Date: 6^th March 2023

According to Minister of Investment Khalid Al-Falih, multinational corporations moving their headquarters to Saudi Arabia in 2023 in order to win government contracts may qualify for tax breaks. Al-Falih stated in an interview with the British Publication Financial Times that a statement addressing incentives will be made shortly to make the rules for multinational corporations clear.

The minister’s announcement comes as Saudi Arabia rapidly establishes itself as a regional hub for foreign direct investments, in accordance with the Vision 2030 objectives for economic diversification. Al-Falih went on to say that multinational corporations’ activities outside of Saudi Arabia would be taxed in the nation in which they are located and won’t be combined with their regional headquarters there.

In order to encourage multinational corporations to establish their headquarters in the Kingdom, the Saudi Arabian Ministry of Investments and the Royal Commission for Riyadh City introduced the Regional Headquarters Programme in 2021.  Al-Falih stated that these international corporations who relocate their headquarters to the Kingdom will only be subject to restricted profit taxation and further stated that it is possible that these companies will receive tax reduction. The RHQ special purpose entity, which will be established in Saudi Arabia, will only be taxed for the meagre earnings they produce inside the RHQ, according to the guiding concept. Most likely, the RHQ SPV’s minimal income will receive tax relief, according to Al-Falih.

The largest economy in the Middle East and North Africa is Saudi Arabia, and through the regional headquarters programme, the country wants to become a commercial hub in order to reduce its reliance on oil income. Al-Falih continued by saying that Saudi Arabia does not wish to charge businesses entering the Kingdom more fees. “We realised that we had to do everything that we can through policy and regulation to ensure that the companies will not incur any additional risks or costs from the alternative jurisdictions for managing their regional operations, and the biggest one, of course, is taxation,” he added.

According to the Financial Times, 80 businesses, including Siemens and Unilever, have already been given permission to relocate their regional headquarters to the Kingdom. Many of these businesses are anticipated to be situated in Riyadh’s King Abdullah Financial District.

It should be noted that Pepsico announced earlier this month that its Middle East CEO office has moved to Saudi Arabia. The Kingdom of Saudi Arabia awarded 4,358 investment licenses in 2022, rising 53.9 percent from 2021, according to a monthly report earlier in February. “This increase reflects the growing position of Saudi Arabia as an attractive investment destination with competitive advantages, including a stable and business-friendly investment environment,” MISA stated in the study.

Source: The national News