Regulations on Economic Substance Requirements for SEZs

The Official Gazette published the Regulations on Economic Substance Requirements for Special Economic Zones (SEZs), covering the King Abdullah Economic City Special Economic Zone, Ras Al-Khair Special Economic Zone, Jazan Special Economic Zone, and Cloud Computing and Informatics Special Economic Zone.

The regulations, effective from the date of their publication, aim to specify the economic substance requirements that licensed entities operating in the zones must satisfy, along with related provisions.

Under the regulations, a licensed entity must meet a set of economic substance requirements on an annual basis, starting from the first fiscal year in which it carries out qualifying activities.

These requirements include the licensed entity must have adequate premises and appropriate assets in the zone to conduct its qualifying activities.

The licensed entity must employ a sufficient number of full-time employees during the fiscal year who are physically present in the zone, in proportion to the qualifying activities carried out. This also includes employees working under employment contracts with companies contracted by the licensed entity.

The licensed entity must incur operating expenses in the zone commensurate with the nature of the qualifying activities it conducts.

The qualifying activities carried out by the licensed entity must be directed and managed from within the zone, including a number of related requirements.