Saudi Arabia Lures Foreign Firms To Relocate Regional HQs With 30-Year Tax Benefits

Earlier in February 2021, the country announced its plans to stop providing government contracts to firms who didn’t have their regional headquarters located in the kingdom by January 1, 2024. 

As part of the incentives, the tax exemption deal includes a zero percent rate for income tax of the regional entity and for the withholding tax on approved activities undertaken by the entities for 30 years. ( Image Source :Getty )

Saudi Arabia will give tax incentives to foreign companies that choose to locate their regional headquarters in the kingdom, the country said on Tuesday. As part of the incentives, the firms will be given a 30-year exemption from corporate income tax, it noted. 

Earlier in February 2021, the oil exporting country announced its plans to stop providing government contracts to firms who didn’t have their regional headquarters located in the kingdom by January 1, 2024, reported Reuters. 

The demand from the country has effectively aggravated its competition with the regional business centre, the United Arab Emirates. This ultimatum comes as part of the efforts by Crown Prince Mohammed bin Salman to make the economy independent from oil and generate job opportunities for Saudis by creating new industries. 

As part of the incentives, the tax exemption deal includes a zero percent rate for income tax of the regional entity and for the withholding tax on approved activities undertaken by the entities for 30 years, the country’s news agency SPA reported. 

The country further said that international firms would benefit from the tax exemption package from the date they are issued licences. The initiative has seen interest from 200 global companies so far, Saudi Investment Minister, Khaled Al-Falih noted. 

SPA cited the country’s Finance Minister, Mohammed Al-Jadaan, and said, “The new tax exemptions granted on regional headquarters activities will give .... international companies in the kingdom more clarity of vision and stability.”

The minister added, “We look forward to welcoming more international companies to participate in projects in all sectors, including mega projects, and our preparations to host major events such as the Asian Winter Games in 2029, and the Expo 2030.”

So far, foreign firms have lined up to cater to the demand from the country to relocate their regional headquarters after it announced in October that the deadline ‘will be enforced’, the report noted. At the same time, certain companies have raised concerns about the regulatory framework such as taxation.

Notably, the United Arab Emirates has remained a popular destination for foreign firms for years to use as a base for their regional operations.