Briefing

Saudi Arabia issues a suite of draft corporate rules for public consultation to support the roll-out of Special Economic Zones

Introduction

The Economic Cities and Special Zones Authority of Saudi Arabia (“ECZA”) has published three pivotal draft regulations for public consultation, representing a major step forward in the regulatory framework governing companies established in or operating within the Kingdom’s Special Economic Zones (“SEZs”). The draft regulations comprise the following:

Draft Companies Rules in Special Economic Zones
Draft Rules of the Register of Companies in Special Economic Zones
Draft Trade Name Rules in Special Economic Zones

(Collectively, the “Draft Rules”).

Public consultation on the Draft Rules will close on 14 March 2026, and they are intended to implement specific provisions of the Regulatory Frameworks of the Special Economic Zones issued by Cabinet Decision No. 468 on 10/7/1447 H (corresponding to 30 December 2025 G) (“SEZs Decision“).

Background

The SEZs Decision represents a continuation of ongoing efforts to establish a robust free zones ecosystem within Saudi Arabia, with origins pre-dating 2010 when the Economic Cities Authority (“ECA“) was initially created by virtue of Royal Order No. A/19 dated 10/3/1431H., corresponding to 24/2/2010G. Some years later, a suite of specific corporate, tax, and landlord-tenant rules for King Abdullah Economic City (“KAEC“) were issued. At that time, the Saudi Arabian General Investment Authority (“SAGIA“) – which was subsequently reconstituted as the Ministry of Investment of Saudi Arabia (“MISA“) in 2020 – typically issued foreign investment licenses after 6 months or more following complicated and time-consuming submissions of feasibility studies, business plans, reference letters, and management CVs. But investors could bypass foreign investment licensing by SAGIA if they incorporated directly in KAEC – one of the key incentives of participating in the Kingdom’s nascent free zone ecosystem.

Now, the latest iteration of this regime in the SEZs Decision introduces zone-specific regulatory frameworks of four (4) SEZs, namely:

KAEC – a SEZ located north of Jeddah on the Red Sea coast
Jazan Special Economic Zone – a SEZ located south of Jeddah on the Red Sea coast
Ras Al-Khair Special Economic Zone – a SEZ located north of Dammam on the Arabian Gulf coast
Cloud Computing & Informatics Special Economic Zone – a SEC located in Riyadh city

SEZs vs Onshore: summary, advantages and practical considerations

Summary

The Draft Rules introduce a distinct legal framework for the Kingdom’s SEZs, offering targeted incentives and a streamlined business environment. Whilst the complete implementation of the Draft Rules and their incentives in detail remains incomplete pending release of further materials from ECZA and its Board of Directors, the text currently confirms certain tax and customs exemptions, simplified administration via a central registrar, faster processing, flexible governance structures, and the option to use English in official documents. However, businesses in regulated sectors must still secure national licences, and eligibility for incentives depends on qualifying activities. Where SEZ rules are silent, national laws will apply. Overall, the Draft Rules aim to make SEZs a more attractive, transparent, and flexible option for both local and international investors.

Advantages

For businesses weighing whether to incorporate within an SEZ or through onshore incorporation, the SEZs Decision and the Draft Rules together point to several key distinctions, namely:

Companies established within SEZs benefit from various advantages including exemption from Zakat, relief from withholding tax in certain zones, and mechanisms for suspending VAT and customs duties on goods movements.
The SEZs Decision states that companies established within SEZs will be subject to local hiring obligations (i.e., Saudization) “in a manner that takes into account the evolving growth and development of activities within the SEZ [and] the availability of qualified national workers“. This implies that SEZ entities may be subject to decreased Saudization obligations.
The establishment of a single SEZ registrar alongside a central electronic register is intended to streamline the process of incorporation, facilitate updates, and simplify the publication of corporate actions, thereby reducing administrative obstacles and enhancing operational efficiency.
The Draft Rules of the Register of Companies establish timelines for processing and correcting entries, thus providing greater certainty for transaction planning and facilitating smoother deal execution.
The formal recognition and registration of partners’/shareholders’ agreements, as well as family charters, provides enhanced flexibility in structuring joint ventures and strengthens the governance of family businesses. This approach allows businesses to tailor their organisational arrangements, ensuring that both commercial partnerships and family-run enterprises can operate with greater clarity and efficiency, while also increasing the confidence of investors considering participation in SEZ entities.
The ability to use English in correspondence and official records with the authorities will help reduce the need for translation and support consistency with global group reporting. This is subject to the condition that Arabic remains the prevailing language and translations must be provided upon request.

In addition, although not stated in the SEZs Decision, the Investment Law enacted by Royal Decree No. M/19 dated 16/01/1446H. corresponding to 23/7/2024G. at Article 14 states that its rules shall not prejudice any specific rules pertaining to SEZs. This implies that the MISA may not enforce certain foreign investment limitations within the SEZs, such as large minimum share capital requirements for import & trading activities, or may not require foreign investment licensing altogether within SEZs.

Practical considerations

While the advantages outlined above may make SEZs an attractive option for many businesses, there are several important practical considerations to bear in mind.

First, the SEZs Decision states clearly that corporate income tax shall continue to apply within the SEZs, which is one of the major costs of doing business in the Kingdom for foreign investors.

Secondly, companies operating in certain regulated industries may still be subject to further oversight and must obtain permits and approvals from national regulatory bodies. For example, businesses in the technology and cloud sectors are required to secure authorisation and license from the Communications, Space and Technology Commission before commencing operations.

Additionally, the incentives and benefits offered by SEZs are closely linked to specific qualifying economic activities, such as technology, manufacturing, and logistics, which can be carried out within the relevant SEZs. In order to access advantages like customs suspension regimes for VAT and duty treatment, businesses must comply with certain customs and tax requirements, ensuring they meet the stipulated criteria related to their chosen economic activity.

It is also crucial to recognise that the SEZs regulatory framework does not operate in isolation. In instances where the SEZs rules are silent or do not provide specific guidance, relevant Kingdom-wide laws and regulations will continue to apply. As such, businesses must ensure they remain compliant with both SEZ-specific and broader national legal requirements when structuring and operating within an SEZ.

Overview

The SEZs Decision confirms that companies licensed to conduct activities within the four (4) SEZs are exempt from the application of the Companies Law and the Commercial Register and Trade Names laws that apply to “onshore entities” in the Kingdom. This exemption underscores the distinct legal and regulatory environment created for SEZ entities.

Additionally, the SEZs Decision mandates ECZA (in coordination with the Ministry of Commerce) to issue the necessary implementing rules governing SEZ companies, including governance, rights, duties, obligations, and liabilities, i.e. the Draft Rules now in consultation.

The Draft Rules will apply across the four (4) SEZs covered by the SEZs Decision, and are designed to create a distinct, modernised, and business-friendly regulatory environment tailored specifically for SEZs, and separate from the “onshore” regime. Their scope will extend to:

Companies incorporated within SEZs
Saudi companies operating in SEZs through branches
GCC and foreign companies with SEZ branches

Purpose and strategic aims of the Draft Rules

For investors considering whether to establish their business within an SEZ (rather than onshore), these proposed rules are particularly relevant. The Draft Rules set forth a clear policy direction by establishing a self-contained legal framework tailored for companies operating within the SEZs corporate ecosystem.

The Draft Rules will introduce company governance, registration processes, and trade name regulations that are tailored to serve the unique economic objectives of SEZs, and differing from the provisions of the general Companies Law. This distinct approach reflects the particular operational requirements and strategic aims of SEZs.

A central pillar of the Draft Rules is the strengthening of governance, transparency, and investor protection. They will provide amongst other things enhanced clarity on important matters such as the process of company incorporation, disclosure of beneficiaries, statutory reporting, and accountability standards.

This framework is intended to foster a more competitive, transparent, and investor-centric business environment within the SEZs, in alignment with the Kingdom’s strategic objectives of economic diversification and attracting foreign direct investment in line with Vision 2030.

To facilitate ease of doing business within SEZs and reduce administrative burdens, the Draft Rules place significant emphasis on streamlining the business environment. This is achieved through simplified registration procedures, flexible company management structures, and the adoption of digital documentation via a centralised Companies Register. These measures aim to facilitate a more agile and responsive business environment within SEZs.

Furthermore, the Draft Rules focus on protecting the value of trade names and maintaining market integrity. The provisions governing trade names will introduce a structured reservation process, robust protection mechanisms, and criteria for ensuring the distinctiveness of company names. These standards are designed to protect corporate identities and encourage fair competition within the SEZs.

Lastly, by differentiating SEZ regulatory frameworks from those of the wider Saudi market, the Kingdom will reinforce its commitment to supporting Saudi Arabia’s broader investment climate and economic diversification objectives.

In providing a distinct legal environment for SEZs, the Kingdom seeks to attract foreign direct investment, promote the development of specialised sectors such as cloud computing and advanced manufacturing, and elevate the global competitiveness of entities established within SEZs.

Overview of each Draft Rule

A. Draft Companies Rules in Special Economic Zones

The Draft Companies Rules establish a comprehensive corporate code for SEZ entities. Key points include:

SEZ companies are formed as limited liability companies (“LLCs“), which may include single-member (one-person) LLCs. However, Article 74 contemplates that non-SEZ investors may incorporate a “branch” within the SEZ. In general, LLCs are separate corporate entities with their own ringfenced liability, whereas branches are considered as an extension of a parent entity, who remains liable for the debts and obligations of the branch.
SEZ entities are deemed Saudi entities, with their principal place of business established within the relevant SEZ.
Capital contributions may be cash or in-kind assets. For multi-shareholder LLCs, partners may also provide work contributions if allowed by the memorandum of association. However, one-person LLCs are restricted to cash/in-kind contributions only.
Share transactions, including share transfers, pledges/mortgages, redemption rights and their enforceability against the company/third parties are contingent upon their registration in the Companies Register. The ability to pledge/mortgage shares in SEZ entities will facilitate unlocking more favorable financing arrangements with banks and lenders in the Kingdom.
Partners’/shareholders’ agreements, as well as family charters can be registered and may prevail over constitutional documents. This approach reinforces effective governance for family businesses and joint ventures.
Interim profits may be distributed if certain liquidity conditions are met.
For multi-shareholder LLCs, the parties may establish profit distribution ratios that vary from the shareholding ratio, provided that no shareholder is completely deprived of the right to participate in profits – e.g., the profit share should not be lower than 1%.

B. Draft Rules of the Register of Companies in Special Economic Zones

The Draft Register Rules implement a digital Companies Register supervised by ECZA. Highlights include:

Certain judgments, bankruptcy/liquidation proceedings, changes in management, and similar events affecting the SEZ entity will be published against the SEZ entity’s registration in the Companies Register, creating transparency and allowing investors, banks, and others to conduct a more streamlined due diligence and observational process over SEZ entities.
Registration is mandatory such that, no licensed entity may conduct economic activity within an SEZ without registration in the Companies Register.
Entities must disclose and maintain up-to-date ultimate beneficial ownership information and keep a dedicated internal register, with defined update timelines.
Decisions on fully completed applications are intended within five (5) days (subject to possible extension), with provisions in place to correct deficiencies and appeal decisions if necessary.
Core company registration information is accessible to the public; while additional extracts can be requested subject to personal data constraints.

Conclusion

The Draft Rules once enacted are likely to shape the future competitiveness and appeal of SEZs as an alternative to traditional onshore incorporation. They represent a strategic move toward more investor‑friendly regulation, offering specialised frameworks, targeted incentives, and streamlined procedures intended to support key sectors, such as technology, manufacturing, and logistics, and promote job creation.

In line with Vision 2030’s emphasis on regulatory modernisation and investment attraction, the Kingdom is signalling a futuristic and maturing SEZs proposition built on predictability, transparency, and administrative efficiency – the qualities that are essential for effective capital deployment and sustainable long‑term operations.

For investors, whether domestic, GCC based, or international, the Draft Rules provide improved clarity, flexibility, and legal certainty. As a result, incorporating within an SEZ may likely become an increasingly attractive alternative to onshore establishment.

If you need assistance analysing these Draft Rules, assessing their structural implications for your business, or preparing a consultation response, our team is available to support you.