THE LAW FIRM OF HAZIM AL MADANI ATTORNEYS AND LEGAL CONSULTANTS

Prospects for free markets without customs for the first time in Saudi Arabia

Opening free markets in Saudi Arabia is a great cultural and historical shift in Saudi Arabia and a competition for all the markets that preceded us. The Saudi Cabinet, in its session held under the chairmanship of the Custodian of the Two Holy Mosques King Salman bin Abdul-Aziz, decided to approve the establishment of free markets as needed in the air, sea and land ports and allowing the sale in them to travelers coming and leaving Saudi Arabia without customs.

The economic and strategic importance of free markets:

Revenues of free markets and travel retail contribute to the financing structure of airports, marine companies and their infrastructure. In Europe, it was found that larger airports are able to achieve the highest levels of retail revenues per passenger, covering around 40-80% of their profit margins. Even smaller regional airports have a strong reliance on retail revenues, as the airports deal with 5-25 million passengers annually, generating about 40% of their revenue per passenger from duty-free and retail travel activities.

Airports would not be able to provide the facilities and services provided by them without the revenue from free markets and travel retail. there would be large numbers of losing airports that would need high levels of government support. In general, Travel to European countries as a whole will be diminished.

The free market is not only useful to the passenger travel experience or airport profits in general, but it also supports the provision of vital transport infrastructure across the country. This will help encourage the tourism and hospitality sector and achieve Saudi Arabia’s Vision 2030.

What is the effective date of the free markets’ regulation?

Rules for free markets’ regulation will be applied from the date of their publication corresponding to Safar 13, 1444, and cancel the rules and conditions manual that regulates free markets at international airports issued by the Minister of Finance Resolution No. (4378).

Free markets zones:

Free markets are allowed at customs ports of entry and exit, whether by air, sea, or land, or on-board aircraft, cruise ships, or tourist areas.

Conditions for applying for the operation of the free markets:

An entity desiring to operate a free market must submit its applications to the Authority according to the following conditions:

A- The commercial registry of the entity.
b- An insurance policy issued by an insurance authority licensed in Saudi Arabia on all goods and property stored or displayed; Provided that the insured entity shall be licensed in Saudi Arabia.
c- A copy of the engineering plans and designs for the free markets; Including showrooms and warehouses.
D- Presentation and breakdown of the technical and security system for the entity desiring to operate a free market.
If the entity desiring to operate a free market, fulfills all the conditions for submitting the application, the authority will consider the appropriateness of approving its operation or not, at its discretion.

What is the financial compensation for the operation of the free markets?

Entities desiring to operate a free market must apply to the Zakat and Tax Authority to obtain a license to operate free markets, then the Authority determines the annual license fees not to exceed (150,000) riyals.

The objective of the decision to establish free markets in Saudi Arabia:

The main objective of establishing free markets is to increase exports. This decision was issued when Saudi Arabia reopened its doors to foreign tourism, after receiving visitors to perform Hajj and Umrah, after two years of closures and restrictions caused by the Covid-19 pandemic.

The importance of the decision to establish free markets in Saudi Arabia:

To enhance the movement of purchases and sales inside Saudi Arabia in addition to supporting national industries, while allowing the entry of authorized foreign products and their display in the free markets, which leads to strengthening the Saudi economy and increasing investments.

The entity expected to supervise these free markets

The Ministry of Finance is represented by the Zakat, Tax and Customs Authority in accordance with the previously declared free markets draft.

What is expected to happen to local products after the establishment of free markets?

The free markets will support national industries, as it is expected that a specific percentage of the products offered in the halls should be of Saudi origin.

What are the powers and obligations of the authority?

1- The Authority may link electronically with the automated system applied in free markets to monitor the movement of goods, whether in warehouses or free markets and their related facilities.
2- The authority may assign employees to work in warehouses when needed and estimate the real costs and administrative expenses from the actual cost.
3- The authority may check documents whenever needed, and make an inventory of the goods deposited in free markets warehouses.
4 - The Authority may inspect the goods deposited in the free markets and their warehouses when needed.
5- The authority may monitor and supervise free markets and their warehouses without any responsibility on the authority in relation to the deposited goods.

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