Regulations for the Ras Al-Khair Special Economic Zone

Regulations for the Ras Al-Khair Special Economic Zone

Resolution No. 468

Date: 10/7/1447H

The Council of Ministers,

In its session held under the chairmanship of the Custodian of the Two Holy Mosques King Salman bin Abdulaziz Al Saud and upon perusal of Casefile No. 48335, dated 13/6/1447H, received from the Royal Court, which includes Telegram No. 6862, dated 28/9/1446H, of His Excellency the Minister of Investment, Chairman of the Board of Directors of the Economic Cities and Special Zones Authority, regarding the draft regulations for the special economic zones;

Upon perusal of the aforementioned draft regulations;

Upon perusal of the Statute of the Economic Cities and Special Zones Authority, issued by Royal Order No. A/19, dated 10/3/1431H;

Upon perusal of the Companies Law, issued by Royal Decree No. M/132, dated 1/12/1443H

Upon perusal of the Law of Commercial Register and the Law of Trade Names, issued by Royal Decree No. M/83, dated 19/3/1446H;

Upon perusal of Council of Ministers Resolution No. 233, dated 29/3/1444H;

Upon perusal of Memoranda No. 2580, dated 17/7/1445H; No. 4200, dated 6/12/1445H; No. 2246, dated 25/6/1446H; No. 3791, dated 20/11/1446H; No. 793, dated 23/2/1447H; No. 1626, dated 30/4/1447H; and No. 2385, dated 27/6/1447H, prepared by the Bureau of Experts at the Council of Ministers;

Upon consideration of Shura Council Resolution No. 133/11, dated 10/6/1447H;

Upon perusal of the recommendation of the General Committee of the Council of Ministers No. 7357, dated 8/7/1447H

Resolves the following:

First: The Regulations for the Special Economic Zones in Jazan, King Abdullah Economic City, and Ras Al-Khair, and for the Cloud Computing Special Economic Zone, attached herewith, shall be approved.

Second: Companies licensed to conduct activities in the Special Economic Zones, referred to in Clause (First) of this Resolution, shall be exempt from the Companies Law, issued by Royal Decree No. M/132, dated 1/12/1443H, and the Commercial Register Law and the Trade Names Law, issued by Royal Decree No. M/83, dated 19/3/1446H.

Third: The Economic Cities and Special Zones Authority shall issue, in agreement with the Ministry of Commerce, the necessary rules relating to companies licensed to conduct activities in the Special Economic Zones, referred to in Clause (First) of this Resolution, and the rules relating to the governance thereof, as well as the rights, duties, obligations, and responsibilities in this regard.

A draft royal decree has been prepared for the provision contained in Clause (Second) above; its form is attached herewith.

Salman bin Abdulaziz Al Saud

Regulations for the Ras Al-Khair Special Economic Zone

Chapter 1: General Provisions

Article 1: Definitions

1. In these Regulations, the following terms and phrases shall have the meanings assigned thereto, unless the context requires otherwise:

Kingdom: Kingdom of Saudi Arabia.

Authority: Economic Cities and Special Zones Authority.

Board: Board of Directors of the Authority.

Statute: The Statute of the Authority issued by Royal Order No. A/19, dated 10/3/1431H, and any amendments thereto.

Regulations: The Regulations of the Ras Al-Khair Special Economic Zone.

Relevant Entity: Royal Commission for Jubail and Yanbu.

Competent Authorities: The government agency with jurisdiction, as per the provisions of these Regulations.

Zone: The Ras Al-Khair Special Economic Zone, established pursuant to Council of Ministers Resolution No. 233, dated 29/3/1444H.

Licensed Enterprise: Any enterprise licensed to conduct activities in the Zone pursuant to these Regulations and the rules and resolutions arising therefrom.

Exemptions and Incentives: The exemptions and incentives granted to the Zone pursuant to Council of Ministers Resolution No. 233, dated 29/3/1444H, and any amendments thereto or any replacement thereof.

Worker: Every natural person working for the benefit of a licensed enterprise in the Zone, under its management and supervision, in return for a wage, even if away from its direct oversight.

Tax Regulations: All tax regulations applicable in the Kingdom, including laws, regulations, rules, instructions, and international tax agreements, and any amendments thereto.

Customs Regulations: All customs regulations applicable in the Kingdom, including laws, regulations, rules, instructions, and international agreements, and any amendments thereto.

Zakat Collection Law: The Zakat Collection Law issued by Royal Decree No. 17/2/28/8634, dated 29/6/1370H, its Implementing Regulations, and any amendments thereto.

Unified Customs Law: The Unified Customs Law of GCC States, issued by Royal Decree No. M/41, dated 3/11/1423H, its Implementing Regulations, and any amendments thereto.

Other Regions of the Kingdom: All regions of the Kingdom except the special economic zones.

Activities: Activities qualifying for the exemptions, incentives, and exceptions approved for the Zone.

2. Absent a specific provision, the same meanings set forth in the Statute shall apply to the terms and phrases provided for in these Regulations.

Article 2: Objective of the Regulations

The Regulations aim to govern the operations of the Zone and the activities therein in a manner that contributes to achieving its objectives, in accordance with the geographical location and maps approved by resolutions of the Council of Ministers.

Article 3: Powers of the Relevant Entity

The Relevant Entity shall exercise the powers granted thereto pursuant to the Statute and these Regulations.

Article 4: License Issuance

1. The Relevant Entity shall, exclusively, issue the licenses, permits, or approvals necessary to conduct activities in the Zone.

2. The Relevant Entity shall draft a guide containing the conditions, procedures, and requirements for licensing, permitting, and approving activities in the Zone, in accordance with the Statute, these Regulations, the controls set by the Authority, and the eligibility criteria specific to the Zone.

Chapter 2: Zakat, Taxes, and Customs

Article 5: Zakat and Taxes

Without prejudice to applicable exemptions and incentives, a licensed enterprise shall be treated in terms of zakat and taxes as follows:

1. The licensed enterprise shall be subject to income tax, in accordance with the provisions governing the same under tax regulations.

2. The provisions of the Zakat Collection Law shall not apply to the licensed enterprise.

3. The licensed enterprise shall be exempt from the withholding tax regulated under tax regulations.

Article 6: Value Added Tax

1. The value added tax, as governed under tax regulations, shall be applied at a zero rate to goods supplied from other regions of the Kingdom to a licensed enterprise in the Zone. This shall include supplies of goods between licensed enterprises within the same Zone, or between licensed enterprises in different special economic zones, provided that the following two conditions are met:

a) Such goods are under customs suspension in accordance with the provisions governing the same under customs regulations.

b) Such goods are required for the activities the enterprise is licensed to practice in the Zone, provided that the Authority, in agreement with the Zakat, Tax, and Customs Authority, sets the necessary criteria therefor.

2. Supplies of goods imported into the Zone from abroad shall be deemed outside the scope of the value added tax, as governed under the tax regulations, provided that the following two conditions are met:

a) Such goods are under customs suspension in accordance with the provisions governing the same under customs regulations.

b) Such goods are required for the activities the enterprise is licensed to practice in the Zone.

Article 7: Customs Duties

Goods entering the facilities of the licensed enterprise in the Zone shall be exempted from customs duties, provided that such goods are required for the activities thereof and qualify for exemption under the Unified Customs Law.

Article 8: Language

1. Competent authorities may use the English language in addition to the Arabic language in correspondence, notices, documents, and decisions received from the licensed enterprise. In case of discrepancy between the Arabic and English texts, the Arabic text shall prevail.

2. A licensed enterprise may maintain its accounting records, documents, and financial statements and their supporting documents in the English language, provided that an Arabic translation is submitted if requested by the competent authorities.

Article 9: Restricted Goods

The Authority shall be in charge of preparing the rules and requirements for the entry of restricted goods into the Zone, in coordination with the competent authorities.

Article 10: Oversight and Inspection

1. The Zakat, Tax, and Customs Authority shall exercise its duties and powers provided for in the tax regulations, the customs regulations, and in these Regulations

2. The Zakat, Tax, and Customs Authority may conduct field visits, in coordination with the Authority and the Relevant Entity, for oversight and inspection purposes.

Article 11: Procedural Guide for Tax and Customs Operations

The Zakat, Tax, and Customs Authority shall issue a detailed procedural guide for tax and customs procedures in the Zone in light of these Regulations, the tax regulations, and the customs regulations, in coordination with the Authority.

Chapter 3: Labor Regulation in the Zone

Article 12: Saudization Percentages

The Relevant Entity shall, after obtaining the approval of the Authority, set Saudization requirements taking into account business growth and development in the Zone, the availability of qualified national cadres, and the exemptions and incentives granted thereto, in coordination with the Ministry of Human Resources and Social Development.

Article 13: Labor Mobility Regulation

The Authority shall, in agreement with the Ministry of Human Resources and Social Development, determine the following:

1. Conditions, controls, and procedures for recruitment from abroad, transfer of services, and change of profession in the Zone.

2. Conditions and procedures regulating labor mobility from one licensed enterprise to another.

3. Cases in which non-Saudis are permitted to work outside the Zone, including the conditions and procedures thereof, provided that such cases do not restrict the freedom and flow of work performance.

Article 14: Work Regulations

1. Each licensed enterprise shall prepare its internal work regulations using the form prepared by the Authority in agreement with the Ministry of Human Resources and Social Development, provided that they include any additional conditions the Relevant Entity deems appropriate to the nature of the Zone.

2. A licensed enterprise may include additional terms and conditions in its internal work regulations, provided that they do not conflict with these Regulations.

3. The licensed enterprise must publish its internal work regulations in a prominent place within the enterprise by means that ensure workers' awareness thereof.

4. The internal work regulations shall become binding on the licensed enterprise and its workers from the date of approval, and shall be deemed complementary to the provisions set forth in this Chapter.

Article 15: Equality Policy

A policy of equality among workers shall be applied in the Zone, without any discrimination based on gender, disability, age, or any other form of discrimination, whether during the performance of work, in recruitment, or in job advertisement; this shall be maintained through setting policies that ensure equality and procedures that ensure compliance by the licensed enterprise, conducting periodic oversight, promoting a culture of equality, and establishing awareness programs.

Article 16: Wages

The Relevant Entity may, in coordination with the Ministry of Human Resources and Social Development, set a minimum wage, provided it is not less than the minimum wage prescribed in other regions of the Kingdom, and taking into account the nature and objectives of the Zone.

Article 17: Power of Supervision over Implementation of the Provisions Relating to Labor

The Authority shall, in coordination with the Ministry of Human Resources and Social Development, supervise the implementation of the provisions relating to labor, and take the necessary measures to perform its duties in accordance with the Statute and these Regulations.

Chapter 4: Companies Operating in the Zone

Article 18: Companies Register

The Authority shall establish a companies register for companies conducting activities in the Zone, in which the data specified by these Regulations and the relevant rules issued by the Authority in agreement with the Ministry of Commerce shall be recorded.

Article 19: Company Form

A company established in the Zone shall take the form of a limited liability company, whether owned by one person or several persons. The Authority shall issue the rules regulating the same in agreement with the Ministry of Commerce.

Article 20: Company Nationality

A company established pursuant to these Regulations shall be deemed to be of Saudi nationality, and its headquarters must be in the Zone.

Article 21: Application for Company Incorporation

An application for incorporating a company in the Zone shall include, at a minimum, the following:

1. The company name, provided that it is selected in accordance with these Regulations and the rules issued by the Authority in this regard.

2. Amount of capital.

3. Name of the incorporator or incorporators, whether natural or legal, and any relevant documents.

4. Name, address, and nationality of the company manager or members of its board of managers or its board of directors.

5. The company’s articles of incorporation or articles of association.

6. Proof of payment of the financial consideration, as determined by the Board.

7. A statement of the activities to be conducted by the company in the Zone.

8. Any other requirements determined by the Authority.

Article 22: Acquisition of Legal Personality

1. A company shall acquire legal personality after being recorded in the Companies Register; however, during the incorporation period, the company shall have legal personality to the extent necessary for its incorporation, provided that the incorporation process is carried out to completion.

2. Recording the company in the Companies Register shall result in the transfer of all contracts and actions carried out by the incorporators on its behalf to its account, and the company shall bear all expenses incurred for its incorporation.

3. If a company fails to satisfy the incorporation procedures as prescribed in these Regulations and the rules arising therefrom, the persons who act or conclude transactions in the name of the company or on its behalf shall be jointly and severally liable vis-à-vis third parties for their acts and dispositions during the incorporation period.

Article 23: Trade Name

Companies conducting activities in the Zone shall observe the following provisions for registering their proposed trade names:

1. Each company shall have a trade name in Arabic or any other language. The name may reflect its purpose, or may be a distinctive name, the name of one or more of its current or former partners, or a combination thereof.

2. A trade name may be reserved, prior to the company's recording in the Companies Register, for a specific period of time, which may be extended. The rules issued by the Authority shall determine the reservation procedures and duration.

3. A phrase indicating that the company was established in the Zone must be added to the company's name in the manner prescribed in the rules issued by the Authority.

4. In determining the trade name, the following shall be observed:

a) It must not be contrary to public policy or public decency.

b) It must be appropriate and must not include misleading data.

c) It must not be identical or similar to a trade name in other regions of the Kingdom, or a trade name recorded with the Authority or reserved by third parties in the Zone or other zones.

d) It must not be identical or similar to a famous trade name or a famous trademark, whether for the same type of trade or any other type.

e) The trade name shall not imply any connection with any of the other regions of the Kingdom or with public legal persons.

f) It must not violate any rules issued by the Authority.

5. The company's trade name may be amended in accordance with the procedures prescribed for amending the company's articles of incorporation or articles of association. The amendment shall not prejudice the company's rights or obligations or the legal procedures taken by or against it prior to the amendment.

Article 24: Partnership Agreement and Family Charter

Partners may enter into one or more agreements, including a family charter, to govern the relationship among themselves or with the company. Such agreement or family charter shall be binding upon the parties and shall prevail over the company’s articles of incorporation or articles of association.

Article 25: Registration of Company Branches

Branches of companies shall be registered in the Authority’s Companies Register in accordance with the procedures established by the Authority for this purpose.

Chapter 5: Inspection, Violations, and Fines

Article 26: Oversight Power

Oversight operations over the licensed enterprise in the Zone shall be conducted as follows:

1. Oversight of workplaces shall be undertaken by inspectors appointed by the Ministry of Human Resources and Social Development in agreement with the Authority.

2. Inspectors appointed pursuant to paragraph (1) of this Article shall be responsible for detecting violations and reporting them to the relevant department at the Authority.

3. If one or more violations are committed, the authorized person in the Authority shall, in accordance with a mechanism and procedures agreed upon between the Authority and the Ministry of Human Resources and Social Development, issue a decision to impose the penalty.

4. One or more committees shall be formed pursuant to a decision by the Board. Such committee must consist of three Sharia or legal specialists, and shall be in charge of considering appeals against the penalty decisions provided for in paragraph (3) of this Article. The decisions thereof shall be approved pursuant to a decision by the Board.

The Board shall issue a decision determining the committee's rules of work, procedures, and the remuneration of its members.

5. Any person against whom a decision to impose a penalty is issued, as provided for in paragraph (3) of this Article, may submit a grievance to the committee referred to in paragraph (4) of this Article within a period not exceeding 30 days from the date of notification of the decision. The committee shall decide on the grievance within a period not exceeding 60 days from the date of submission and its decision shall be subject to appeal before the administrative court within 60 days from the date of notification of such decision.

Article 27: Inspection and Detection of Labor Violations

The Board shall determine the violations and the procedures for their detection and set oversight and inspection mechanisms, in coordination with the Ministry of Human Resources and Social Development and in accordance with these Regulations.

Article 28: Classification Table of Violations and Penalties

The Board shall, in agreement with the competent authorities, classify violations of the provisions of the Statute and these Regulations, and determine the fines and penalties for each of them in a table issued pursuant to a decision by the Board, taking into account the following:

1. Defining and specifying grave violations.

2. Applying a principle of warning for non-grave violations and granting the licensed enterprise a corrective grace period to remedy the violation for which an initial warning is issued, prior to the imposition of any fine or penalty.

3. Establishing an identification number in the Authority’s internal database for each violation in the table.

4. Setting a minimum and maximum limit for each fine or penalty, and gradually imposing fines and penalties for non-grave violations on the licensed enterprise based on the number of times the same violation is repeated by the same enterprise.

5. Classifying violations, penalties, and fines based on the size of the licensed enterprise, its economic activity, and its zone, in light of the guidelines issued by the Small and Medium Enterprises General Authority, which define small and medium enterprises in terms of size.

6. Suspending the licensed enterprise shall not take place during the appeal and grievance period, unless the reason for suspension is related to cases of fraud, circumvention, or impact on public health, in accordance with relevant rules and decisions.

7. Establishing a clear mechanism within the Authority governing the issuance of violations against the licensed enterprise, objections thereto, and finalization thereof.

Chapter 6: Final Provisions

Article 29: Role of Competent Authorities

Competent authorities shall provide the Authority and the Relevant Entity with the support necessary to implement Article 4 of these Regulations, and shall share relevant data with the Authority to enable it to perform its roles.

Article 30: Compliance

Licensed entities in the Zone shall bring their activities into compliance with these Regulations within a period not exceeding 90 days from their entry into force.

Article 31: Applicable Legislation in the Zone

Absent a specific provision in these Regulations or in any other regulations issued by the Authority or the Relevant Entity pursuant to the statutory powers vested in them, the Zone shall be subject to the laws and regulations in force in the Kingdom.

Article 32: Exemptions and Incentives

The Authority shall issue a guide that includes the controls and conditions relating to the exemptions and incentives granted in the Zone.

Article 33: Executive Rules and Decisions

The Board shall issue the rules and decisions necessary for the implementation of these Regulations, in agreement with the competent authorities.

Article 34: Publication and Entry into Force

These Regulations shall be published in the Official Gazette and shall enter into force 90 days after the date of the publication thereof.