BlogConsultationSpecial Economic Zones in Saudi Arabia

February 3, 2024by admin0

Special Economic Zones in Saudi Arabia

In a strategic move to accelerate economic diversification and attract global investors, the Saudi government recently announced the four new Special Economic Zones (SEZs) across different regions of the country. These zones, namely King Abdullah Economic City (KAEC), Jazan, Ras Al Khair, and the Cloud Computing SEZ at King Abdulaziz City for Science and Technology (KACST) come with various competitive incentives to foster a thriving business environment.

 

Special Economic Zones in Saudi Arabia

 

Incentives for Investors

 

These newly established Special Economic Zones (SEZs) aim to attract businesses by providing appealing incentives, including:

  • A reduced Corporate Income Tax rate of 5% for a duration of up to 20 years.
  • No withholding tax on the transfer of profits from SEZs to foreign countries.
  • Deferral of customs duties for goods within SEZs or a 0% customs duty on capital equipment and inputs within SEZs.
  • Supportive regulations for foreign talent during the initial 5 years.
  • No Value Added Tax (VAT) for goods exchanged within and between SEZs.
  • Special tax treatment aligned with OECD principles to prevent double taxation.
  • Competitive utility rates, particularly for electricity.
  • Exemption from operational fees for employees and their families within SEZs.

These zones will be tailored to specific areas based on their location and circumstances. Dedicated contact lines and communication channels have been established for investors to express their interest and obtain additional information as needed.

 

Special Economic Zones in Saudi Arabia: Objectives

 

  • Boost the economy by strategically investing and offering incentives to diversify industries.
  • Foster a welcoming environment for investors, encouraging growth, knowledge sharing, and a variety of businesses.
  • Strengthen the Kingdom’s supply chain and back emerging industries for greater empowerment.
  • Enhance the Kingdom’s global business reputation by becoming a leading logistics hub and a crucial re-export market.

 

Support for Foreign Talent and Operations 

 

Recognizing the importance of a skilled workforce, the SEZs provide flexible and supportive regulations around foreign talent during the first 5 years. Additionally, investors can benefit from exemption from operational fees for employees and their families within the SEZ, further facilitating a seamless operational experience.

 

VAT Exemptions and Special Tax Treatment 

 

All intra-SEZ goods exchanged within and between the zones enjoy a 0% VAT rate to enhance competitiveness. Furthermore, the SEZs offer special tax treatment in line with OECD principles to avoid double taxation, providing a transparent and globally accepted tax framework.

 

Target industries for Special Economic Zones.

 

  • Light industries involve the production of small consumer goods and electronics, emphasizing efficiency and innovation in manufacturing processes.

 

  • Logistics is the management of the flow of goods, services, and information throughout the supply chain, ensuring timely delivery and cost-effective operations.

 

  • Shipbuilding & Marine industries focus on constructing ships and maritime structures, contributing to global trade, defense, and transportation infrastructure.

 

  • Marine services encompass a range of support activities, such as vessel maintenance, crewing, and navigation services, essential for smooth maritime operations.

 

  • Offshoring and Rig building involve the construction of offshore oil and gas rigs, expanding energy exploration and production capabilities in deep-sea environments.

 

  • Metals conversion refers to the processing of raw metals into finished products, showcasing the importance of metalworking industries in manufacturing and construction.

 

  • Food industries involve the production, processing, and distribution of food products, catering to diverse consumer preferences and global nutritional needs.

 

Focused Sectors and Economic Development Goals 

 

Each SEZ has its specific focus areas based on the location and circumstances of the respective zone. These SEZs cover a diverse range of industrial sectors, from automobile supply chain and assembly to shipbuilding, food processing, and cloud computing services. This strategic diversification aligns with Saudi Arabia’s Vision 2030, contributing to the nation’s economic development goals and reinforcing its ambition to become a global business hub.

 

Detailed Overview of SEZs:

 

 

  • King Abdullah Economic City (KAEC) SEZ:

 

  • Focused Sectors: Automobile supply chain and assembly, Consumer goods, ICT (Electronic light manufacturing), Pharmaceutical, MedTech, and Logistics.
  • Commercial Incentives: 5% Corporate Income Tax up to 20 years, 0% withholding tax permanently for repatriation of profits, 0% customs duties, flexible regulations around foreign talent, 0% VAT for intra-SEZ goods, exemption from applicable fees on expats and families.

 

  • Ras Al-Khair SEZ:

 

  • Focused Industries: MRO and Shipbuilding, MRO and Rig Platforms.
  • Commercial Incentives: 5% Corporate Income Tax up to 20 years, 0% withholding tax, 0% customs duties, flexible regulations around foreign talent, 0% VAT for intra-SEZ goods, and exemption from applicable fees on expats and families.

 

  • Jazan SEZ:

 

  • Focused Industries: Food Processing, Metal Conversion, Logistics.
  • Commercial Incentives: 5% Corporate Income Tax up to 20 years, 0% withholding tax, 0% Customs duties on capital equipment and inputs, flexible regulations around foreign talent, 0% VAT for intra-SEZ goods, exemption from applicable fees on expats and families.

 

  • Cloud Computing SEZ at KACST:

 

  • Focused Sector: Cloud Computing Services.
  • Commercial Incentives: Special tax treatment, competitive electricity rates, exemption from applicable fees on expats and families, flexibility to provide cloud computing services from SEZ.

 

Special Economic Zones in Saudi Arabia: Conclusion

 

Establishing these new SEZs in Saudi Arabia marks a significant stride towards realizing the Vision 2030 goals and positioning the country as a global business hub. Investors keen on exploring opportunities within these zones can utilize dedicated contact lines and communication channels to register their interest and acquire further information. With robust incentives and a focus on diverse industries, these SEZs present a compelling proposition for businesses looking to thrive in the dynamic Saudi Arabian market.

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