In October 2018, a Royal decree was issued approving the regulatory framework for an “Integrated Logistics Bonded Zone” (“ILBZ”) and had assigned its establishment and operation to the General Authority for Civil Aviation (“GACA”) as the Zone Governing Body. GACA has now launched Saudi Arabia’s first ILBZ, which serves as the pilot project in following His Royal Highness Crown Prince Mohammed bin Salman’s Vision 2030 to transform Saudi Arabia’s strategic location into a transportation and logistics hub connecting three continents – Europe, Asia, and Africa. This complies with the major strategic plan of Saudi Arabia to become one of the ten largest city economies in the world.
The ILBZ will be located next to King Khalid International Airport in Riyadh. The three million-square-meter zone is strategically located to serve more than 650 million customers across Africa, Asia, and Europe, linking them through King Khalid International Airport and the domestic and regional markets via the Saudi Land-Bridge Railway crossing Riyadh, and dry ports surrounding King Khalid International Airport.
The ILBZ will enjoy special rules and regulations aiming at attracting more multinational companies to the Kingdom. The zone development offers a significant opportunity for international companies to strengthen their operations, efficiency, and market reach. Prospective incentives that Saudi Arabia will provide to the multinational companies establishing operations at the ILBZ will include:
- A 50-year Tax Holiday to include VAT suspension while under customs suspension;
- zero-rated corporate, income and withholding tax on certain payments;
- 100% business ownership (no restrictions on the private ownership of assets, including intellectual property);
- 100% suspension of customs and import restrictions; and
- no restrictions on foreign borrowing and capital repatriation.
The ILBZ offerings are tailored for multinational companies, supporting a wide range of activities and facilities, including aviation facilities, cargo handling, warehousing and fulfillment, inventory management, maintenance and repairs, staging, testing, and assembly, government-sponsored training programs, and advanced cargo-tracking technology, alongside a Government Services Office in the ILBZ to serve as a one-stop-shop to obtain any government services for the investors.
By serving as a unified hub where companies can engage in these activities and access a vast network of transportation corridors by air, land, and sea, the ILBZ is expected to enable the Kingdom of Saudi Arabia to become a global logistics hub increasingly central role in world trade.