Saudi Arabia will offer a 30-year tax break as an incentive for global companies that move their regional headquarters to the kingdom as it seeks to attract more multinationals amid a diversification push.
The package includes a zero per cent rate for both corporate income tax as well as withholding tax related to the “approved regional headquarters activities”, the Ministry of Investment, Ministry of Finance and the Zakat, Tax and Customs Authority said in a statement on Tuesday.
The kingdom currently imposes corporate tax of 20 per cent, along with charging withholding tax (the amount deducted from an employee's gross salary that is paid by the employer to the government) on various services ranging from 5 per cent to 20 per cent.
Global companies will benefit from the tax relief from the day they obtain their regional headquarters licence, the statement said.
The tax concession move follows Saudi Arabia's introduction of rules in 2021 requiring foreign companies to set up regional headquarters in the country by the end of this year or risk losing out on government contracts.
“This new incentive gives business more visibility and certainty for future planning as MNCs [multinational corporations] expand their presence in the region through Saudi Arabia while also taking part in our own transformation journey,” Mohammed Al Jadaan, Minister of Finance, said.
“We look forward to welcoming more MNCs to participate in projects across all sectors, including our giga-projects and in preparation for the hosting of such events as the 2029 Asian Winter Games and Expo 2030.”
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Saudi Arabia is aiming to boost foreign direct investment as part of its Vision 2030 agenda to diversify its economy away from oil. The kingdom hopes to have 480 global companies establish headquarters in the kingdom by 2030 amid efforts to boost economic output.
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 companies since 2021.
“The tax incentive gives multinational companies operating in the region yet another reason to make Saudi Arabia home to their regional headquarters, on top of other benefits such as relaxed Saudisation requirements and work permits for the spouses of RHQ [reginal headquarters] executives,” said Khalid Al Falih, Minister of Investment.
“The kingdom’s long-term economic stability, young and skilled workforce, strategic location and strong growth prospects have already attracted the world’s leading companies to pick Saudi Arabia as their new regional base of operations, while an even greater number of executives, entrepreneurs and talented professionals … are finding the kingdom a most attractive place to advance their careers.”
Saudi Arabia’s economy, which grew by 8.7 per cent last year, is expected to expand by 0.8 per cent this year, with non-oil economic growth anticipated to remain close to 5 per cent this year on strong domestic demand, according to the International Monetary Fund.
Saudi Arabia projects its non-oil economy to grow at 5.9 per cent this year, driven by the trade, hospitality and tourism sectors, the Ministry of Finance said in a preliminary budget statement in October.
Business activity in Saudi Arabia's non-oil private sector economy remained robust in November, with the headline Riyad Bank purchasing managers' index at 57.5 last month, well above the 50-point neutral mark that separates expansion from contraction.
New orders and output, the two largest contributors to the headline index, rose markedly in November, the report found.
