Saudi Arabia is preparing to launch a dedicated cloud computing special economic zone that will introduce significant tax and regulatory incentives for investors from April, aiming to accelerate cloud adoption and digital infrastructure growth.
The initiative, approved by the Cabinet, is designed to attract cloud service providers and data centre operators, sectors that face high upfront capital requirements and substantial energy demands. While full details have yet to be published, the zone will operate under a distinct framework compared to the rest of the Kingdom.
Saudi Arabia has already established fixed incentive regimes for three special economic zones — King Abdullah Economic City, Ras Al-Khair, and Jazan — where corporate income tax is reduced from 20 percent to 5 percent, and zero VAT applies to certain intra-zone transactions.
The Cloud Computing SEZ, centred around Riyadh, will follow a different model. Rather than fixed tax rates, it will align with international standards and place licensed entities solely under the corporate income tax system. The zakat collection law will not apply within the zone, creating a single income tax framework for companies operating there.
Yusef Alyusef, Managing Director at Alvarez & Marsal in Saudi Arabia, said this represents a materially different tax and regulatory proposition.
“For the domestic tech community, it’s a strong signal that Saudi Arabia wants to accelerate cloud adoption and scale local digital infrastructure,” he 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 legal force in early April 2026, according to the Economic Cities and Special Zones Authority. The cloud zone rules take effect 90 days after their publication in the official gazette on January 16, with licensed entities granted an additional 90 days to regularise their status.
Alyusef expects an initial “settling-in period” as guidance and administrative processes are clarified. Further details on tax relief and qualifying conditions are still anticipated, with no public timeline yet announced.
He noted that while the zone materially improves the investment case for cloud-led business models, incentives alone will not determine foreign investment.
“It improves the 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 based on how the licensing and operating framework is applied in practice, including compliance and administrative requirements.”
Compliance will remain central. Businesses must 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 detailed requirements are not met,” Alyusef added.
