Saudi Arabia free zones
In order to diversify Saudi Arabia’s economy, the kingdom has implemented two type of free zones that have as main objective attract foreign companies to develop industrial activities in the country: i) the industrial cities and ii) the economic cities.
The industrial cities were established in the 1980s and are now important economic centers in the kingdom. The economic cities project was launched in the years 2000 and are still under development.
The greatest advantage of both the industrial cities and the economic cities is that they allow 100% foreign owned companies.
Currently the Kingdom counts with 28 industrial cities, all under the administration of the Saudi Industrial Property Authority (MODON).
Advantages include i) low land lease ii) availability of loans of up to 75% of the capital, with an extended repayment period of 20 years and iii) custom duty exemption for raw material and equipment.
The most famous industrial cities are: i) Jubail and ii) Yanbu. Both are major center for production of petrochemicals, chemic fertilizer, industrial gases, steel, iron and oil.
Tax incentives have yet to be announced, however it will include i) tax deductibility for training and salary costs and ii) tax exemption from customs duties on machinery and raw materials. Furthermore, projects with more than SAR 1 million capital and more than 5 Saudi national employees will be granted further deductions.
King Abdullah Economic City
- The biggest of all of the economic cities, will cover an area of 168km2;
- Main industries: port and logistics, light industry and services;
- It expected to create 1 million jobs and to hold 2 million people;
- It is being developed by Emaar the Economic City.
Knowledge Economic City
- Located near the Holy Mosque of the Prophet in Medinah, it will cater to companies with a focus on Islamic education and services;
- It will create 20,000 jobs and hold a population of 200,000 people.
Prince Abdulaziz Bin Mousaed Economic City
- Will cover an area of 156km2;
- It will create half a million jobs and hold 80,000 people;
- The main industries are logistics, agribusiness, minerals and construction materials.
Jazan Economic City
- It will focus on energy and labor intensive industries;
- It will create 500,000 new jobs and will accommodate 250,000 people;
- The main part of this Economic City is the Industrial park, which will occupy 2/3 of the space.
KSA Economic Industrial Zones King Abdullah Economic City Jubail Industrial City Yanbu Industrial City Ras Al-Khair Minerals City Jazan Economic City (JEC) Summary at a glance Total year 1 engagement set up costs? (USD) 87,627 87,627 87,627 87,627 87,627 Total subsequent yearly costs (incl. audit and tax)? 19,420 19,420 19,420 19,420 19,420 Minimum paid-up share capital required (USD)? 134,000 134,000 134,000 134,000 134,000 Free zone mostly popular in which industry? Logistics
Power and water
Steel & Plastics
Total engagement period? 7 months 7 months 7 months 7 months 7 months Exempt from corporation tax and GST? No Yes Yes No Yes Exempt from customs duties on machinery & raw materials? No Yes Yes No Yes 100% foreign owned? Yes Yes Yes Yes Yes Average monthly warehouse rental (per sq. m.)? US$11 US$7 US$8 US$8 US$12 Manufacturing allowed in the free zone? Yes Yes Yes Yes Yes Legal considerations Local or national shareholder required? No No No No No Minimum number of shareholders 1 1 1 1 1 Minimum number of directors 1 1 1 1 1 Resident director required No No No No No Resident company secretary required No No No No No Public register of shareholders and directors Yes Yes Yes Yes Yes Minimum paid-up capital required? (US$) 134,000 134,000 134,000 134,000 134,000 Global sales exempt from corporate tax? No No No No No Must register for GST/VAT? Yes Yes Yes Yes Yes Global sales exempt from GST/VAT? Yes Yes Yes Yes Yes Social security on employees’ remuneration? 12% 12% 12% 12% 12% Corporation tax payable on local sales? 20% 20% 20% 20% 20% Annual audited financial statements? Yes Yes Yes Yes Yes Government grants for manufacturing? Yes Yes Yes Yes Yes Access to how many double tax treaties? 52 52 52 52 52 Average customs tax on imports? 0.5% to 15% 0.5% to 15% 0.5% to 15% 0.5% to 15% 0.5% to 15% Can rent premises outside free zones? Yes Yes Yes Yes Yes Can make sales to overseas Clients? Yes Yes Yes Yes Yes Allowed to make sales to local Clients? No No No No No Government approval required? Yes Yes Yes Yes Yes Average skilled labour monthly salary US$2,500 US$2,500 US$2,500 US$2,500 US$2,500 Average unskilled labour monthly salary? US$900 US$900 US$900 US$900 US$900 Can the entity hire expatriate staff? Yes Yes Yes Yes Yes How long to get work permit approved? 2 months 2 months 2 months 2 months 2 months Monthly office rental (per sq. m.)? US$15 US$17 US$15 US$20 US$15 Average annual Industrial space rent per 1000 sq ft US$130,000 US$90,000 US$100,000 US$95,000 US$90,000 Allowed to import raw materials? Yes Yes Yes Yes Yes Allowed to export goods? Yes Yes Yes Yes Yes Nearest large port? King Abdullah Port Jubail Commercial Port Yanbu Commercial Port Ras Al-Khair Port Jazan Port Nearest to which international airport? King Abdulaziz International Airport King Fahd International Airport Prince Abdulmohsin Bin Abdulaziz Airport King Fahd International Airport King Abdullah bin Abdulaziz Airport Proximity to train network? Rabigh Station 101.8 km 500km 750km 660km Time to obtain corporate bank account 7 weeks 7 weeks 7 weeks 7 weeks 7 weeks Recommended bank? SABB Samba QNB Bank Al Jazira ANB Travel required for bank account opening? Yes Yes Yes Yes Yes Multi-currency bank accounts available? Yes Yes Yes Yes Yes Overseas remittance currency controls? No No No No No Other considerations OPEC member? Yes Yes Yes Yes Yes OECD member? No No No No No FATCA reporting? Yes Yes Yes Yes Yes CRS reporting? No No No No No Is the jurisdiction blacklisted? No No No No No