Saudi Arabia’s cloud SEZ to reshape taxes on digital assets

• Scheme to speed up cloud adoption
• Incentives to attract tech operators
• Single income tax for companies

Saudi Arabia is setting up a cloud computing special economic zone that will offer significant tax and regulatory relief for investors from April.

The incentives are designed to attract cloud service providers and data centre operators who face high upfront costs and significant energy demands. The initiative has been approved by the cabinet but not yet detailed publicly.

Saudi Arabia has already published fixed incentive rates for three of its special economic zones (SEZs) – King Abdullah Economic City, Ras Al-Khair and Jazan. 

In those areas, corporate income tax has been reduced from 20 percent to 5 percent, while 0 percent value added tax applies to certain intra-zone transactions.

The Cloud Computing SEZ, designed to support cloud and digital infrastructure development around Riyadh, will have special tax treatment aligned with international standards rather than fixed tax rates. 

Licensed entities will fall under the corporate income tax system and the zakat collection law (see below) will not apply, creating a single income tax treatment for companies operating within the zone.

Yusef Alyusef, managing director at Alvarez & Marsal in Saudi Arabia, said this meant the cloud zone would offer a materially different tax and regulatory proposition from the rest of the kingdom.

“For the domestic tech community, it’s a strong signal that Saudi Arabia wants to accelerate cloud adoption and scale local digital infrastructure,” Alyusef said. 

“Practically, it should make it easier for local cloud and digital infrastructure firms to build, partner and grow around a larger cloud ecosystem.”

The regulatory frameworks for the zones, including the Cloud Computing SEZ, are scheduled to enter into legal force from early April 2026, according to an announcement from the Economic Cities and Special Zones Authority.

The rules for the cloud SEZ come into effect 90 days after publication in the official gazette on January 16. 

Licensed entities have a further 90 days to regularise their position. Alyusef said he expected a short “settling-in period” as guidance and administrative processes are clarified.

Alyusef, who has held senior tax and regulatory roles at the Economic Cities and Special Zones Authority and the Zakat, Tax and Customs Authority, said further details around tax relief and qualifying conditions for the cloud SEZ were still expected. 

No public timeline has been provided for these.

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Alyusef said the zone materially improved the case for cloud-led business models, adding that incentives alone should not drive foreign direct investment decisions.

“It improves the investment case for cloud and data-centre-led models because it is designed around the operational needs of cloud providers,” he said. 

“However, investors will still decide whether to commit capital based on how the licensing and operating framework is applied in practice, including compliance requirements and administrative processes.”

Compliance will remain a key consideration, Alyusef added, with businesses required to maintain appropriate licences, meet substance and documentation requirements, and adhere to detailed tax, customs and VAT procedures.

“The practical risks revolve around reliefs or special treatments that may be conditional and can be affected if the detailed requirements are not met,” he said.