Updated as of November 9th, following the launch of Riyadh’s Special Economic Zone Center
With Saudi Arabia’s transformative journey of diversifying its economy, aligned with Saudi Vision 2030, the Kingdom has become a prime destination for market expansion and growth – the recent announcement of Saudi Arabia’s Speical Economic Zones further solidify this statement. This year in April, Saudi Arabia unveiled 4 new Special Economic Zones. These newly established environments present immense opportunities for international companies across a number of high-growth sectors.
Continuing on this strategic initiative, the Kingdom has launched a Special Economic Zone Center in Riyadh this week. This center, established by the Royal Commission for Riyadh City, signifies yet another step toward enhancing Riyadh’s position as one of the world’s foremost city economies. This positions the Saudi capital as a major hub for emerging sectors and reinforces its economic presence globally.
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The governing body of the newly launched center, the Royal Commission for Riyadh City, will oversee the functioning of the special economic zones in Riyadh, having complete financial and administrative independence. Additionally, the center will also have the power to launch new special economic zones in the capital to respond to the changing economic conditions and market demands and further stimulate economic growth across the Kingdom.
While over 450 companies at AstroLabs have already understood the need to expand to Saudi Arabia right now and capitalize on the first-mover advantage to leverage the strategic opportunities present in this market – Riyadh is becoming the natural next pivotal destination for growth for companies across the world. With the capital of Saudi being situated at the crossroads of the Middle East, it gives these companies proximity to key markets in the Gulf and expands their footprint in the region.
The Special Economic Zone Center in Riyadh will issue licenses to investors in these zones and bring in an influx of international talent and expertise, creating an environment that not only nurtures economic growth but also beckons international investments, setting the stage for a vibrant and competitive landscape.
On the national level, this move is anticipated to grab foreign direct investments to fast-track Saudi Vision 2030’s progress to attract $25B+ in FDI by 2025. Apart from investments, the center marks a pivotal shift to support the development of the private sector in Saudi and increase their contribution to the GDP to 65% by 2030 from 43% in 2022. This is the latest in a series of projects and reforms, with the aim of elevating the role of the private sector for a more powerful and competitive economy in the Kingdom.
Insights and Prospects for Global Businesses in Saudi Arabia
AstroLabs was the first-ever licensed incubator in Saudi Arabia over five years ago and has expanded companies across 25+ industries into the Kingdom.
We break down some of the most important insights from our Director of KSA Expansion, Alex Nicholls’ appearance on Dubai Eye’s Business Breakfast from earlier this year. The full episode below elaborates on the opportunities brought about by this exciting initiative. Alex discussed the prospective advantages in store for global businesses planning on expanding into one of the Saudi Arabia‘ Special Economic Zones as strategic zones, as well as some of the logistical challenges they may encounter through the process.
Tax Incentives & Hiring Flexibility in Saudi Arabia’s Special Economic Zones
It was expected that operating in one of the SEZs would exempt companies from standard taxation procedures, although no full waivers on taxes were announced. This might not necessarily be a bad thing, Alex explains, as these zones, which target specific sectors, including logistics, pharmaceutical, and medtech, offer a range of other attractive incentives for companies. One of the most appealing motivational measures is flexibility on the national quota for hiring local talents to complement foreign recruitment or “Saudization.”
There are, however, exciting tax incentives in the newly debuted SEZs. While foreign businesses currently face a 20% corporate tax on net profit, the newly established zones would offer a considerably lower corporate tax rate, totaling 5%. Additionally, companies will benefit from certain tax exemptions for processes like transferring capital outside of the Kingdom.
While no details have been made available on hiring incentives yet, Alex noted that Saudization might be subject to certain breaks. Saudization is a policy that aims to ensure the hiring of local talents, with 25% to 33% of service company employees needing to be Saudi nationals. It seems, however, that the new SEZs would ease up on the Saudization quota depending on the zone and the company on a case-by-case basis.
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Navigating the Expansion Landscape: Insights into Saudi Arabia’s SEZ Setup Process
While the sentiment around the potential benefits of SEZs is greatly optimistic, the intricate, multi-step process to set up 100% foreign-owned companies in Saudi Arabia remains more or less remains the same. This includes registering with the Ministry of Investment in Saudi Arabia (MISA), attesting a Local Article of Association (AoA), and registering with multiple industries and platforms, including the General Authority of Zakat and Tax (ZATCA), amongst many other significant steps. Yet, with the momentous growth driven by Saudi Vision 2030, and the launch of Saudi Arabia’s Special Economic Zones, more regional and global businesses grow their interest in expanding into this mega-growth market.
From our experience, many global firms are moving their regional headquarters to the highly attractive Saudi market or expanding into regional subsidiaries, and SEZs present a unique environment where some of the most future-forward industries can develop and grow into important disruptive forces.
With 450+ high-growth companies expanded to KSA, AstroLabs is your trusted Expansion Partner. Set Up Your Company in Saudi Today.