ZATCA publishes Special Integrated Logistics Zone guide

The Zakat, Tax and Customs Authority (ZATCA) of Saudi Arabia has issued comprehensive guidelines for the Special Integrated Logistics Zone (SILZ) at King Khalid International Airport. The guidelines align with the Gulf Cooperation Council’s Unified Customs System and details the operational and tax-related provisions for businesses within the SILZ.

Permitted activities

• Allowed activities include maintenance, repair, import/export, value-added services, and recycling.

Tax incentives

• Businesses in the SILZ are eligible for significant tax benefits, including a 50-year income tax holiday, exemptions from withholding tax, VAT, and customs duties.
• Qualifying income from activities conducted in the SILZ is subject to a 0% income tax rate during the tax holiday.
• Non-qualifying income or income earned post-tax holiday is taxed at the standard rate.
• Exemptions from withholding tax apply to specific payments to non-residents during the tax holiday.

VAT and customs duties

• The SILZ has a suspended status for customs duties and VAT, encouraging imports and exports without immediate tax burdens.
• Customs duties suspension applies to goods moving into, from, or between Special Economic Zones (SEZs). This includes conditions for claiming refunds on re-exported goods and duty payments when moving goods into KSA from SEZs.
• Special VAT treatment applies to supplies related to licensed activities within the zone.

Transfer pricing and compliance

• Businesses must adhere to transaction pricing guidelines in dealings with related parties.
• The guide also covers procedures for VAT deductions, zakat declarations, and tax assessments.

Import and transportation procedures

• Documentation for Importing Goods: The guide specifies the process for amending customs declarations, which is primarily initiated by the declarant. ZATCA may, however, amend declarations if discrepancies are found.
• Transportation of Goods: It outlines the redirection of goods received through land customs to other customs offices within KSA, based on inspection requirements. The guide also details the splitting of single consignments under specific circumstances, like incomplete receipt from the exporting country.

Pre-clearance and inspection

• Pre-clearance of Goods: To expedite customs clearance, goods must be shipped from the export country, with electronic customs declarations submitted 24 hours before arrival at KSA customs ports.
• Inspection Rules: The guidelines establish criteria for goods inspection, including provisions for inspections outside customs offices. Importers can request pre-declaration inspections and sampling of goods.

Customs duty suspension and exemptions

• Customs duties suspension applies to goods moving into, from, or between SEZs. This includes conditions for claiming refunds on re-exported goods and duty payments when moving goods into KSA from SEZs.

Record keeping

• Entities in the SILZ are required to maintain separate financial records and comply with electronic invoicing regulations.

Penalties for non-compliance

• Non-compliance with the region’s tax and customs regulations can result in penalties, including fines, license withdrawal, or other sanctions.
• The guidelines establish a framework for businesses in the SILZ, offering a clear understanding of the tax and customs procedures, benefits, and compliance requirements, thus facilitating trade and investment in the zone.

Authored by: Zain Satardien, Mohammed Alqarni*
*Member of ZH Partner – Relationship firm in Saudi Arabia