Gulf Countries

Saudi Arabia exempts regional headquarters from income tax for 30 years

Saudi Arabia has initiated the implementation of exempting regional headquarters from income tax for a period of up to 30 years.

It is planned that the Kingdom will provide incentives to regional headquarters of foreign companies in Saudi Arabia, including a 30-year exemption from income tax and withholding tax on payments made by the regional headquarters to non-resident individuals.

The rules published in the official gazette of the Kingdom, “Um Al-Qura,” stipulate that qualifying regional headquarters, as per the criteria issued by the relevant authority, will be granted a 30-year exemption from income tax, renewable, starting from the date of obtaining the license for the regional headquarters to carry out qualified activities.

Regional headquarters are exempt from withholding tax on payments made by the regional headquarters to non-resident individuals, including profit distributions, payments to related parties, and payments to unrelated parties for services necessary for the regional headquarters’ activities.

It is worth noting that Saudi Arabia announced in February 2021 plans to stop contracting with companies whose regional headquarters are not located in the Kingdom by January 1, 2024, to help create local job opportunities and enhance economic diversification plans.

The rules stipulate that regional headquarters must obtain a valid license from the relevant authority, refrain from engaging in activities other than those covered by this license, and possess suitable assets to conduct the activity.

The management and direction of activities, including holding board meetings in the Kingdom, are also required.

The rules also require achieving suitable revenues and operating expenses for qualified activities, as well as having at least one resident manager and an adequate number of full-time employees during the tax year.

Approximately 200 companies have applied to establish regional headquarters for their operations in the Middle East in Saudi Arabia, including companies such as Airbus, Oracle, Pfizer, and Boeing.

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