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A 30-year tax incentive package have been proposed for Multinational Companies (MNCs) establishing Regional Head Quarters (RHQs) in Saudi Arabia. This is a joint initiative proposed by Ministry of Investment of Saudi Arabia (MISA) in coordination with the Ministry of Finance and the Zakat, Tax and Customs Authority (ZATCA).<\/p>\n\n\n\n

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Key points<\/strong><\/th>Details<\/strong><\/th><\/tr><\/thead>
Background & Development<\/em><\/strong><\/td>Regional Headquarters (RHQ) regime is an initiative jointly developed by the Ministry of Investment (MISA) and the Royal Commission for Riyadh City which aims to attract multinational companies (MNCs) to establish their regional headquarters in the KSA. \n
    \n
  • KSA government announced its intention to cease contracting with companies that do not have their RHQ situated in KSA;\n
  • The Regulations for Government Agencies Contracting with Entities that do not have a Regional Headquarter in KSA and their related parties (the Regulations) were issued during December 2022; and\n

  • 30 years tax incentive regime have been proposed for MNCs with RHQ in Saudi Arabia, key proposals are as follows :<\/b><\/p>\n

    \n[a] Nil Corporate tax on RHQ profits; and
    \n[b] Nil Withholding tax on payments to related and third parties, subject to\nconditions\n<\/p><\/b>\nThe proposed tax incentive shall be available to MNCs from the date of obtaining the RHQ license.\n\n<\/ul>\n<\/td><\/tr>

Effective<\/td>The Regulations for RHQs are effective from 1 January 2024 and may prevent all government agencies from contracting with companies that do not have an RHQ in the KSA and their related parties.\n
    \n
  • MISA will maintain a list of MNCs with RHQ in Saudi Arabia on an online portal; and\n
  • MISA may also consider maintaining a list of \u201cMNCs that do not have an RHQ in Saudi Arabia and have an RHQ in the MENA Region\n<\/ul>\n<\/td><\/tr>
Restrictions<\/td>\n
    \n
  • Government agencies will be restricted from contracting with MNCs and its related parties that do not have their RHQ in Saudi Arabia; and\n
  • Government agencies includes ministries, governmental entities, public bodies, departments, institutions and independent agencies with a public legal personality\n<\/ul>\n<\/td><\/tr>
Exception<\/td>\n
    \n
  • Contracts value less than SAR 1 million;\n
  • Where there is only one technically acceptable offer;\n
  • Can only be served by one company without an RHQ in the KSA; and\n
  • Emergency and discretion of authorities\n<\/ul>\n<\/td><\/tr>
Activities permitted for RHQs<\/td>\n
    \n
  • Mandatory : Strategic Director and Management functions\n
  • Optional : Sales, Marketing, HR, Finance, IT, Procurement, Intellectual Property etc\n<\/ul>\n<\/td><\/tr>
Wayforward for MNCs<\/td>\n