On 5 December 2023, the Saudi government announced the tax regime that will be applicable to Regional Headquarter entities (“RHQs“). RHQs will effectively be given a tax holiday for 30 years and outward payments by the RHQ would be subject to nil withholding tax. Specific details have yet to be announced.
The Ministry of Investment, in coordination with the Ministry of Finance and the Zakat, Tax and Customs Authority (ZATCA) announced a tax holiday package for foreign companies with RHQ licenses. The tax incentive package will offer RHQ licensees zero percent income tax rate for 30 years from the date they receive the RHQ license, in addition to zero percent withholding tax rate on payments related to approved RHQ activities.
At this stage, there is still no information on the details of the incentives and what compliance procedures will be put in place. We expect the relevant regulatory agencies to publish detailed rules for the incentives package, including eligibility, reporting and filing requirements, and anti-abuse rules similar to those that govern tax incentives offered to Special Integrated Logistics Zone companies.
Companies that have RHQ licenses or are in the process of setting up RHQs will need to review their plans in the light of the above.
To speak with us in relation to the Saudi tax regime, or any tax matters or issues more generally, please contact one of the team members below.