Saudi Arabia’s recent policy change has introduced a 30-year income tax exemption for regional headquarters, marking a significant shift in its taxation strategy.
Incentives for Foreign Companies
Foreign firms establishing regional bases in Saudi Arabia will enjoy significant incentives, including extended tax waivers aimed at fostering investment and economic growth.
Qualification Criteria and Renewal
Regional headquarters that meet specific criteria outlined in the official gazette “Umm Al-Qura” will qualify for the tax exemption. Furthermore, this exemption is subject to renewal, ensuring ongoing compliance with qualification standards.
Exemption on Withholding Tax
An important feature of this policy is the exemption from withholding tax on various transactions involving non-resident individuals. Moreover, this exemption covers profit distributions, payments to related parties, and remunerations for essential services.
Building on Previous Initiatives
This policy aligns with Saudi Arabia’s previous efforts to bolster its business environment. It follows the plan announced in February 2021 to enhance local employment opportunities by incentivizing companies to establish regional headquarters within the Kingdom.
Regulatory Requirements
To ensure compliance, regulations specify several requirements for regional headquarters. Also, these include obtaining a valid license, adhering strictly to activities covered by the license and Staffing Obligations
Companies establishing regional headquarters must meet revenue and staffing criteria, demonstrating commitment to the Saudi market. Additionally, this includes generating revenue from qualified activities within Saudi Arabia.
Attractiveness of Saudi Arabia as Business Destination
Consequently, the significant interest from global corporations, including industry leaders like Airbus and Pfizer, reflects Saudi Arabia’s appeal as a business hub. This influx of interest also underscores confidence in the Kingdom’s economic prospects and the favorable regulatory environment it offers to investors.
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