Riyadh city skyline
Riyadh city skyline at night. In addition to promoting economic growth, the tax exemption programme contributes to enhancing Saudi Arabia’s competitiveness on the global stage. Image Credit: Shutterstock

Dubai: Saudi Arabia has unveiled comprehensive terms and conditions for multinational companies seeking a 30-year income tax exemption upon relocating their regional headquarters to the Kingdom.

Published in the official Umm Al Qura Gazette, these regulations represent a pivotal step in Saudi Arabia’s ongoing efforts to attract international businesses and diversify its economy beyond oil.

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Under the newly released guidelines, multinational corporations must meet the criteria to qualify for the lucrative tax incentives.

Notably, companies found furnishing false information, engaging in tax evasion, or participating in any other malpractices will be disqualified from benefiting from these incentives. The regulations aim to ensure transparency, integrity, and adherence to the highest standards of corporate governance.

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The tax exemption programme, unveiled by Saudi Arabia in December 2023, aims to entice foreign companies to establish their regional headquarters within the Kingdom’s borders.

Eligible companies stand to benefit from a zero per cent income tax rate on corporate earnings and withholding taxes for a period of 30 years upon receiving their regional headquarters license.

In addition to the tax benefits, companies relocating to Saudi Arabia will enjoy eased Saudisation requirements and streamlined work permit provisions for spouses of regional headquarters executives. These complementary measures underscore Saudi Arabia’s commitment to providing a supportive environment for international businesses and their employees.

The tax rules, effective immediately upon their publication in the official gazette, are aligned with Saudi Arabia's existing tax and zakat regulations.

They specify the eligibility criteria, tax incentives, and obligations for regional headquarters of multinational companies operating in the Kingdom.

Non-compliance and fines

By providing clarity and transparency, the regulations aim to instill confidence in foreign investors and facilitate their decision-making process.

Furthermore, the regulations outline the penalties for non-compliance, including fines and potential suspension of tax incentives.

In the event of failure to correct violations, fines of up to SR100,000 may be imposed, with additional fines of SR400,000 if the violation persists or is repeated within three years.

Additionally, the Zakat, Tax, and Customs Authority, in coordination with the Ministry of Investment, reserves the right to suspend or cancel tax incentives for regional headquarters found guilty of deliberate submission of false information, misuse of tax incentives, or improper payments to non-resident persons.

Business-friendly destination

Saudi Arabia's initiative to offer tax incentives reflects its strategic vision to diversify its economy and reduce reliance on oil revenues. By attracting multinational corporations and fostering a vibrant business ecosystem, the Kingdom aims to create new employment opportunities, transfer knowledge and technology, and stimulate innovation across various sectors.

In addition to promoting economic growth, the tax exemption programme contributes to enhancing Saudi Arabia's competitiveness on the global stage. By positioning itself as a business-friendly destination with attractive incentives for foreign investors, the Kingdom seeks to strengthen its position as a leading hub for trade and investment in the Middle East and beyond.

Moreover, the regulations emphasize the importance of accountability and compliance with international standards of corporate governance. By promoting transparency and integrity in business practices, Saudi Arabia aims to build trust and confidence among investors and stakeholders.