Latest KSA Tax Update

Establishment of special integrated logistics zones

A new regulation has been issued by royal decree for the establishment of special integrated logistics zones to attract foreign investment into the Kingdom of Saudi Arabia (KSA).

The first zone will be located at King Khalid Airport in Riyadh with the General Authority for Civil Aviation responsible for the management, development and supervision of the zone and the regulation of the activities conducted in the zone. Further zones may be created at other airports by way of a resolution issued by the Economic and Development Affairs Council at the recommendation of the General Authority for Civil Aviation.

Special tax rules will apply to activities conducted in the zone related to goods. There will be various tax incentives available to businesses that operate in these zones including:

• Non-residents conducting activities in the zone directly related to goods would not be regarded as having a permanent establishment in KSA;
• The goods in the zone will be under customs suspension so no customs duties or VAT will be applicable on the import of the goods or the supply of the goods in the zone;
• No VAT will be imposed on the temporary transport of the goods to the mainland for the purpose of repair and maintenance.

The General Authority of Zakat and Tax (GAZT) will issue rules related to the application of income tax to businesses operating in the zone.

GAZT issues general VAT guide

GAZT has published a general VAT guide which deals with various VAT obligations of taxpayers in KSA including VAT registration, issue of tax invoices, recoverability of input VAT and submission of VAT returns.

How can we help?

We will be happy to share our international experience on similar free zones and discuss the regulation on the establishment of special integrated logistics zones regulation in further detail.

In relation to VAT, businesses are being actively audited by GAZT. In our experience, many clients were not properly prepared for the introduction of VAT and encountered difficulties in implementing VAT in a very short period of time. As a result, clients have taken incorrect positions in their VAT returns and are liable for substantial penalties. It is recommended that you take a proactive approach and undertake a health check to identify and rectify these errors going forward to minimise any penalty and reputational exposure.

Al Tamimi has a strong and dedicated tax team and can help you with all your tax requirements across corporate tax, withholding tax, VAT, excise tax and customs. Please do not hesitate to contact us if you require any assistance.