New Special Economic Zones in Saudi Arabia
Saudi Arabia is taking a bold step forward in its pursuit of becoming a global investment destination with the announcement of the establishment of four new special economic zones (SEZs) on 14 April 2023. The SEZs will be located in Riyadh, Jazan, Ras Al-Khair, and King Abdullah Economic City. And the zones aim to offer competitive incentives to international investors. The zones will serve as new hubs for businesses across key growth sectors, enabling them to launch and expand companies and technologies that will shape the future.
Crown Prince Mohammed bin Salman stated that the new special economic zones will create tens of thousands of jobs. Equally important, the Crown Prince stated that the SEZ will contribute billions of riyals to the country’s gross domestic product. The zones will support existing national strategies and build new links with international frameworks. The zones will leverage the competitive advantages of each region of the country to support key sectors such as logistics, advanced manufacturing, technology, and other priority sectors in the Kingdom.
Opportunities in the Special Economic Zones
Companies operating in the SEZs will enjoy a range of benefits, including competitive corporate tax rates, exemption from customs duties on imports, production inputs, machinery, and raw materials, 100 percent foreign ownership of companies, and flexibility to attract and hire the best talent worldwide.
In addition to the benefits for international investors, the SEZs will also provide significant opportunities for developing the local economy, generating jobs, and localizing supply chains. These zones represent a continuation of the Kingdom’s long-running initiatives to transform itself into a global investment destination and a vital hub for global supply chains, leveraging its strategic location at the heart of global trade routes.
The new SEZs come with a host of competitive benefits. Firstly, a 5% Corporate Income Tax rate for up to 20 years, 0% withholding tax on repatriation of profits from SEZ into foreign countries. Then, customs duties are deferral for goods inside SEZ or 0% Custom duties on capital equipment and inputs inside SEZ. Also, there will be 0% VAT for all intra-SEZ goods exchanged within and between the SEZs.
In addition, the SEZs will have flexible and supportive regulations around foreign talent during the first 5 years. There will be the special tax treatment in line with OECD principles to avoid double taxation. Furthermore, there will be a competitive rate of utilities exemption from operational fees for employees and their families.
Special Economic Zones Role in Diversification of the Saudi Economy
The establishment of these new SEZs is a significant milestone for Saudi Arabia as it seeks to diversify its economy and attract more foreign investment. Evidently, the new SEZs offer a unique opportunity for businesses looking to expand into the Middle East region.
By creating a business-friendly environment with attractive incentives, the Saudi government is demonstrating its commitment to accelerating economic growth. Moreover, the SEZ are supporting job creation and promoting innovation across the country. This is why, the SEZs are expected to become key drivers of growth. The Special Economic Zones help to create new industries and unlock new opportunities for investment and development.
In conclusion, the establishment of these new Special Economic Zones is a welcome development for Saudi Arabia and the broader Middle East region. The competitive incentives and business-friendly environment they offer are obviously expected to attract significant investment and drive economic growth in the coming years. As such, they represent a unique opportunity for businesses looking to expand their operations in the region and take advantage of the numerous benefits on offer.
The Special Economic Zones
King Abdullah Economic City (KAEC) SEZ
The premier destination for advanced manufacturing and logistics, from automobile supply chain and assembly to consumer goods, ICT to MedTech. Set in a prime location on the Red Sea, KAEC is less than 90 minutes from Jeddah Airport. And then, this 60km2 site offers unrivaled access to global trade routes through King Abdullah Port. Positively, the King Abdullah Port is ranked the world’s most efficient by the World Bank in 2022. Anchor investor Lucid, for example, a leader in the global EV industry, will produce 150,000 EVs a year from its base in KAEC SEZ.
Jazan Special Economic Zone
Jazan SEZ is an industrial center and a key platform for trade with fast-growing markets in Africa and Asia. The SEZ offers access to the largest port in the region for the export of goods and import of materials. Besides it is helping investors benefit from and contribute to large-scale infrastructure projects in Saudi Arabia and around the world, backed by easy access to both natural and industrial resources. What’s more, Jazan is part of the Kingdom’s fertile southwestern region. Thus, Jazan Special Economic Zone provides opportunities for the manufacturing, processing, and distribution of food products to cater to growing regional demand and meet food security challenges across the region.
Ras Al-Khair SEZ
A launchpad on the Arabian Gulf for leaders in the maritime industry, Ras Al-Khair SEZ is a fully integrated marine ecosystem. The SEZ has a rich network of existing investors – 40% of the zone is already reserved. Equally important, Ras Al-Khair SEZ has myriad opportunities across shipbuilding and repair, offshore drilling and maritime value chains.
Cloud Computing SEZ, located in King Abdulaziz City for Science and Technology (KACST)
In King Abdulaziz City for Science and Technology, a new Cloud Computing SEZ will serve as a hub for emerging and disruptive technologies. The Cloud Computing SEZ underlines the Kingdom’s commitment to digital innovation and the fast-growing tech sector. Also, the Zone is based on an innovative hybrid model that allows investors to establish physical data centers and cloud computing infrastructure in multiple locations within the Kingdom.