ECZA launches Special Economic Zones in KSA
18 April 2023 - On 14 April 2023, the Economic Cities and Special Zones Authority (ECZA) announced the launch of Special Economic Zones (SEZ) in the Kingdom of Saudi Arabia (KSA) to create a more competitive investment landscape in the country. The purpose of the SEZs is to provide investors with opportunities for regional and international growth by easing access to the rapidly growing KSA market.
To provide more information about these zones, ECZA published a document titled “Investing in Saudi Arabia’s Special Economic Zones” which highlights the importance and advantages of these zones. The “Taxes and Customs in Special Economic Zones Draft Regulations” was also published by ECZA for public comments, with a deadline of 21 May 2023 for submitting feedback.
The first wave of SEZs includes five different zones, each designed to accelerate the growth of specified key sectors depending on their strategic location. The zones and their focus sectors are listed in the table below:
Zone |
Location |
Focus Sector |
|---|---|---|
King Abdullah Economic City (KAEC) |
Makkah Province |
Automobile supply chain and assembly, Consumer goods, ICT (Electronic light manufacturing), Pharmaceuticals, MedTech, Logistics |
Ras Al-Khair SEZ |
Eastern Province |
Shipbuilding and MRO, Rig platforms and MRO |
Jazan SEZ |
Jazan Province |
Food Processing, Metal conversion, Logistics |
Cloud |
Headquarters |
Cloud |
Special Integrated Logistics Zone (SILZ) |
Riyadh Province |
Consumer products, Computer parts, Pharmaceuticals, Nutritional and medical supplies, Aerospace spare parts, Luxury goods, jewelry and precious metals |
These SEZs offer a promising opportunity for businesses looking to invest in Saudi Arabia and expand their operations in the Middle East. By providing investors with a more favorable business environment and access to a rapidly growing market, the SEZs are expected to help drive economic growth in the Kingdom.
Key considerations for investors in KSA's SEZs
Investors should take into account the following key factors when considering investment opportunities in KSA’s SEZs:
- Regional and global growth opportunities: The SEZs offer access to a robust and stable domestic market as well as strategic global markets due to KSA's prime location.
- Integrated support and services platform: The SEZs provide a comprehensive One Stop Shop (OSS) platform that offers businesses ease of establishment and access to non-government and government services.
- Competitive tax and regulatory incentives: Depending on the sector and zone, businesses can benefit from several incentives, including exemptions from value-added tax (VAT), reduced corporate income tax (CIT), and withholding tax (WHT), waivers from customs duties, flexible and supportive regulations around foreign talent, and operational fee exemptions for employees and their families within the SEZs.
- Recruitment of Foreign Nationals: Investors can take advantage of the flexible hiring policies for expats during the first five years of registration.
However, investors should note that the draft regulations do not yet apply CIT exemptions and incentives to multinational groups subject to the global minimum tax under the OECD BEPS Pillar 2 rules. Furthermore, the relocation of eligible activities from the mainland to the SEZ may not qualify for exemptions or incentives, as specified in the draft regulations.
Additionally, related persons as defined by the Transfer Pricing Bylaws must transact at arm's length.
Overall, the launch of SEZs and the OSS platform is a step towards improving the ease of doing business and providing access to strategic locations in KSA, making it an attractive option for businesses seeking long-term investment opportunities.
