ZATCA has initiated a consultation on economic substance rules for SEZs, effective April 2026, to boost investment and local operations.
The Saudi Zakat, Tax and Customs Authority (ZATCA) has launched a public consultation on draft economic substance requirements for investors in Saudi Arabia’s special economic zones (SEZs), the authority announced on 18 February 2026.
The draft regulations, covering Jazan, Ras Al-Khair, King Abdullah Economic City, and the Cloud Computing and Information Technology Zone, aim to ensure that businesses carrying out “qualified activities” demonstrate substantial operations locally.
Under the proposed rules, investors would be required to maintain adequate premises and assets, employ sufficient full-time staff physically present in the zone, incur operating expenditure aligned with their activities, and manage operations from within the SEZs. Management requirements include a resident director, suitably qualified management, and board meetings held in the Kingdom where strategic decisions are taken and recorded.
Additional obligations apply to companies engaged in intellectual property activities, such as having at least 50% of directors resident in Saudi Arabia, providing detailed employee and business plan information, and ensuring that strategic decisions for IP assets occur within the zone.
The regulations, scheduled to take effect in April 2026, form part of Saudi Arabia’s broader effort to modernise its investment framework, attract high-quality foreign investment, and strengthen the Kingdom’s role in global supply chains.
The consultation period runs from 16 February to 3 March 2026.
