Comparing FDI Incentive Models: Abu Dhabi Hub Vs Riyadh SEZs

Abu Dhabi and Riyadh compete for FDI with contrasting incentive models: Abu Dhabi leans on free zones, low taxes, and industrial support, while Riyadh pushes SEZs, mega-projects, and long tax holidays. Both aim to position themselves as global hubs under their respective development strategies.

Foreign direct investment (FDI) incentives have become central to competition between Abu Dhabi and Riyadh. Abu Dhabi presents itself as a hub built on free zones and support programs. Riyadh, in turn, has concentrated its efforts on special economic zones (SEZs) and mega-projects under Vision 2030.

A comparison of their tax regimes, ownership rules, sectoral incentives, and regulatory efficiency reveals the contrasting models in the working.

Corporate tax, customs, and VAT incentives

Abu Dhabi retains a low-tax model anchored by its free zones. Qualifying companies registered in these zones benefit from a 0 percent corporate income tax, provided they meet substance and activity requirements. On the mainland, corporate income tax is set at 9 percent on profits above AED 375,000 (US$102,110.3), while small businesses below that threshold remain exempt. Beginning in January 2025, large multinational groups with revenues above EUR 750 million (US$884 million) also face a 15 percent domestic minimum tax in line with OECD commitments.

Riyadh’s SEZs offer one of the most aggressive tax regimes in the region. Foreign investors in these zones enjoy a 5 percent corporate income tax rate for up to 20 years, compared with the standard 20 percent rate outside the SEZ framework. Companies establishing regional headquarters in Saudi Arabia can secure a 30-year tax holiday with 0 percent corporate income tax and 0 percent withholding tax, a measure designed to anchor global firms in the Kingdom.

On customs and VAT, Abu Dhabi provides exemptions on industrial inputs, equipment, and raw materials for manufacturers holding valid licenses. The UAE applies a 5 percent VAT, but designated free zones are treated as outside the VAT system, making intra-zone transactions non-taxable.

Riyadh extends more expansive exemptions. SEZ companies benefit from 0 percent VAT on transactions within and between zones, and goods imported into SEZs are deemed outside the VAT scope. Customs duties are also set at 0 percent for capital equipment and inputs, with deferrals available for goods moving within SEZs.

Read more: How to Get 15% VAT Refund in Saudi Arabia

Foreign ownership and FDI policy clarity

Abu Dhabi allows 100 percent foreign ownership across 122 economic activities in 13 sectors like advanced manufacturing, renewable energy, healthcare, information and communication technology (ICT), and construction. The positive list system provides regulatory certainty for international investors by clearly defining eligible activities.

Saudi Arabia has extended similar ownership reforms under Vision 2030. SEZ companies benefit from full foreign ownership rights without the need for local partners, alongside eased rules for employing foreign talent during the initial years of operation.

On regulatory clarity, Abu Dhabi draws strength from the UAE’s long-established legal system and stable business policies. Setup costs have been reduced to AED 1,000 (US$272.2) for company formation and license renewal. Riyadh has introduced its own legal reforms, granting certain SEZs autonomous judicial systems. NEOM, for instance, operates under a dedicated civil and tax framework, with its own arbitration and reconciliation centers built on international standards.

Incentives for strategic sectors

Abu Dhabi’s Industrial Strategy (ADIS) focuses on advanced manufacturing, the circular economy, and Industry 4.0 technologies. The program has AED 10 billion (US$2.7 billion) in government investment and aims to double the size of the manufacturing sector to AED 172 billion (US$46.8 billion) by 2031 and create 13,600 skilled jobs. The Abu Dhabi Investment Office (ADIO) also operates a AED 2 billion (US$544.5 million) Innovation Program to support high-growth companies in ICT, health services, biopharma, and agricultural technology. Since 2020, AED 1.3 billion (US$353.9 million) has already been allocated to more than 40 innovative firms.

Read more: UAE Launches New AI-Driven Government Planning Cycle

Saudi Arabia’s SEZ framework is focused on logistics, manufacturing, and technology. NEOM, the Kingdom’s flagship mega-project, targets 14 sectors, which has energy, biotechnology, digital technologies, and advanced manufacturing. It is projected to add US$48 billion to GDP by 2030 and create 380,000 jobs. The Standard Incentives Program supplements this push by covering up to 35 percent of project investment, capped at SAR 50 million (US$13.3 million) per qualifying initiative.

Land, infrastructure, and utilities support

Land pricing and infrastructure support remain central to investor decisions. Abu Dhabi’s Land Rebate Incentive Program (LRIP) offers long-term leases at discounted rates for companies operating in priority sub-sectors, lowering entry barriers for industrial projects.

Saudi Arabia provides industrial land with leases of up to 30 years under the Authorized Economic Operator program. Riyadh has also allocated between 10,000 and 40,000 residential plots annually, capped at SAR 1,500 (US$400) per square meter, to support workforce settlement around economic zones.

On utilities, Abu Dhabi operates the Energy Tariff Incentive Program (ETIP 2.0), which reduces electricity and gas tariffs for manufacturing entities based on their economic impact and efficiency ratings. Companies scoring above 80 receive the highest discount tiers, cutting operational costs substantially. Riyadh’s SEZs similarly offer competitive energy pricing. NEOM, in particular, markets itself as the first fully renewable-powered zone, giving companies the benefit of sustainable operations and reduced energy expenses.

Zone-specific benefits and tax regimes

Abu Dhabi’s free zones maintain 0 percent corporate tax for qualifying activities and exempt transactions from VAT and customs duties when conducted inside designated zones.

Saudi Arabia’s SEZs (KAEC, Jazan, Ras Al Khair, and Riyadh Cloud Computing), by contrast, extend deeper concessions. Corporate income tax is reduced to 5 percent for 20 years, compared with 20 percent outside the zones. Regional headquarters can secure a 30-year holiday with zero corporate and withholding tax. SEZ firms also enjoy 0 percent VAT on intra-zone transactions and full customs exemptions or deferrals. The scale of these incentives makes Riyadh’s model one of the most ambitious in the region.

Workforce policies and residency incentives

Abu Dhabi provides long-term stability for investors and employees through the Golden Visa, available to investors contributing at least AED 2 million (US$544,588.2). The visa covers spouses, children, advisors, and executive directors, offering 10 years of residency security. Workforce policy is tied to Emiratization, with firms of 50 employees or more required to increase Emirati hires by 2 percent annually. Manufacturing companies must meet Emiratization targets to qualify for In-Country Value (ICV) certification.

Riyadh has chosen a different route. SEZ companies are permanently exempt from Saudization requirements. The Kingdom’s Premium Residency program offers flexible visa categories for investors, entrepreneurs, and managers, but entry capital requirements often exceed SAR 500,000 (US$133,300.7). Firms that voluntarily employ Saudi nationals gain access to several incentives through the Human Resources Development Fund.

Financial support and subsidies

Abu Dhabi uses targeted programs to stimulate industrial development. The Smart Manufacturing Incentive Program dedicates AED 500 million (US$136.1 million) to help SMEs adopt Industry 4.0 technologies. The Golden List Program creates preferential procurement opportunities for local suppliers. In parallel, the AED 2 billion Innovation Program has already distributed more than AED 1.3 billion to technology firms in health, ICT, biopharma, and agritech.

Saudi Arabia deploys larger-scale funding. The Saudi Industrial Development Fund (SIDF) can finance up to 75 percent of a project’s cost, with repayment terms stretching to 20 years. The Standard Incentives Program supplements this by covering up to SAR 50 million or 35 percent of project value.

In short

Programs under the Abu Dhabi Industrial Strategy provide incentives for innovation-led growth. The emirate’s connectivity hosts world-class ports and airports and offers four-hour flight access to more than 38 destinations across the Middle East, Africa, and Asia.

Saudi Arabia’s ambitions under Vision 2030 are broader in scale. NEOM alone is expected to add US$100 billion annually to its GDP by 2030. Its Red Sea location links Europe, Asia, and Africa through major maritime trade routes. The Riyadh expansion project, budgeted at US$800 billion, seeks to transform capital into a global economic hub with access to over 2 billion consumers.

Thus, Abu Dhabi and Riyadh have adopted competitive models to attract FDI. Abu Dhabi uses its free zone ecosystem and industrial strategies to create a business friendly hub for investors. Riyadh positions its SEZs and mega-projects as offering tax holidays and ownership rights to draw global firms.

Read more: Opportunities for Chinese Businesses in the UAE: Trade, Tech, and Energy

(US$1 = AED 3.67; US$1 = SAR 3.75)

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