30-Year Tax Incentive Package: Attracting Foreign Companies to Saudi Arabia

Last Updated on 4 January 2025

The Saudi government has recently announced a lucrative tax exemption package aimed at enticing foreign companies to establish their regional headquarters (RHQ) in Saudi Arabia.

This initiative is part of the government’s broader campaign to attract multinational enterprises (MNEs) and stimulate international investment and job creation in the Kingdom.

30-Year Tax Incentive Package for RHQ Programme

The tax incentive package unveiled by the Saudi government includes a remarkable 30-year exemption from corporate taxes.

This means that companies establishing their RHQ in Saudi Arabia will enjoy a 0% corporate tax rate for three decades. The tax benefits will be applicable from the day these companies obtain their RHQ license.

The Ministry of Investment, in collaboration with the Ministry of Finance and the Zakat, Tax & Customs Authority, issued a joint statement confirming the details of the tax incentive package.

The statement emphasized that the program aims to attract MNEs to set up their RHQ in Saudi Arabia, positioning the Kingdom as a leading commercial, industrial, and investment hub in the MENA region.

Driving Factors Behind the RHQ Campaign

The Saudi government initiated its RHQ campaign in February 2021, making it clear that any foreign company without an RHQ office in Saudi Arabia by the beginning of 2024 would be prohibited from conducting business with state entities.

This ultimatum was reiterated by Saudi ministers in October, reaffirming the government’s commitment to the program.

Since its launch, the RHQ program has successfully licensed over 200 companies to operate their regional headquarters in Saudi Arabia. The tax incentive is yet another compelling reason for multinational companies to choose Saudi Arabia as their RHQ. The relaxed Saudization requirements and work permits for RHQ executives’ spouses further enhance the attractiveness of the program.

Vision 2030: Diversifying the Saudi Economy

The RHQ program is a crucial component of Vision 2030, an ambitious campaign introduced by Crown Prince Mohammed bin Salman in 2016.

The primary objective of Vision 2030 is to create job opportunities in the private sector and reduce the Saudi economy’s dependence on oil as the country’s young population continues to grow.

Despite extended oil production cuts and lower oil prices, the Saudi government foresees only a slight decrease in revenues in its 2024 budget. The government plans to allocate significant funds to mega-projects aimed at boosting the non-oil sector of the economy.

Last year, Saudi Arabia experienced substantial economic growth, driven by high crude prices, resulting in the highest GDP growth among G20 nations and the country’s first budget surplus in almost a decade.

Investments and Growth Projections

Vision 2030 necessitates substantial investments to shift the Saudi economy away from hydrocarbon income. The government plans to develop key sectors such as tourism and industry through the construction of major infrastructure projects and the expansion of the private sector.

In the 2024 budget, total expenditure is projected to reach USD 334 billion, a 12% increase compared to the previous year. Meanwhile, estimated total revenues for 2024 are expected to reach USD 300 billion.

Non-oil GDP growth is projected to be 5.9%, significantly outperforming the overall economy, which is expected to see almost flat growth of 0.03% due to declining oil GDP.

Deadline Approaching for RHQ Establishment

Olivia Baikova, a business development consultant at PRO Partner Group, highlighted the urgency for companies interested in securing government contracts to consider establishing their regional headquarters in Saudi Arabia.

With the deadline fast approaching, companies that wish to take advantage of the incentives and opportunities offered by the Saudi government should act promptly.

The tax exemption package for foreign companies establishing their RHQ in Saudi Arabia is a significant step towards attracting multinational enterprises and boosting international investment in the Kingdom.

With its competitive value proposition, strategic location, and commitment to economic diversification, Saudi Arabia is poised to become a leading destination for businesses seeking growth and expansion in the MENA region.