In February the Zakat, Tax and Customs Authority published guidelines specifying RHQ tax rules. Under the new rules, specific activities qualify for tax incentives. The new RHQ tax rules aim to clarify the scope and conditions of tax relief for RHQ entities, as announced by MISA in December 2023.
The Saudi Ministry of Investment recently announced that over 350 international investors have so far obtained licenses to establish their RHQs in KSA, most of which are in Riyadh.
The law office of Al-Akeel & Partners which works with Mayer|Brown in Saudi Arabia recently published a useful update on Saudi Arabia’s Regional Headquarters Program (RHQ).
The update’s authors, Jad A. Taha, Nanda Al Qazaz and Marc Saroufim, provide useful background on the RHQ noting its official announcement in February 2021, the Minister of Finance’s directives issued in December 2022 and the launch of the RHQ program on January 1, 2024.
Referencing the February 2024 Zakat, Tax and Customs Authority published guidelines specifying RHQ tax rules, the report provides a summary of benefits for setting up RHQ in KSA, which includes, but is not limited to:
- 10-year Saudization exemption;
- 30-year corporate income and withholding tax exemption (related to specific activities);
- Waiver of professional accreditation;
- Visa limit exemptions and issuance acceleration; and
- Government tendering priority.
The multinational company must start RHQ operations within six (6) months after its RHQ license is granted and it must establish three (3) optional activities chosen in the first year of the license operation.
The RHQ must have 15 full-time employees within the first year. Also, at least 3 mandatory RHQ activity employees must be of executive or senior level (such as a Regional Managing Director or Vice President) and to perform strategic management activities on behalf of its branches and other affiliates in the region.
Adding that further updates in relation to the RHQ Program are expected in the coming few months.
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