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Significant tax breaks for companies relocating their regional HQs have come into force:The Kingdom has unrolled tax incentives for foreign companies relocating their regional headquarters here, new tax rules published by the official gazette, Umm Al Qura, showed last week.
Ironing out the details: The incentives include a 30-year exemption from corporate income tax on each company’s approved activities in the Kingdom. License holders will also be able to make payments to entities outside Saudi without paying withholding tax. The 30-year no-tax window for the activities of the regional entity incorporated in KSA will open from the day the company’s business license is issued until the lapse of the period or if the business ceases to be a regional HQ for any reason. The incentives are subject to renewal, the rules showed.
And requirements: Foreign companies relocating their regional HQs here need to meet a set of requirements that includes:
- A valid license from the Investment Ministry. Business activities in the Kingdom need to fall within the scope of the license;
- Have an office here;
- The office needs to be staffed and managed here and BoD meetings must take place in KSA;
- Incurring operational expenses related to the regional office;
- Must generate revenue;
- Must have at least one resident director in the Kingdom.
Fail to comply? You’ll have a 90-day window to set things right and pay a SAR 100k fine. Mess up again within three years or fail to fix things, you’ll face a fine of SAR 400k and could be on the road to losing your tax-exempt status.
Remember: The Kingdom had set a 1 January 2024 deadline for foreign firms to move their regional HQs here or run the risk of losing out on government contracts. The plan, a cornerstone of Crown Prince and Prime Minister Mohamed bn Salman’s drive to build a diversified, globally significant non-oil economy, has been in the works since February 2021.
