Legal Update: KSA Zakat, Tax and Customs Authority new regulations

The KSA Zakat, Tax and Customs Authority has on 2 July 2021 issued an immediately effective new decision No. 3852 (the “Decision”) setting new customs regulations. The Decision relates to GCC countries only.

What does the Decision mean?

1. If you are a GCC based manufacturer and wish to enjoy KSA customs exemption, you need to show that at least 25% of the labour of the product you are manufacturing are nationals of the GCC country your factory is in. The percentage can vary as per article 3 below.

2. GCC free zone goods are not exempted from customs tariff anymore. The Decision did not detail if this would include EFTA goods.

3. Any goods with an Israeli component will not be exempted from customs tariff.

Summary of the most important articles in the said rules:

1. Article 3 imposes on GCC industrial entities a minimum of 25% national labour to be involved in the manufacturing of the goods to enjoy the preferable tariff.

2. Article 13 restricts goods enjoying preferable tariff to those: Transported directly from one of the GCC countries. Coming from outside the GCC countries however, with no transformation, amendment or reproduction of the goods should be made. Invoices and/or transport documents issued by the free zones in the GCC are not accepted.

3. Article 15 excludes free zones and markets from any preferable treatment even if duty was already paid or if it consisted on raw material from the GCC countries.

4. Article 29 stipulates that the rules and procedures to verify the origin of the goods are yet to be issued.

5. Article 31 stipulates that any goods with an Israeli component shall not in any way be considered of GCC national origin.

We expand on these important rules in our full article.

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