Navigating Tech Growth in Special Economic Zones

Whether moving servers across borders or importing IT equipment, establishing your business in a Special Economic Zone is a tech company’s smartest move yet.

Companies are turning towards Special Economic Zones (SEZs) to remain competitive. Special Economic Zones are designated areas within a country that offer tax and infrastructure advantages. They are no longer just a manufacturing hub but are evolving into a digital trade accelerator.

What Is a Special Economic Zone?

A Special Economic Zone is a designated area established to create positive economic growth within a country. It has favourable economic regulations that differ from those that apply to the rest of the country, helping promote trade and encouraging investment.

Why are Special Economic Zones Important?

Digital/Tech Special Economic Zones offer strategic benefits that make them appealing to tech companies. These include reduced taxes on imported goods, easier customs and trade facilitations, and efficient supply chains.

Tax Benefits

One of the primary benefits of Special Economic Zones is the reduced tax rates offered. Every SEZ worldwide has different rules and regulations, including benefits in Corporate Tax Rates, Value-Added Tax, Capital Gains Tax, and Land Tax.

Most SEZs have corporate tax benefits. China’s Shenzhen Special Economic Zone enjoys significantly lower tax rates, making it an ideal attraction for multinational corporations. Corporate income tax, for example, is reduced from 25% to 15%.

Value-added tax is also heavily subsidized for goods imported into Special Economic Zones, such as Oman, which, subject to conditions, has a 100% exemption from VAT.
Trade Facilitation

Special Economic Zones also play a pivotal role in facilitating trade by streamlining customs and reducing delays. Many SEZs have a single-window system, which is a one-stop entry point for all import and export information, making getting goods into SEZs more efficient and effective.

Customs duties are also lowered and sometimes even exempted, further facilitating trade. This preferential treatment through lowering costs fosters an import– and export-oriented economy.

It is important to note that you will still need an IOR to navigate these systems efficiently.
Integrating Supply Chains

In trade, location is everything; hence, the strategic positioning of Special Economic Zones streamlines global trade. SEZs are located near transport hubs such as major ports, highways, and airports. They are also often situated within emerging urban areas, allowing abundant space, opportunity, and potential.

In addition to the well-established transportation networks, infrastructural support and government funding help accelerate and boost tech operations within these zones.

Successful Special Economic Zones

Shenzhen Special Economic Zone

Shenzhen Special Economic Zone is a leading business innovation hub in China. It was once a small fishing village and is now becoming a dynamic force in the tech industry. The zone has $430 billion in import and export value and is home to many multinational IT operations, including Huawei.

Dubai Internet City

Dubai Internet City is one of the significant technological hubs in the Middle East. All the tech giants, including Microsoft, Google, and Oracle, have already established themselves there. This Special Economic Zone hosts various tech summits and has access to multiple tech resources and a skilled workforce.

Nongasa Digital Park

Nongasa Digital Park is located in Indonesia, connecting IT between Indonesia and Singapore. This Special Economic Zone not only has state-of-the-art data centers but also houses 12 submarine fiber optic cables, ensuring global connectivity.

The park is becoming a tech community with start-up support, making it an ideal location for digital businesses and data center development. The data center facilities are tier III Uptime Institute certified, offering enhanced reliability and fault tolerance.

Why Should Tech Companies Care?

Special Economic Zones are located in the centers of some of the fastest-growing economies. Hence, setting up operations in SEZs creates new market access, making it the perfect opportunity for companies to establish operations like data centers.

Special Economic Zones also provide access to a wide range of skill sets. The Nongasa Digital Park has educational hubs and tech academies, giving access to a qualified workforce. Establishing other multinational companies in these zones enables advanced tech and knowledge transfer.

Leveraging the benefits of Special Economic Zones is crucial for tech companies that want to stay ahead of the game, optimise operations, and gain a competitive edge in global trade.

Although the appeal and advantages of setting up tech operations in SEZs are evident, having a clear understanding of applying to the relevant authorities to establish your tech in these centers is another story.

How do I Get Tech Into Special Economic Zones?

As tech companies rapidly start moving their establishments into Special Economic Zones, the next step is ensuring seamless integration and facilitating the physical relocation and operations.

Due to the differences in tax and customs regulations, rules regarding trade within SEZs differ, so having an Importer of Record is crucial to find the economic zone that best suits your specific needs.

For example, understanding the regulations, procedures, and eligibility criteria for establishing a data center in a Special Economic Zone is a process.

Yet, once set up, the rewards make up for it.

Interested in importing to a Special Economic Zone?

TecEx can help facilitate trade in and out of these zones.

We take on all the responsibility and handle the entire import and export process, from gathering documents to navigating customs.

Contact one of our trade experts to get your tech goods into Special Economic Zones.

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