The Kingdom of Saudi Arabia amended its rules on imports from the other five Gulf Cooperation Council (GCC) countries to exclude goods made in free zones or using Israeli inputs from preferential tariff concessions.
The Kingdom is trying to diversify its economy and reduce its dependence on oil while providing more jobs for its own citizens, a point also covered by the rule changes announced at the weekend.
The country will henceforth exclude from the GCC tariff agreement goods made by companies with a workforce made up of less than 25 percent of local people and industrial products with less than 40 percent of added value after their transformation process.
The ministerial decree published in the Saudi official gazette Umm Al Qura said all goods made in free zones in the region will not be considered locally made.
Free zones are areas in which foreign companies can operate under light regulation, and where foreign investors are allowed to take 100 percent ownership of companies.
According to the decree, goods that contain a component made or produced in Israel or manufactured by companies owned fully or partially by Israeli investors or by companies listed in the Arab boycott agreement regarding Israel will be disqualified.
The UAE and Israel signed a tax treaty last May as both sides work to spur on business development after normalizing relations last year.
Bahrain, another GCC member, has also normalized ties with Israel under the Abraham Accords signed in September 2020.
In February, the Saudi government said it will stop giving state contracts to businesses that base their Middle East hubs in any other country in the region.
The Kingdom has announced the latest rule changes based on recent Saudi trade data.
The ministerial decree said companies with a local workforce of between 10 percent and 25 percent of the total could compensate for the difference by increasing the industrial added value in their products and vice versa.
The added value should not be less than 15 percent, in any case, to benefit from the preferential tariff agreement, it added.