electricity, telecommunication and yearly renewal will apply.

April, 2012 Catherine Jaskiewicz
  Meyer-Reumann & Partners, Oman Office