Executive summary

Saudi Arabia's Zakat, Tax and Customs Authority (ZATCA), in cooperation with the Economic Cities and Special Zones Authority, has issued a detailed procedural guide on tax and customs operations in Special Economic Zones (SEZs).

The guide aims to provide the necessary clarifications and guidance regarding the tax and customs procedures and provisions applicable to SEZs and licensed entities operating within them. It consolidates and explains the operation of existing SEZ regulations and outlines the practical application of tax incentives, customs suspension mechanisms, compliance obligations and administrative procedures.

The guide covers key areas including corporate income tax, withholding tax, value-added tax (VAT), customs duties, tax registrations, reporting obligations, customs procedures, inventory management requirements, transfer pricing and other tax considerations relevant to SEZ operations.

Background

Saudi Arabia established SEZs as part of its broader economic transformation strategy aimed at attracting investment, promoting industrial development, strengthening supply chains and enhancing Saudi Arabia's position as a regional logistics and business hub.

The ZATCA has issued the guide pursuant to the Implementing Regulations for SEZs issued by Council of Ministers Resolution No. (468), dated 10/07/1447 AH (see EY Global Tax Alert, Saudi Arabia issues Implementing Regulations for Special Economic Zones, dated 30 January 2026) and provides practical guidance on the operation of the four SEZs currently established in Saudi Arabia:

1. King Abdullah Economic City (KAEC) Special Economic Zone
2. Ras Al-Khair Special Economic Zone
3. Jazan Special Economic Zone
4. Cloud Computing and Informatics Special Economic Zone

The guide clarifies the tax and customs incentives available to licensed entities and outlines the responsibilities of the ZATCA in supervising compliance with applicable tax and customs requirements within SEZs.

Key provisions from the guide

Corporate income tax incentives

Licensed entities carrying out qualifying activities in the KAEC, Ras Al-Khair and Jazan SEZs may benefit from a reduced corporate income tax rate of 5% for a period of 20 years, subject to applicable conditions and review considering global minimum tax developments. Nonqualifying income remains subject to the standard 20% income tax rate applicable in Saudi Arabia.

Withholding tax exemptions

Licensed entities in eligible SEZs benefit from an exemption from withholding tax on qualifying payments made to nonresidents. However, entities remain subject to annual withholding tax reporting requirements and anti-avoidance provisions.

VAT treatment

The guide provides clarification on VAT treatments applicable to goods supplied within, to, from and between SEZs.

Key VAT provisions include:

• Zero-rating of qualifying supplies of goods between licensed entities within the same SEZ or between eligible SEZs
• Zero-rating of certain supplies of goods from the basic economy to a SEZ
• Out-of-scope VAT treatment for qualifying imports from outside Saudi Arabia into a SEZ under customs suspension
• Application of ordinary VAT rules to services supplied to, from and within SEZs
• The ability of VAT-registered entities to recover input VAT incurred on taxable activities, including zero-rated supplies

Customs duty suspension framework

The guide confirms that qualifying activities conducted within SEZs operate under a customs suspension regime, under which customs duties and import VAT are generally suspended until goods enter the domestic market.

The guidance includes rules relating to:

• Imports into SEZs
• Movements between SEZs
• Movements between SEZs and the Basic Economy (territory of Saudi Arabia, excluding the SEZs)
• Re-export transactions
• Manufacturing and processing activities
• Repair and maintenance operations
• Returned goods and customs duty refunds

Administrative and compliance requirements

The guide introduces comprehensive compliance obligations for licensed entities, including:

• Tax and VAT registration requirements
• Annual income tax and withholding tax reporting
• VAT filing obligations
• Customs declaration procedures for movements into and out of SEZs
• Record retention requirements
• Inventory management system requirements and electronic integration with the ZATCA
• Audit and assessment procedures
• Penalties for noncompliance

Transfer pricing and other tax considerations

Licensed entities must comply with Saudi Arabia's transfer pricing regulations and maintain the required documentation for related-party transactions.

The guide also clarifies the application of Real Estate Transaction Tax, excise tax and special tax considerations applicable to the Cloud Computing and Informatics SEZ.

Implications

The issuance of the procedural guide provides operational clarity on the application of tax and customs rules within Saudi Arabia's SEZs. It offers greater transparency regarding the availability of tax incentives, customs suspension arrangements, VAT treatments and compliance obligations applicable to licensed entities.

Businesses currently operating in SEZs, as well as prospective investors considering establishing operations within these zones, should review their tax governance, customs compliance, inventory management systems, supply chain structures and reporting processes to align with the procedural requirements outlined by the ZATCA. Companies should focus on qualifying activity requirements, customs suspension controls, documentation obligations, transfer pricing compliance, and the operational implications of the guide for cross-border and domestic transactions within and involving SEZs.