The Clap
Saudi Arabia has decided to exempt the regional headquarters of foreign companies from income tax for 30 years. Additionally, the withholding tax on payments made by non-resident individuals’ regional headquarters will be suspended for the same duration.
What
Regional headquarters meeting qualification standards issued by the relevant authority are set to be exempt from income tax for a renewable period of 30 years. This exemption commences from the date of obtaining the regional headquarters license to execute qualified activities.
Additionally, regional headquarters are exempted from withholding tax on payments executed by the regional headquarters for non-resident individuals. This includes profit distributions, payments to related parties, and payments to unrelated parties for services necessary for the regional headquarters’ activities.
So What
As the largest economy in the Middle East and North Africa and ranking eighteenth among the world’s largest economies, the Kingdom seeks to attract global companies to its territory and encourage increased investment therein.
Hence, the government announced in February 2021 its decision to stop contracting with companies whose regional headquarters are not located in Saudi Arabia by January 1, 2024. This is to create local employment opportunities and support economic diversification plans.
Furthermore, it enhances the country’s status as a regional business hub.
Some Context
The new tax incentive initiative announced last December has led numerous companies to submit applications to open regional headquarters for their operations in the Middle East in Saudi Arabia.
The number of applicants has exceeded 200 establishments, with the latest being Airbus, Oracle, and Pfizer, all of whom have obtained licenses to establish regional centers in the country in recent months.
Boeing has also applied for a license to establish its main headquarters for the Middle East region in Riyadh earlier this month, according to Bloomberg.
