Customs duty suspension, special zones, and the limits of Article 32 bis

From the publication of ZATCA Board Resolution No. (01-06-24), the supply of goods into a customs duty suspension situation, and the supply of goods within such a situation, is zero-rated under a new Article 32 bis of the Implementing Regulations, in accordance with the Unified Customs Law. The re-export of transportable goods temporarily imported into the Kingdom for repair, restoration, conversion or processing, and the services added to those goods, is also zero-rated where the provisions and procedures of that Law are met. Tax on the import of goods placed under a customs duty suspension situation is suspended while the Law’s requirements are met, and becomes due when the goods exit that situation. The same treatment extends to specified transactions in special zones, but only where the zone and the goods meet the conditions in clause 5. The resolution does not create a general zero-rate for services supplied in a special zone.

The instruments relied on do not contain a Special Integrated Logistics Zone law, regulations, or a list of designated zones. They do not use the name “SILZ”. What follows is only the customs-suspension and special-zone text those instruments contain.

The Agreement framework

Article 34(1)(b) of the Common VAT Agreement subjects to the zero-rate the supply of Goods to a customs duty suspension situation as provided for in the Common Customs Law, and the supply of Goods within customs duty suspension situations. Article 34(1)(c) zero-rates the re-export of moveable Goods temporarily imported into the GCC Territory for repairs, refurbishment, conversion or processing, as well as the Services added to those Goods. Article 39 suspends Tax on imports of Goods placed under a customs duty suspension situation in accordance with the Common Customs Law, and allows each Member State to link that suspension to security for the value of the Tax. Article 22(2) provides that, where Goods are placed under customs duty suspension under the Common Customs Law immediately upon entry into the GCC Territory, the place of import is the Member State where the Goods are released from that status. The Common Customs Law itself is not among the instruments relied on.

The deleted paragraph and the current article

The ninth edition of the Regulations contained, as Article 32(7), a zero-rate for the supply of Goods situated in the Kingdom while subject to a customs duty suspension regime under the Unified Customs Law, subject to evidence of the location of the goods at the time of supply. The April 2025 resolution records that clause as deleted. It is not the current text. The current text in the resolution is Article 32 bis.

Clause 1 states that the supply of goods into a customs duty suspension situation is subject to zero-rate tax, and that the supply of goods within such situations is subject to zero-rate tax in accordance with the provisions of the Unified Customs Law.

Clause 2 states that the re-export of transportable goods temporarily imported into the Kingdom for repair, restoration, conversion or processing, and the services added to those goods, are subject to zero-rate tax, provided that the provisions and procedures stipulated in the Unified Customs Law are met. This is the provision which addresses services. It does so only for services added to goods of that description. It is not a zero-rate for services supplied in a special zone generally, and it is not a zero-rate for services supplied to a person in a suspension situation where no such goods are in point.

Clause 3 suspends the tax due on the import of goods placed under a customs duty suspension situation if the customs duty suspension requirements in the Unified Customs Law are met. The tax is due upon the goods’ exit from the customs suspension situation, in accordance with the cases and procedures stipulated in that Law.

Clause 4 states that goods exiting a customs duty suspension situation outside the territory of the GCC States shall be treated in the same manner as the export of goods. The resolution does not amend Article 32(1) to (6) of the ninth edition, which prescribe the evidence for an export of Goods from the Kingdom to a place outside Council Territory, including transport from Council Territory within ninety (90) days and the customs, commercial and transportation documents there listed. Clause 4 does not itself repeat those evidential conditions.

Special zones

Clause 5 applies the same tax treatment as clauses 1, 2, 3 and 4 to specified transactions involving special zones, without prejudice to any other provisions stipulated in the laws in force in the Kingdom. The transactions are the import of goods into any of the special zones, the supplies of goods to any of them, supplies within them, supplies between two special zones, and the case when goods exit the customs suspension status or outside the territory of the GCC States, according to the nature of the transaction. All of the following conditions must be met. The special zone must be one of the zones that has a customs suspension status in accordance with the Unified Customs Law. The goods must be related to the activities licensed to be carried out in the zone, in accordance with the statutory provisions issued regarding the special zone. The goods must be placed under one of the customs suspension statuses in accordance with the Unified Customs Law. The special zone must have procedures for monitoring the movement and import of goods to, from, and within the zone.

Clause 5 is drafted by reference to goods and to the treatment in clauses 1 to 4. The services it can reach are those already within clause 2, namely services added to transportable goods temporarily imported for repair, restoration, conversion or processing, and only where the clause 5 conditions are met and the nature of the transaction is that described. The instruments relied on do not contain a separate zero-rate for services performed in a special zone, for services supplied to a person established in a special zone, or for services relating to goods that remain in the zone.

Records, and what falls outside the article

Clause 6 requires invoices and documents related to supplies related to special zones to be retained in accordance with the Regulations. Clause 7 requires the Taxable Person, for the purpose of the Article, to retain all documents proving the location of the goods at the time of supply, and evidence of their transfer and placement under, from, or within any customs duty suspension procedure, including those related to special zones. Those documents include, in particular, customs documents issued in accordance with the provisions and procedures of the Unified Customs Law.

Clause 8 states that water and all types of energy, including electricity, gas, lighting, heat, refrigeration and air conditioning, which are not covered by customs suspension procedures, are not included within the scope of the Article.

Clause I of the resolution provides that the approved amendments are effective from the date of publication in the Official Gazette. The resolution is presented as Gazette issue 5082 of 18 April 2025. Clause III defers only clause 3 of Article 47. It does not defer Article 32 bis.

What the legislation does not determine

The instruments relied on do not contain the Special Integrated Logistics Zone, any zone designated by name, or any instrument other than those named at the end of this article. They do not contain the text of the Unified Customs Law or of the Common Customs Law, including which procedures constitute a customs duty suspension situation. They do not state a general rule that services, as opposed to goods, are zero-rated when supplied in, to, or within a special zone. Clause 2 is the only services rule in Article 32 bis, and it is limited as stated. Article 39 of the Agreement permits a Member State to require security for the Tax. Article 32 bis, as set out in the resolution, does not restate a security condition. The same resolution amends Tax Group membership, including a condition that a member not be licensed to operate in a special zone enjoying tariff suspension status. That is a registration condition, not the zero-rate.

Instruments relied on: ZATCA Board Resolution No. (01-06-24), dated 17/05/1446H, Official Gazette issue 5082, 20 Shawwal 1446H corresponding to 18 April 2025, unofficial English translation (“Errors and Omissions Excepted”), introducing Article 32 bis and recording clause 7 of Article 32 as deleted; Common VAT Agreement, Articles 22(2), 34(1)(b), 34(1)(c) and 39, executed in Arabic; Implementing Regulations, ninth edition, June 2023, unofficial English translation, Article 32(1) to (6) only, being the paragraphs the resolution does not show as amended. The ninth edition’s Article 32(7) is not cited as current law. The Arabic text prevails.

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