THE FUTURE OF BUSINESS IN THE SAUDI SPECIAL ECONOMIC ZONES (SEZs)

Name: Creation Business Consultants
Address: Office 2102, Cheddar Cheese Tower, O-14 Tower, Marasi Dr, Business Bay, Dubai, Dubai, 00000, United Arab Emirates
Telephone: +971 4 878 6240
Price range: $$$$

This article has been researched and written by the Business Development team at Creation Business Consultants. AI has not been used in generating this article.

In April 2023, the Saudi government announced the establishment of new Special Economic Zones (SEZs) across four regions in the country.

These new SEZs aim to offer competitive incentives for businesses investors as part of the Kingdom’s vision to accelerate economic diversification, encourage foreign investment in the country, develop a dynamic and innovative environment for investments, and attract global talent.

Each zone in the SEZs accommodates various industries, but they each focus on specific sectors depending on their location and unique conditions. Investors who choose to set up their businesses in these SEZs benefit from unrestricted capital repatriation and incentives for importing and exporting goods. This makes it easier for companies to move their products in and out of the zones smoothly, supporting a seamless flow of goods.

The newly established five (5) economic zones are as follows:

Since there announcement, we have seen multinationals, well-established and publicly listed international groups and companies of various specialised industries establish their commercial presence in these zones.

BOOK A FREE CONSULTATION

REGULATORY AUTHORITIES IN SPECIAL ECONOMIC ZONES

The SEZs enjoy independent integrated and advanced legislative systems and regulations for the specific economic activities offered, which make these zones among the most competitive in the world to attract valuable investments. Economic Cities and Special Zones Authority (ECZA) is the enabler and umbrella regulator of KSA’s Economic Cities (ECs) and SEZ. It acts as an integrated government services platform (one stop shop) implemented to streamline, facilitate, and support the business incorporation processes for investors.

ECZA was originally formed in 2010 to oversee the development of the economic cities, yet in 2019 its mandate was expanded to include the supervision of SEZs and the creation of a framework to attract businesses. The five SEZs focus on key growth sectors of advanced manufacturing, maritime activities, metal conversion, logistics and cloud computing.

OVERVIEW OF THE SAUDI SPECIAL ECONOMIC ZONES (SEZS)

RAS AL KHAIR SEZ

Located in the eastern province near Ras Al-Khair Port, considered Saudi’s newest industrial port to manage bulk cargo and serve more than one hundred manufacturing projects.

With a potential global maritime industry market opportunity projected to reach USD 162 billion by 2023 and a global ship repairs market size estimated at USD 39 billion by 2025, Ras Al-Khair’s 12 million square metres shipyard, the largest in the MENA region, aims to offer comprehensive services including newbuild and maintenance services, repair and overhaul services for offshore support vessels, jack-up rigs, Very Large Crude Carriers (VLCCs) and bulk carriers. Equipped with four (4) new offshore rigs and a capacity to manage forty-three vessels.

FOCUS SECTORS:

Shipbuilding and MRO.
Rig Platforms and MRO.

KING ABDULLAH ECONOMIC CITY (KAEC) SEZ

Situated mid-way between Makkah and Madinah near Saudi’s full service commercial port, King Abdullah Port; and further near to the Red Sea, through which serves as a key maritime corridor for the Saudi Arabia-China Belt and Road Initiative (BRI), linking Europe, Africa, and Asia.

Spanning 168-180 square kilometres, KAEC aims to become the commercial hub of Jeddah. It will further feature residential complexes, resort district, and a seaport expected to be among the world’s largest upon completion. Being part of the KAEC enables investors to leverage from the doubling ecosystem of a USD 869 billion potential EV and automotive market size by 2027 and become part of the MedTech cluster with a forecasted global market size of USD 769 billion by 2027.

FOCUS SECTORS:

Automobile Supply Chain and Assembly (Electric Cars Manufacturing)
FMCG
Information and Communication Technology (ICT)
Pharmaceuticals
MedTech
Logistics

JAZAN SPECIAL ECONOMIC ZONE

A 24.6 square kilometres industrial city situated in the Jazan province inside Jazan City for Primary and Downstream Industries (JCPDI), will have its own desalination and power plant to generate 4000 MW of electricity which will cover an area of 100 square kilometres.

Jazan SEZ have a unique position at the Red Sea shipping route, giving access to investors to one of the region’s largest ports which witness 13% global trade for the mining, global construction, chemicals, agriculture, and processed metal and minerals industries. Jazan offers investors the access to exploit the potential opportunities of the metal conversion industry which is estimated to have a USD 1.3 trillion global market size in 2026.

FOCUS SECTORS:

Food Processing
Metal Conversion
Logistics

SPECIAL INTEGRATED LOGISTICS ZONE (SILZ)

In 2022, the General Authority of Civil Aviation (GACA) had launched the Integrated Logistics Bonded Zone (ILBZ) known as Riyadh Integrated Special Logistics Zone, situated neat the Riyadh Internation Airport.

The 3 million square metres site aim to position the Kingdom as a global logistics hub and double its cargo capacity to more than 4.5million tons per annum and increase the contribution of the transport and logistics sector to GDP up to 10%, increasing the sector’s non-oil revenues to around SAR 45 billion a year by 2030.

FOCUS SECTORS:

Consumer Products.
Computer Parts.
Pharmaceuticals.
Nutritional And Medical Supplies.
Aerospace Space Parts.
Luxury Goods, Jewellery and Precious Metals.

CLOUD COMPUTING SEZ

Situated within the Innovation Tower at the King Abdulaziz City for Science and Technology (KACST) in Riyadh, Cloud Computing SEZ is dedicated to support and foster the growth of the ICT sector and digital technologies as part of the Kingdom’s digital transformation strategy.

Driven by its vision, the Kingdom aims to attract USD 20 billion in investments by 2030 across cloud computing services comprising both foreign and domestic direct investment. Additionally, it targets to establish a market size of USD 10 billion, reflecting its commitment to its ‘Cloud First’ policy and becoming a global leader in the cloud technology.

FOCUS SECTORS:

Cloud Computing.

REGISTRATION PROCESS AND LICENSING FEES IN SAUDI SPECIAL PURPOSE ZONES

Investors seeking to incorporate their business in Saudi Arabia’s Special Purpose (SP) zones will be required to complete their licensing process either via:

Ministry of Investment (MISA) which is the licensing issuing regulatory authority for foreign investors in the four zones, namely Ras Al Khair SEZ, King Abdullah Economic City SEZ, Jazan SEZ and Cloud Computing SEZ.
General Authority of Civil Aviation (GACA) will be considered the governing body of the Special Integrated Logistics Zone.

The licensing fees differ amongst the above, and these range from SAR 12,000 to SAR 21,200 in the first year.

KEY INCENTIVES AND EXEMPTIONS IN SAUDI SEZS

The SEZs provide companies attractive incentives including supportive regulations, top-notch infrastructure, integrated logistics and robust industrial platforms. They boast global connectivity, access to local talent and global human resources, an environment that support local and international investors. These zones present distinguished investment opportunities at a competitive cost with minimal risk. The incentives and exemptions offered to companies are as follows:

ZONE NAME	INCENTIVES AND EXCEPTIONS
Ras Al-Khair SEZ	• 5% corporate income tax for up to 20 years. • 0% customs duties deferral for goods inside the SEZ. • 0% VAT for all intra-SEZ goods exchanged within the zone and between zones. • 0% withholding tax permanently for repatriation of profits from SEZ into foreign countries. • Innovative lifecycle management offerings. • Flexible and supportive regulations around foreign talent during the first 5 years. • Expat levy ensuring fee exemption for employees and families in SEZs.
King Abdullah Economic City SEZ (KAEC SEZ)	• 5% Corporate income tax for up to 20 years. • 0% customs duties deferral for goods inside the SEZ. • 0% VAT for all intra-SEZ goods exchanged within the zone and between zones. • 0% withholding tax permanently for repatriation of profits from SEZ into foreign countries. • Flexible and supportive regulations around foreign talent during the first 15 years. • Expat levy ensuring fee exemption for employees and their families in the zone.
Special Integrated Logistics Zone (SILZ)	• 50-year tax relief period. • 0% corporate income tax. • VAT exemptions. • Withholding tax exemptions. • Remittance tax exemptions.
Cloud Computing Special Economic SEZ	• 5% Corporate income tax for up to 20 years. • 0% Customs duties deferral for goods inside the SEZ. • 0% VAT for all intra-SEZ goods exchanged within the zone and between zones. • 0% Withholding tax permanently for repatriation of profits from SEZ into foreign countries. • Flexible and supportive regulations around foreign talent during the first 5 years. • Expat levy ensures fee exemption for employees and their families in the zone.
Jazan Special Economic SEZ	• 5% Corporate income tax for up to 20 years. • 0% Customs duties deferral for goods inside the SEZ. • 0% VAT for all intra-SEZ goods exchanged within the zone and between zones. • 0% Withholding tax permanently for repatriation of profits from SEZ into foreign countries. • Flexible and supportive regulations around foreign talent during the first 5 years. • Expat levy ensures fee exemption for employees and their families in the zone.

TAKEAWAY

If you are interested to learn more, reach out to our team of consultants, and secure your complimentary expert consultation. Our team will take you through a journey in these Special Economic Zones, accessing your eligibility for incorporation and demonstrate how your business can leverage the value-added opportunities and incentives they offer. Take the lead in your industry; contact us via Email: [email protected] | UAE: +971 4 878 6240 | Saudi Arabia: +966 54 511 2494