Saudi Arabia has implemented a 30-year tax relief policy to attract regional headquarters, marking a significant shift in its economic strategy

Dec 11, 2023

In a bold move aimed at attracting global businesses and bolstering its position as a regional hub, Saudi Arabia has unveiled an enticing offer: a 30-year corporate income tax relief for multinational companies to operate and establish their headquarters in the kingdom.

This incentive offers a zero per cent income tax rate on corporate and withholding taxes for 30 years, available to companies as soon as they receive their Regional Headquarters (RHQ) licence.

Additionally, companies will benefit from eased ‘Saudization’ requirements and work permit provisions for spouses of RHQ executives.

Let’s delve into the intricacies of the RHQ tax relief initiative and explore why it holds significant appeal for international companies.

Saudi Arabia’s The Regional Headquarters Programme

The regional headquarters programme, an initiative by the Ministry of Investment and the Royal Commission for Riyadh City, aims to attract multinational companies by offering a range of benefits and premium support services. The programme has licensed more than 200 of the world’s leading companies since 2021.

This initiative follows the Kingdom’s earlier decision to cease granting government contracts to multinationals without regional headquarters in its capital (Riyadh City) from January 1, 2024.

The Saudi Press Agency (SPA) and Saudi Minister of Investment Khalid Al-Falih have both highlighted that this ground-breaking initiative represents a strategic leap forward in the nation’s economic diversification efforts and aims to position Saudi Arabia as an attractive destination for multinational companies operating in the MENA region.

The Offer: 30-Year Corporate Income Tax Exemption

Under the new policy, foreign companies that set up their regional headquarters in the kingdom are eligible for a generous 30-year withholding tax. This tax incentive aims to encourage foreign companies to establish a strong presence (regional headquarters) in Saudi Arabia, leveraging its strategic geographical location, investment hub and robust infrastructure for regional operations.

Saudi Arabia’s Strategic Positioning as a Regional Hub

Saudi Arabia is strategically located at the crossroads of Europe, Asia, and Africa. Coupled with an extensive transportation network and world-class infrastructure, Saudi Arabia is an ideal gateway to regional markets. By offering extended tax relief, Saudi Arabia seeks to capitalise on this advantage, attracting multinational companies looking to expand their footprint across the Middle East and beyond.

Economic Diversification and Saudi Vision 2030

This initiative aligns seamlessly with Saudi Arabia’s Vision 2030, a comprehensive plan aimed at reducing the country’s dependence on oil revenue and diversifying its economy. By incentivising multinational corporations to establish regional headquarters, Saudi Arabia aims to stimulate economic growth, foster innovation, and create private sector job opportunities for its young and skilled workforce.

Competitive Edge and Attraction for Global Businesses

The 30-year tax relief serves as a powerful incentive for multinational corporations seeking favourable business environments. For global companies considering expansion into the Middle East and North Africa (MENA) region, Saudi Arabia offers strong growth prospects, such as this long-term tax incentive that enhances profitability and operational flexibility. Other benefits include relaxed Saudisation requirements, and work permits for the spouses of RHQ executives.

Facilitating Business Operations and Investment in Saudi Arabia

Apart from tax incentives, global companies establishing regional headquarters in Saudi Arabia enjoy other benefits, such as access to a business-friendly ecosystem supported by streamlined regulations, efficient processes, and a supportive infrastructure. This facilitates smoother operations and encourages further investment in sectors ranging from finance and technology to logistics and manufacturing.

Conclusion: Paving the Way for Economic Growth

Saudi Arabia’s decision to offer 30-year tax relief to international companies establishing their regional headquarters is a pivotal step in its own transformation journey towards economic diversification and in advancing the Kingdom’s globally competitive landscape. By leveraging its strategic advantages and fostering an attractive business environment, Saudi Arabia aims to attract investment, drive innovation, and emerge as a leading regional business hub for foreign investors and companies.

This initiative not only benefits international companies seeking growth opportunities but also aligns with Saudi Arabia’s ambitious Vision 2030, signalling an era of economic transformation and prosperity for the kingdom and the region at large.

For further information on setting up in Saudi Arabia, applying for a regional headquarters licence or general advice on the new policies, don’t hesitate to contact our strategic government liaison team today!