New guidelines for special economic zones - Highlights of customs procedures

ZATCA has issued the detailed tax and customs processes for investors operating in Saudi Arabia’s Special Economic Zones (SEZs. 

The framework reinforces the need for businesses to maintain genuine qualifying activities, proper customs controls, and clear records to support their operations and benefit from the SEZ regime. 

Key takeaways

1. Qualifying activities: Businesses need to demonstrate that qualifying activities are supported by an appropriate economic presence, including relevant people, resources, and operations.
2. Customs duties can be suspended: Goods linked to qualifying activities may enter the SEZ under customs suspension, subject to the applicable procedures and controls. Goods consumed in the SEZ as part of the qualifying activities are not subject to customs duties. This suspension does not apply for goods not connected to the qualifying activities.
3. Goods entering the domestic market: When goods move from the SEZ into the Saudi domestic market, they are treated as imports and may become subject to customs duties and applicable clearance requirements. Customs duties will be due based on the customs tariff in force at the date of registration of the customs declaration upon exit. The value of goods should be declared as of the final cost of goods.
4. Goods entering the SEZ from domestic market: Goods brought from the Saudi domestic market into the SEZ that are linked to qualified activities are treated as exported or re-exported goods for customs purposes.
5. Transfer between SEZs: Goods may be transferred from one zone to another under a customs suspension arrangement by means of a transit declaration as per rules set on the GCC Unified Customs Law.
6. Repair and maintenance of goods: Transfer of goods from the Saudi domestic market to the SEZ, or from the SEZ to the Saudi domestic market, for the purposes of repair, maintenance, and after-sales services is permitted, subject to compliance with the customs procedures set on Section 2.5.5 of the guide.
7. Refund of customs duties: A business may apply for a refund of customs duties in the event goods are re-exported into the SEZ, in accordance with the time limits and procedures set out in the GCC Unified Customs Law.
8. Strong inventory controls are essential: Businesses must maintain an auditable electronic inventory system and provide ZATCA with the information required to reconcile goods entering, being consumed, manufactured and leaving the SEZ.
9. Ongoing compliance: Customs declarations, manufacturing records, inventory reconciliations, and supporting documentation must be maintained in accordance with the applicable requirements.
10. Penalties: Licensed establishments within the SEZs are subject to penalties arising from violations of the relevant tax or customs regulations, including the VAT Law, the Income Tax Law, the Excise Tax Law, the Real Estate Transaction Tax Law, and the Unified Customs Law.

Deloitte’s view

The new requirements reinforce the importance for businesses of having a well-controlled SEZ operating model. The benefits available to SEZ businesses come with corresponding customs, tax, and operational obligations, particularly around the movement and tracking of goods.Businesses should therefore consider whether their current processes allow them to clearly demonstrate where goods enter, how they are used or transformed, where they are transferred and up to the ultimate exit of the SEZ.

Business impact

The SEZ regime can provide significant customs and tax benefits for companies operating in the Kingdom. Whenever considering establishing in the Saudi market, or when considering operating from a SEZ, companies should ensure that their operational activity, economic substance, and customs records are aligned since inception to avoid future penalties.