Saudi Arabia

Tax Rules for Regional Headquarters (RHQs)

The Tax Rules for RHQs have been published by the Zakat, Tax and Customs Authority (ZATCA) with an immediate effect from the date of publishing (i.e. 16 February 2024).

The rules clarify several key matters to the tax and investment society, which includes the following, among others:

• Key definitions regarding the RHQs.
• Tax incentives.
• Exemption duration and criteria.
• Economic substance rules for the RHQs.
• Tax compliance requirements.
• Fines and penalties in case of violating the rules.
• Rights of both ZATCA and the RHQ in case of tax audits and disputes.

Tax incentives

RHQs meeting the qualification criteria shall be eligible to enjoy the following tax incentives:

• 0% income tax on the qualifying income.
• 0% withholding tax (WHT) on the payment made by the RHQ to non-residents, meeting any of the following criteria:

• Payments of dividends.
• Payments to related parties.
• Payments to third parties for services necessary for the RHQ’s activities.

The WHT exemption shall not apply in any of the following cases:

• If the payment made by the RHQ is related to non-qualifying activities.
• In any of the tax evasion cases prescribed as per the RHQs Tax Rules.

Income derived by the RHQ from non-qualifying activities shall be treated according to the provisions of the relevant tax regulations in the Kingdom.

The provisions of the in-force treaties in Saudi and international obligations shall apply to the RHQs.

For purposes of all international treaties, conventions, or other agreements to which the Kingdom is party, RHQs are considered tax residents to the extent they meet the tax residency criteria according to Saudi Income Tax Law.

Duration of the tax incentives

• The tax incentives are applicable to the qualifying activities for renewable 30 years, starting from the date of obtaining the RHQ licence to carry out the qualifying activities.
• The tax incentives shall expire on the earlier of:
• The elapsing of the 30-years period.
• The entity ceasing to be qualified as an RHQ for whatsoever reason.

New Zakat regulations

On 22 March 2024, the Zakat, Tax and Customs Authority (ZATCA) announced the issuance of a new Zakat Implementing Regulation, through the Ministerial Resolution (MR) No.1007 dated 29 February 2024, which was electronically published in the Official Gazette (Umm Al-Qura) on 21 March 2024 and applicable for the fiscal years starting from January 1, 2024 onward. The new Zakat regulation is replacing the current regulation issued through MR No. 2216 dated 14 March 2019.

Tax Amnesty Extension

New RETT Law:

The Real Estate Transaction Tax (RETT) Law, under Ministerial Resolution No. 84, dated 22 September 2024, has been officially published. The law is set to take effect 180 days from the date of publication in the Official Gazette (11 October 2024).