Key Takeaways from Rödl & Partner’s latest KSA Tax Update

28/05/2024

On May 21, 2024 the Live Webinar about "Essential Updates and Latest Developments on Taxation in Saudi Arabia" took place.

Our guest speaker, Dr. Thomas Bücheler, LL. M., Head of Tax bei Roedl & Partner, informed the participants about the evolving tax laws of the Kingdom of Saudi Arabia. Dr. Thomas Bücheler shed light on the provisions for Qualified Regional Headquarters, presented the main takeaways of the draft of the Kingdom’s new income tax law, which envisages broad changes to a variety of key provisions.

Also, it was discussed the potential impact on foreign investors and businesses operating in KSA. Further, our guest speaker updated on the recent developments regarding Special Economic Zones and the Special Integrated Logistics Zone, along with the opportunities these present for astute investors.

Key Takeaways from Rödl & Partner’s latest KSA Tax Update:

Keeping up with the changing tax landscape in Saudi Arabia is critical for multinational corporations and investors. Here are the key takeaways from our recent seminar:

Regional Headquarter (RHQ) Regulations:

Saudi Arabia’s RHQ regulations offer incentives for multinational corporations operating in the MENA region. Benefits include:

Regulatory benefits: in particular, visa and Saudization exemptions.
Tax advantages: 0% income tax and 0% withholding tax on eligible income.

However, failure to comply with regulatory requirements and Economic Substance Regulations can jeopardize all these benefits. Ensure you stay compliant to protect your interests.

Special Economic Zones (SEZs) & Special Integrated Logistics Zone (SILZ):

Investors looking to establish a presence in Saudi Arabia might benefit from the advantages the SEZs and the SILZ present. Key incentives include:

Tax incentives: significant tax reductions, such as a reduced income tax rate of 5% (most SEZs) / 0% for the SILZ and a 0% withholding tax rate for repatriation of profits.
Ease of establishment: streamlined processes for setting up entities.

These zones present a lucrative opportunity for strategic investment and expansion in the Kingdom.

Draft of New Income Tax Law:

The upcoming changes to Saudi Arabia’s income tax law are set to reshape the direct tax landscape of the Kingdom:

Currently envisaged changes include:

Tax residency rules and source of income definition: new 90 days within a 270-days period rule and inclusion of remotely rendered services as source of income.
Permanent Establishment rules: extension of service PE and amendments to force of attraction rule.
Interest Deduction rules: new rules and thresholds for interest deductions.
Preferential tax regimes: introduction of a blacklist for jurisdictions with preferential tax regimes, impacting withholding tax rates and the availability of the participation exemption.

It is key to monitor further developments surrounding the implementation of the new income tax law and to plan ahead.

The evolving tax landscape in the KSA brings opportunities and challenges alike.

Reach out and let us help you navigate them effectively.