Saudi Arabia unveils rules for 30-year tax exemptions for MNCs

The new regulations are a significant step in Saudi Arabia's efforts to attract international businesses and diversify its economy beyond oil.

Riyadh: The Kingdom of Saudi Arabia (KSA) recently unveiled terms and conditions for multinational companies (MNCs) to qualify for a 30-year income tax exemption after relocating their regional headquarters to the Kingdom.

This comes as Saudi Arabia introduced a tax incentive initiative in December 2023 to attract foreign companies to establish their regional headquarters in its capital city Riyadh.

The new regulations, published in the official daily “Umm Al Qura,” are a significant step in Saudi Arabia’s efforts to attract international businesses and diversify its economy beyond oil.

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This aligns with the tax and zakat regulations in Saudi Arabia, as outlined in the national classification of economic activities.

As per a report by the Arabic daily Okaz, companies that provide false or misleading information, engage in tax evasion, or commit malpractices will not be eligible for incentives.

This initiative offers eligible firms a zero percent income tax rate and 30 years of withholding taxes for corporate entities, provided they meet the established conditions.

In addition, companies will benefit from reduced Saudization requirements and work permit provisions for spouses.

Article 3 of the regulations states that regional headquarters meeting the Ministry of Investment’s qualification criteria will receive tax incentives.

The incentives offer a zero percent income tax rate on qualified income and a zero percent withholding tax on various payments, provided companies meet specific conditions.

Exemptions from withholding tax are restricted under specific circumstances, such as non-approved activities or tax avoidance as per the rules.

Article 4 grants tax incentives for 30 years to regional headquarters engaged in qualified activities, with a countdown starting from license acquisition and ending upon term expiry or cessation.

Article 5 outlines economic requirements for regional headquarters in Saudi Arabia, including a valid investment license, proper asset and operational expenses, and revenue generation from approved activities.

The Zakat, Tax, and Customs Authority will enforce compliance with tax requirements, ensuring companies adhere to the rules and avoid penalties or loss of tax breaks.

Starting from January 1, 2024, the Saudi Arabian government will no longer award contracts to foreign companies with Middle Eastern headquarters outside Saudi Arabia.

Riyadh has established regional headquarters for over 200 international firms, allowing them to bid for government contracts in Saudi Arabia.

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