General Guideline

Suspension of Value-Added Tax (VAT) and Customs Duties A Special Integrated Logistics Zone is an area with a suspension status of customs duties and restrictions. Consequently, goods entering the zone are subject to special customs controls and procedures. The suspension extends to VAT in accordance with the VAT provisions and legislation in force in the Kingdom. Goods of foreign origin from outside the Kingdom may enter the zone and be taken outside of the Kingdom without being subject to customs duties, VAT and restrictions if they are related to the activities licensed to be practiced in the zone while fulfilling the customs procedures and controls associated with the suspension. If the customs duties on foreign goods imported into the zone are suspended in accordance with the Common Customs Law and customs procedures related to the provisions of the suspension, the VAT entitlement on those goods shall also be suspended, i.e. the tax is not due on them, until the date of the goods entering the local market and the end of the customs suspension status. The goods are removed from the customs suspension status as soon as they are transported from the zone to the mainland(10). Goods leaving the Zone to the local market shall be subject to customs duties and restrictions according to the customs tariff in force on the date of registration of the customs declaration upon their exit, as well as to VAT according to the rate applicable to them in normal circumstances(11) , in addition to any other amounts due on them in accordance with the normal rules on the same date. If goods are temporarily transported from the zone to the mainland and vice versa, for repair, maintenance and after-sales services, they remain in a suspended mode of customs duties, taxes and restrictions, provided that the customs procedures specified in accordance with the tax and customs regulations are met. (10)Article (7) of The Statute of the zone (11) Article (15) of the Common Customs Law Special treatment in terms of value added tax (VAT) for certain supplies of goods associated with the zone The VAT shall not be payable on supplies of goods that meet the definition of goods or other goods related to the exercise of licensed activities in the zone that is under customs suspension, and such supplies shall be considered outside the scope of tax in any of the following two cases(12): 1. By transportation from the mainland to the zone. 2. Within the zone between different people (as these goods remain within the zone as a result of the supply process). The VAT is also not payable on supplies of goods that meet the definition of goods or other goods exported from the zone to outside the Kingdom. If the person supplying the previous goods in any of the above cases is subject to VAT and registered with the Authority for VAT purposes, the previous supplies will be considered subject to the zero rates, which enables him to refund the VAT incurred by him on those supplies through his regular tax returns submitted periodically to the Authority. In the event of the supply of goods from the zone to the mainland, VAT shall be applied at the time of the exit of the goods for free circulation and the end of the suspended status of customs duties, restrictions and VAT, and the tax shall be payable by the person identified as the importer of the goods in the customs declaration in accordance with the normal customs procedures for importing into the Kingdom.