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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.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Professional Services (Professional LLC), Riyadh
- Asim Sheikh, Saudi Arabia Tax Market Segment Leader
- Ahmed H Akeel, Business Tax Services
- Amr Farouk, Global Compliance & Reporting
- Atif Khan, Global Compliance & Reporting
- Esraa Albuti, Business Tax Services
- Hosam Abdulkareem, Business Tax Services
- Imran Iqbal, Global Compliance & Reporting
- Mirza Ashraf, Global Compliance & Reporting
- Babar Ali, Business Tax Services
- Wissam Merhej, Business Tax Services
- Carl Suchtelen, Global Compliance & Reporting
- Rula Dajani, Business Tax Services
- Suleiman Mohammed, Global Compliance & Reporting
- Billy Thorne, International Tax and Transaction Services
- Carsten Kuhlmann, International Tax and Transaction Services
- Ricardo M. Cruz, KSA ITTS and Transfer Pricing Leader
Ernst & Young Professional Services (Professional LLC), Jeddah
- Ayman Abu El lzz, Global Compliance & Reporting
- Hussain Asiri, Business Tax Services
- Amro El Fadly, Business Tax Advisory
- Ahmed Mubarak, Business Tax Services
- Dana D. Dandashi, Global Compliance & Reporting
- Khalid Feroze, Business Tax Services
- Asem Habis, Business Tax Services
- Suleman Mulla, International Tax and Transaction Services
Ernst & Young Professional Services (Professional LLC), Al Khobar
- Syed Farhan Zubair, Global Compliance & Reporting
- Ali K. Khamis, Business Tax Services
- Bilal Mian, Global Compliance & Reporting
- Javed Aziz, Global Compliance & Reporting
- Haytham Hassan, Global Compliance & Reporting
- Waqas Khan, Business Tax Services
EY Consulting LLC, Dubai
- Guy Taylor, MENA Transfer Pricing Leader
Ernst & Young — Middle East, Bahrain
- Miranda Baas, International Tax and Transaction Services
- David J. Macklin, International Tax and Transaction Services
- Patrick Oparah, International Tax and Transaction Services - Transfer Pricing
Ernst & Young LLP (United States), Middle East Tax Desk, New York
- Asmaa Ali
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
