What changed?
SEZ incentive eligibility was not accompanied by this published annual economic-substance regulation.
Licensed entities carrying out qualifying activities must satisfy annual economic-substance requirements and file an annual return.
Practical consequence: Review staffing, premises, expenditure, Saudi-resident management, board processes, IP substance and annual filing readiness.
Confirmed facts
Saudi Arabia’s Economic Substance Requirements Regulation for Special Economic Zones applies to licensed entities carrying out qualifying activities in the King Abdullah Economic City, Ras Al-Khair, Jazan and Cloud Computing Special Economic Zones.
Article 9 states that the regulation is effective from the date of publication in the Official Gazette. This is an effective regulation, not a consultation or announcement.
What changed
From the first financial year in which qualifying activities are carried out, licensed entities must satisfy annual economic-substance requirements covering adequate premises and assets, sufficient full-time personnel physically present in the zone, and operating expenditure commensurate with the qualifying activities.
Qualifying activities must be directed and managed from within the zone. At least one director responsible for the qualifying activities must be resident in Saudi Arabia, management must have appropriate qualifications, and strategic board decisions must be taken and recorded with the required quorum present in the Kingdom.
Additional requirements apply to intellectual-property activities, including a requirement that at least 50% of the directors managing qualifying activities are Saudi residents and that the entity demonstrate the commercial rationale for holding IP in the zone.