Saudi Arabia: Proposed direct and indirect tax and customs incentives for new “special economic zones”

Public consultation on draft legislation regarding the tax and customs treatment of special economic zones

Public consultation on draft legislation

02 May 2023

The government announced four new special economic zones (SEZs) in Saudi Arabia, along with a public consultation on draft legislation regarding the tax and customs treatment of the SEZs.

The following tax incentives for the new SEZs are proposed:

Special economic zone	Focus sectors	Tax incentives
King Abdullah Economic City (KAEC) Makkah province	Automobile supply chain and assembly Consumer goods ICT (Electronic light manufacturing) Pharmaceuticals MedTech Logistics	5% corporate income tax for up to 20 years 0% unlimited withholding tax for repatriation of profits from SEZs to foreign countries 0% customs duties deferral for goods inside the SEZs (for Jazan - only on capital equipment and inputs) 0% value added tax (VAT) for all intra-SEZ goods exchanged within and between zones
Ras Al-Khair Eastern province	Shipbuilding and MRO Rig platforms and MRO
Jazan Jazan province	Food processing Metal conversion Logistics
Cloud computing Headquarters in Riyadh	Cloud computing services by headquarters in Riyadh with the ability for businesses to build and operate data centers from all over Saudi Arabia	Special tax treatment in line with OECD principles to avoid double taxation

A detailed procedural guide will be issued subsequently regulating the tax and customs benefits and conditions for SEZs, which will include record-keeping requirements, usage of Arabic and English language, submission of tax returns, tax payment, tax assessments, application for tax refunds, entry and exit of goods, transfer of ownership, manufacturing operations within the zone, anti-tax avoidance, violations and penalties.

For more information, contact a KPMG tax professional:

Philippe Stephanny | philippestephanny@kpmg.com

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