Economy

Saudi Arabia to offer ‘tax relief’ to firms relocating regional HQs

By Pramod Kumar

March 6, 2023

Khalid Al-Falih said the limited income by the regional HQ special purpose vehicle will most likely be granted tax relief

Saudi Arabia is likely to offer tax relief to multinationals that choose to relocate their regional headquarters to the kingdom in 2023, according to Minister of Investment Khalid Al-Falih.

These companies are aiming to secure “lucrative” government contracts.

“It is business as usual for them in Saudi Arabia and outside Saudi Arabia,” The Financial Times reported the minister as saying.

Operations outside the kingdom “will be taxed in those entities’ country of operations and will not be intermingled or mixed with the regional headquarters,” he added.

“The guiding principle is that the regional HQ special purpose vehicle, which will be created in Saudi Arabia, will be only taxed for the limited — almost nothing — profits that they make within the regional HQ .”

Most likely, the limited income by the regional HQ special purpose vehicle will be granted tax relief, Al-Falih said.

As many as 80 companies have already been granted licences to move their regional headquarters to the kingdom, with many expected to be based in King Abdullah Financial District.

On January 1, 2024, the Saudi government and state-backed institutions will stop signing contracts with foreign firms that base their Middle East HQs outside the kingdom.

On Sunday, Riyad Bank reported that the seasonally adjusted Saudi Arabia Purchasing Managers’ Index jumped to 59.8 in February 2023 from 58.2 the previous month, the fastest increase since March 2015.

The non-oil business sector activity soared to its highest level in eight years in February, based on a strong increase in demand and an optimistic economic outlook.