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15 December 2023

Saudi Arabia offers 30-year tax holiday under Regional Headquarters program

  • Saudi Arabia has announced a 30-year tax relief package for multinational companies' regional headquarters activities in Saudi Arabia.
  • Companies will benefit from the tax relief from the day they obtain their regional headquarters license.
  • The tax relief includes a 0% rate on corporate income tax and on withholding tax for approved regional headquarters activities.
  • The regional headquarters program will be effective from 1 January 2024.

Executive summary

On 5 December 2023, the Ministry of Investment of Saudi Arabia (MISA), in conjunction with the Ministry of Finance, and the Zakat, Tax and Customs Authority (ZATCA), announced a 30-year tax incentive package for multinational companies with regional headquarters (RHQ) activities in Saudi Arabia, according to the Saudi Press Agency. The comprehensive tax incentive package offers a 0% corporate tax and withholding tax rate for three decades on approved regional headquarter activities, applicable from the date companies obtain their RHQ license.

The new tax exemption is expected to further boost the appeal of Saudi Arabia to multinational companies and help the country achieve its goal of becoming one of the world's 10 largest city economies by 2030.

Formal regulations on the proposed tax incentive scheme are still awaited.

Detailed discussion

Background

In February 2021, Saudi Arabia launched the RHQ program informing foreign companies looking to conduct business with Saudi government entities to have their RHQ based in Saudi Arabia by 1 January 2024. Since then, more than 200 companies have been licensed to operate their RHQ from Saudi Arabia.

The recent tax incentive package is provided to further facilitate and encourage the establishment of such foreign companies' RHQs in Saudi Arabia.

Highlights of the RHQ program and the tax incentive package

  • The program aims to make Saudi Arabia the preferred destination for RHQs in the Middle East, offering benefits like flexible Saudization requirements.
  • The tax incentives provide RHQs with financial stability and long-term planning benefits, encouraging expansion within the region.
  • The program seeks to attract multinational companies to participate in various projects, including mega projects and events like the 2029 Asian Winter Games and Expo 2030.
  • Saudi Arabia's economic stability and growth prospects will attract talent from around the world, making it a competitive RHQ destination.

Implications

Under the new 30-year tax incentive package, businesses are encouraged to relocate their RHQ to Saudi Arabia to benefit from the applicable incentives and advantages and explore business opportunities with state entities.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young Professional Services (Professional LLC), Riyadh

Ernst & Young Professional Services (Professional LLC), Jeddah

Ernst & Young Professional Services (Professional LLC), Al Khobar

EY Consulting LLC, Dubai

Ernst & Young — Middle East, Bahrain

Ernst & Young LLP (United States), Middle East Tax Desk, New York

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

Document ID: 2023-2071

 
 

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