KSA Special Economic Zones (SEZs)
The Kingdom of Saudi Arabia (KSA) has been actively pursuing economic diversification for investors to do business in the Kingdom. One of the key strategies for achieving this goal has been the establishment of the first Special Economic Zones (SEZs) across the Kingdom with special commercial regulations.
SEZs are essentially designed to attract investment and promote economic activity in targeted industries such as trading, maritime, technology and logistics. At the time of writing this article, five major SEZs in the KSA have been launched, each with their own unique focus and set of incentives for investors. These zones are located in strategic locations across the Kingdom, and offer a range of benefits to companies looking to establish a presence in the KSA and the broader region.
King Abdullah Economic City was the first SEZ to be launched, located in the province of Makkah at a unique location on the Red Sea, giving access to a global supply chain, an efficient port and to world-class infrastructure.
Another major SEZ in the KSA is Ras Al Khair Special Economic Zone which is building an established maritime industry in the area with the largest shipbuilding yard, (International Maritime Industries), located in Ras Al Khair. It is located in the Eastern Province near the KSA’s newest industrial port, Ras Al Khair Port. Interestingly, the port can accommodate any size of ship due to its depth.
The third SEZ is located in Jazan which is already a highly attractive location for international investors. Jazan is home to the biggest port in the southern region of the Kingdom, ideal for trading.
Cloud Computing SEZ and the Special Integrated Logistics Zone are the last two SEZs. Both SEZs are located in the KSA’s capital, Riyadh. Whilst the Cloud Computing SEZ is headquartered in Riyadh, it gives the opportunity to investors to build and operate data centres anywhere in the KSA. Whereas, the Logistics Zone has an ideal position next to King Khaled International Airport and to the metro station. The Logistics Zone is said to be a highly attractive option as it attracts both local and foreign investors.
The King Abdullah Financial District (Financial District) is also located in the heart of Riyadh. The Financial District offers a mixed-use district of offices, retail stores, residential units, hotels and entertainment. Whilst it is designed to capture the values of the Kingdom’s 'Vision 2030', to date, the Financial District has not yet been announced as an SEZ. However, as the Financial District’s objective is to take the economy of Riyadh to new heights, this announcement is expected in order to further attract foreign businesses to the KSA’s capital.
The SEZ regulations are designed to be flexible and supportive towards foreign investment during their first five years. Various incentives are also offered for investors including 5% corporate income tax for up to 20 years, 0% withholding tax, 0% VAT for all SEZs goods exchanged and 0% custom duties inside the SEZ. That is on top of expat levy for fees exemption for employees and their families in the SEZs.
Overall, the SEZs in KSA are a key part of the country's economic diversification strategy in accordance with the Kingdom’s ‘Vision 2030’ which is a strategic framework to reduce the KSA’s dependence on oil. These zones offer a range of incentives for investors and are designed to promote economic activity in targeted industries. With continued investment and development, these SEZs bear the potential to become home to leading international businesses from around the world.
Should you require any further information around the SEZs, or any information regarding doing business, entering the Kingdom or generally, please get in touch with us.
Note - this article was authored together with Paralegal, Reem Sharif.
Author
Khurram Ali, Partner
