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Home » Economy » Saudi Arabia Outlines 30 Year Tax Exemption for Multinational Companies Relocating Regional HQs To Riyadh
Saudi Arabia Outlines 30 Year Tax Exemption for Multinational Companies Relocating Regional HQs To Riyadh
Saudi Arabia Outlines 30 Year Tax Exemption for Multinational Companies Relocating Regional HQs To Riyadh

Saudi Arabia has officially outlined the law for multinational companies to gain an attractive 30-year income tax exception by relocating their regional headquarters to Riyadh

The regulations promise a lucrative 0% income tax rate and withholding taxes for eligible firms.

The regulations aim to attract foreign investment into the Kingdom and offer additional perks such as reduced Saudization requirements.

Over 200 well-known multinational companies have already relocated their Middle East Headquarters to Riyadh, including IHG Hotels & Resorts, Deloitte, and PwC.

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The Zero Tax Incentive Program

Saudi Arabia introduced a tax incentive initiative in December 2023 to attract foreign companies and encourage them to establish their regional headquarters within the Kingdom’s borders. 

This initiative offers a zero percent income tax rate on corporate entities and withholding taxes for 30 years. The benefit becomes immediately available to companies upon obtaining their regional headquarters license. 

This benefit, coupled with additional perks such as relaxed Saudization requirements and streamlined work permit provisions for spouses of executives, underscores Saudi Arabia’s commitment to providing a supportive environment for international businesses and their employees.

The Ground Rules

However, these enticing incentives come with certain conditions. Companies need to be transparent and honest in their dealings. Any instances of false or misleading information, tax evasion, or other malpractices can lead to the withdrawal of these incentives.

Furthermore, these tax rules are built on the tax and zakat regulations already in force in the Kingdom. The rules are applicable according to the national classification of economic activities.

The Key Criteria

Regional headquarters that meet the qualification criteria issued by the Ministry of Investment will be granted the following tax incentives:

  • Income tax at a rate of zero percent on qualified income
  • Withholding tax at a rate of zero percent on payments made by the regional headquarters to non-resident persons in terms of dividends, payments to related persons, and payments to unrelated persons for services necessary for the activity of the regional headquarters.

However, these exemptions will not apply if the regional headquarters are involved in non-approved activities or tax avoidance cases.

The Economic Requirements

Image Credit The PIF

The regional headquarters must fulfill the following actual economic requirements:

  • Hold a valid license issued by the Ministry of Investment and engage only in activities authorized by this license.
  • Have appropriate assets, including a suitable building for its activities in Saudi Arabia.
  • Generate revenues from approved activities in Saudi Arabia and have at least one director residing in Saudi Arabia.
  • Employ sufficient full-time employees with the necessary knowledge and experience to enable them to perform their tasks and responsibilities.

Penalties for Non-Compliance

In the event of failure to correct violations, penalties may be imposed. These may include fines of up to   $26,662 (SAR 100,000), with additional penalties of  $106650 (SAR 400,000) if the violation persists or is repeated within three years.

In severe cases, the Zakat, Tax, and Customs Authority reserves the right to suspend or cancel the tax incentives in coordination with the Ministry of Investment.

Implications for Foreign Investors

Image Credit KAFD

The regulations promise a lucrative 0% income tax rate and withholding taxes for eligible firms. This, coupled with additional benefits such as reduced Saudization requirements, makes Saudi Arabia an attractive destination for foreign investors. 

By creating a supportive environment for international businesses, Saudi Arabia aims to attract foreign investment, stimulate innovation across various sectors, and create new employment opportunities.

Impact on the Saudi Economy

The tax incentive program is part of Saudi Arabia’s strategic vision to diversify its economy beyond oil. By attracting multinational corporations and fostering a vibrant business ecosystem, the Kingdom hopes to stimulate innovation across various sectors. 

This move is expected to create new employment opportunities, transfer knowledge and technology, and contribute to economic growth.

A Leading Regional Hub

Saudi Arabia’s initiative to offer tax incentives is a strategic move to attract foreign investment and position itself as a leading hub for trade and investment in the Middle East. 

The Kingdom aims to build trust and confidence among investors and stakeholders by ensuring transparency and integrity in business practices. 

With these new regulations, Saudi Arabia is poised to promote a vibrant business ecosystem, stimulate innovation, and drive sustainable economic development.

Companies’ Regional HQs Established in Riyadh 

Boeing

Image Credit Boeing

Boeing has officially announced to establish its new Regional Headquarters for the Middle East in Riyadh.

This decision underscores Boeing’s dedication to the prosperous Saudi aviation market, which was made after a substantial order placed last year by Saudi Arabia’s national carriers for 121 787-Dreamliners.

This strategic step is in communion with the upcoming introduction of Riyadh Air in 2025 and aligns with the objectives of Saudi Arabia’s Vision 2030, which aims to invest $100 in the aviation sector.

Rothschild & Co

Image Credit Rothschild Co

[Rothschild & Co], one of the oldest banks in the world, has unveiled plans to open a new office in the King Abdullah Financial District in Riyadh, Saudi Arabia. 

This strategic decision underscores Rothschild & Co.’s dedication to supporting Saudi Arabia’s economic advancement and its determination to cater effectively to the growing demands of its esteemed clientele in the region.

Northern Trust

Image Credit Backyard Production

Northern Trust Corp., a leading global financial institution with a massive $1.3 trillion in assets under management, has opened its Middle East headquarters in Riyadh, Saudi Arabia. 

Its decision to set up its Middle East headquarters in Riyadh is a clear endorsement of Saudi Arabia’s economic diversification efforts.

JLL

Image Credit JLL

JLL, a renowned International Real Estate Consultancy Firm, has recently opened its regional headquarters at the King Abdullah Financial District (KAFD) in Riyadh. Their objective is to improve the real estate sector in the country, with a particular emphasis on technology and sustainability.

The global move to KAFD, the largest LEED for Neighbourhood Development (LEED-ND) Stage 2 platinum-certified project, brings JLL closer to fulfilling its sustainability objectives. It also aligns with the Kingdom’s vision to decarbonize its built environment.

IHG Hotels & Resorts

Image Credit InterContinental Hotels Group

IHG Hotels & Resorts has recently opened its Headquarters in Riyadh. It oversees 40 operational hotels and 32 under construction in the kingdom, marking a significant expansion with 50% of Middle East development concentrated in Saudi Arabia.

IHG has also committed to the Kingdom’s Saudization objectives. The company currently employs about 1,700 Saudi nationals, representing 44% of its total workforce in the Kingdom. IHG plans to increase this number to 6,000 by 2030.

Knight Frank

Image Credit Knight Frank

Knight Frank, a prominent leader in international real estate advisory firms, has recently opened its Saudi office in Laysen Valley, Riyadh.

This collaboration signifies a notable advancement in enhancing public parks and urban areas, aiming to create sustainable and appealing spaces.

With these companies setting up their regional headquarters in Saudi Arabia, the Kingdom is quickly emerging as a new global commercial hub.

Keep Reading: Over 200 Firms Establish Regional Headquarters in Saudi Arabia To Compete For Government Contracts

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