Saudi Arabia Guidelines for Regional Headquarters Tax and Zakat Rules

Saudi Arabia has released guidelines through the Zakat, Tax and Customs Authority (ZATCA) regarding the tax and zakat provisions applicable to regional headquarters' activities in the country. These guidelines offer additional insights into the Regional Headquarters Tax Rules (RHQ Tax Rules) published earlier, aiming to clarify ambiguities and provide a structured framework for compliance.

Key Points from the Guidelines:

• Eligibility for Tax Incentives: The guidelines reaffirm that regional headquarters (RHQs) can benefit from the 30-year tax holiday, focusing on corporate income tax and withholding tax. However, other tax regimes like zakat, value-added tax (VAT), and real estate transaction tax (RETT) remain applicable as per general rules.
• Economic Substance Requirements: RHQs must meet specific economic substance criteria, including having a physical office in Saudi Arabia, conducting board meetings in the country, employing sufficient staff, and maintaining assets and expenses in line with their activities.
• Compliance and Reporting: RHQs are required to submit an annual report demonstrating compliance with economic substance requirements. They must also adhere to tax residency rules, transfer pricing regulations, and other compliance procedures outlined in the guidelines.
• Revocation of Tax Incentives: The guidelines outline scenarios where tax incentives may be revoked, such as providing false information, misapplying tax rules, or engaging in ineligible activities to benefit from tax incentives.
• VAT Registration: While the tax holiday excludes VAT, RHQs may need to register for VAT based on thresholds related to taxable supplies and expenses, with voluntary registration options available in certain cases.
• Transfer Pricing and Compliance: RHQs are subject to Saudi transfer pricing rules, requiring transactions with related parties to be conducted on an arm's-length basis. Additionally, standard tax and zakat compliance procedures, including tax return filing and record-keeping, apply to RHQs.

Sources: Saudi Arabia issues guidelines for Regional Headquarters Tax and zakat rules (ey.com) 

FEH0, *(DJ: B1'1 'DE,D3 1BE (9-1-24) (4.../ 'D61J(J) DDEB1'* 'D%BDJEJ) (002).pdf (zatca.gov.sa)