Tax News Update    Email this document    Print this document  

December 15, 2023
2023-2071

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.

———————————————

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

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 1996 – 2024, Ernst & Young LLP

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

EY US Tax News Update Master Agreement | EY Privacy Statement