Tax Update

Regional Headquarters Tax Rules in Saudi Arabia

Adel Daglas
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The tax regulations governing regional headquarters in Saudi Arabia were outlined in the Umm Al-Qura newspaper on February 16. Effective immediately upon publication, these regulations provide crucial insights into the criteria for tax incentives extended to regional headquarters operating within the kingdom.

The regulations outlined encompass the criteria for tax incentives available to regional headquarters, becoming effective immediately upon publication.

Eligible regional headquarters are granted a zero per cent income tax rate on qualifying earnings and zero per cent withholding tax on payments to nonresidents.

These incentives apply to activities approved by the relevant authorities and remain valid for a 30-year duration, with the option for renewal. The incentive period begins upon issuing the regional headquarters license and persists for 30 years or until the entity no longer operates as a regional headquarters.

Delving deeper into the specifics, it's essential to understand the key provisions outlined in the tax rules:

Tax Incentives and Duration:

  • Tax incentives include zero per cent income tax on eligible income and zero per cent withholding tax on specific payments.
  • These incentives are applicable for 30 years, subject to renewal, starting from obtaining the headquarters license.

Economic Substance Requirements:

  • Regional headquarters must meet specific criteria to ensure economic substance, including holding a valid license, maintaining suitable premises, and employing residents of the Kingdom.

Compliance and Enforcement:

  • Regional headquarters are subject to regular monitoring and examination by the authorities to ensure compliance.
  • Non-compliance with tax and Zakat laws may result in penalties, with provisions for objection and appeal.
  • Anti-avoidance measures are in place to prevent misuse of tax incentives.

These tax regulations offer a favourable environment for multinational companies establishing regional headquarters in Saudi Arabia. By providing clear incentives and guidelines while ensuring compliance, the Kingdom aims to attract foreign investment and bolster its position as a regional economic hub. However, adherence to the outlined provisions and maintaining economic substance is paramount for regional headquarters to benefit fully from these incentives and contribute effectively to the Saudi economy.

Please refer to the guide here for further details on the tax rules or regional headquarters.