Saudi Arabia recently introduced terms and conditions for multinational companies (MNCs) to qualify for a 30-year income tax exemption upon relocating their regional headquarters to the Kingdom. This move, announced in December 2023 as part of a tax incentive initiative to attract foreign companies to Riyadh, marks a significant step in diversifying the Saudi economy beyond oil. The regulations, published in the official daily “Umm Al Qura,” align with Saudi Arabia’s tax and zakat regulations, aiming to attract international businesses.
Under the initiative, eligible firms can benefit from a zero percent income tax rate and 30 years of withholding tax exemption for corporate entities, subject to meeting specified conditions. Additionally, there are reduced Saudization requirements and work permit provisions for spouses. The regulations stipulate that regional headquarters meeting the Ministry of Investment’s criteria will receive tax incentives.
These incentives include a zero percent income tax rate on qualified income and zero percent withholding tax on various payments, provided companies meet specific conditions. However, exemptions from withholding tax are limited under certain circumstances, such as non-approved activities or tax avoidance.
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Regional headquarters engaged in qualified activities are granted tax incentives for 30 years, starting from license acquisition until the term expires or cessation. Economic requirements include holding a valid investment license, proper asset and operational expenses, and revenue generation from approved activities.
To ensure compliance, the Zakat, Tax, and Customs Authority will enforce tax requirements, penalizing companies for non-compliance. Additionally, starting from January 1, 2024, the Saudi government will exclusively award contracts to foreign companies with regional headquarters in Saudi Arabia, supporting over 200 international firms already established in Riyadh.