Saudi Arabia Business Incentives
Saudi Arabia extends a 30-year tax exemption to multinational corporations relocating their regional headquarters to Riyadh, as per the official gazette
By Staff Writer, Halal Incorp
RIYADH: In a move to incentivize multinational corporations to establish their regional headquarters in Saudi Arabia, the government has announced a significant tax exemption lasting three decades, as reported in the official gazette.
Saudi Arabia Business Incentives
The initiative, unveiled in December 2023, aims to attract foreign investment and foster the establishment of regional hubs in the Kingdom, according to Umm Al-Qura. Under this initiative, any multinational company relocating its regional base to Saudi Arabia will benefit from a 30-year exemption from income tax.
Saudi Arabia Business Incentives
Starting from January 1, 2024, Saudi Arabia has also ceased awarding contracts to foreign companies with Middle Eastern bases outside the Kingdom, as previously announced.
Over 200 international firms have become eligible to bid for government contracts in Saudi Arabia by establishing regional headquarters in Riyadh by the end of 2023.
Saudi Arabia Business Incentives
As per the official gazette, qualifying firms can avail themselves of a 0 percent income tax rate for corporate entities and withholding taxes for a period of 30 years upon obtaining their regional headquarters license.
Additionally, these companies will enjoy relaxed Saudization requirements and simplified work permit provisions for executive spouses stationed at these regional headquarters.
The tax regulations, published in the gazette, come into immediate effect, aligning with existing tax and zakat regulations in Saudi Arabia as per the national economic activity classification.
Article 3 of the regulations details the tax incentives for qualifying regional headquarters, including a 0 percent income tax rate on eligible income and withholding tax exemptions on various payments, subject to specific conditions.
However, exemptions from withholding tax are not applicable in certain circumstances, such as non-approved activities or instances of tax avoidance.
Article 4 stipulates that these tax incentives are valid for 30 years for regional headquarters engaged in qualified activities, with the option for renewal. The countdown begins upon obtaining the regional headquarters license and ends upon the expiration of the 30-year term or the cessation of regional headquarters operations.
Article 5 sets forth economic requirements for regional headquarters, including holding a valid license from the Ministry of Investment, maintaining sufficient assets and operational expenses in Saudi Arabia, and generating revenue from approved activities within the country.
The regulations also mandate specific record-keeping and reporting procedures, overseen by the Zakat, Tax, and Customs Authority to ensure compliance. Failure to meet economic requirements may result in penalties, fines, or the suspension/cancellation of tax incentives, as outlined in Articles 11 and 12.
Furthermore, regional headquarters are considered residents of Saudi Arabia for international treaty purposes if they meet residency criteria outlined in the Income Tax Law.
These measures underscore Saudi Arabia’s commitment to attracting foreign investment and enhancing its status as a regional business hub.
Numerous international firms across various sectors, including energy, technology, healthcare, and hospitality, have already relocated their headquarters to Riyadh. Notable examples include Northern Trust, Bechtel, and PepsiCo from the US, and IHG Hotels and Resorts, PwC, and Deloitte from the UK.
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