Saudi Arabia is offering a 30-year tax cut to attract businesses

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Saudi Arabia has announced a 30-year tax exemption package targeted at foreign companies establishing their regional headquarters in the kingdom. The initiative, officially termed The Regional Headquarters (RHQ) Program, was jointly introduced by the Ministry of Investment of Saudi Arabia, the Ministry of Finance, and the Zakat, Tax, and Customs Authority.

According to an official statement released by the Saudi state press agency, the comprehensive tax incentive package features a great 30-year duration of a 0% corporate tax rate, applicable to companies from the moment they get their RHQ license. The objective of this program is to enhance and facilitate the process for multinational companies (MNCs) looking to establish their regional headquarters in Saudi Arabia.

The statement adds that the program is strategically designed to attract MNCs, positioning Saudi Arabia as the top commercial, industrial, and investment hub for the MENA region. By offering benefits and premium support services, the initiative aims to enhance the Kingdom’s globally competitive value proposition, promoting its status as a preferred destination for international businesses.

The kingdom made considerable investor attention and got into a controversy in February 2021 when it initially introduced its RHQ campaign, issuing a bold declaration that any foreign company failing to establish its regional headquarters in Saudi Arabia by the commencement of 2024 would face restrictions in conducting business with state entities.

This announcement took investors and expatriate workers by surprise, with many interpreting the move as a direct challenge to Dubai, the commercial capital of the United Arab Emirates and the primary location for a significant number of Middle East regional headquarters.

As of October this year, Saudi ministers reiterated that the ultimatum remains unchanged: Foreign companies must establish their regional headquarters in the kingdom by January 1, 2024, or risk being excluded from lucrative government contracts.

Foreign investors remain careful about the capacity of Saudi Arabia—an extensively conservative Muslim theocracy with a widely criticized human rights record—to effectively attract foreign talent. 

The kingdom’s limitations, including concerns about quality of life services such as international schools, sufficient housing, and elements of a more Western lifestyle, notably the prohibition of alcohol, have led expats in Dubai, a prominent regional headquarters hub, to question Saudi Arabia’s appeal.

Addressing these concerns, Saudi Arabia declares that its RHQ program has successfully granted licenses to over 200 companies to establish their regional head offices in the kingdom. In response to concerts of expat workers regarding the availability of international schools for their families, the Saudi Press Agency statement highlights that “seven international K-12 schools have announced their new campuses in the Kingdom.” This is seen as an effort to alleviate concerns and enhance the overall attractiveness of Saudi Arabia for foreign professionals and their families.

The tax incentive serves as an additional compelling factor for multinational companies operating in the region to choose Saudi Arabia as the location for their regional headquarters. This incentive complements other advantages, including more flexible Saudization requirements and the provision of work permits for the spouses of executives affiliated with regional headquarters, as highlighted by Saudi Minister of Investment Khalid Al-Falih, as reported by the Saudi Press Agency (SPA).

The kingdom’s initiative to attract regional headquarters aligns with Vision 2030, a visionary campaign initiated by Crown Prince Mohammed bin Salman in 2016. This ambitious initiative aims to generate employment opportunities in the private sector and diversify the Saudi economy away from its reliance on oil, especially crucial as the country’s population, with over 60% under the age of 30, continues to grow.

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