How to Maximise Tax Benefits as an Investor in Saudi Arabia

Posted on: 7th November 2024 in Finance

Saudi Arabia has rapidly become a top investment destination, drawing investors from around the globe, thanks to its business-friendly environment and abundant opportunities.

Part of what makes it so appealing is its investor-focused tax incentives and benefits, many of which are linked to the country’s ambitious Vision 2030 programme.

Whether you’re new to the region or a seasoned investor, knowing how to maximise tax benefits can help boost your returns and make your investments go further.

Here, we’ll walk you through the key tax benefits and incentives available to investors in Saudi Arabia.

The Regional Headquarters (RHQ) Programme

The RHQ Programme is among Saudi Arabia’s most generous tax incentives for multinational companies.

Designed to attract big names to establish their regional headquarters in the Kingdom, the RHQ Programme offers a 30-year tax holiday on qualifying activities. This means a 0% corporate income tax rate and no withholding tax on certain payments tied to these approved activities.

Requirements

Companies must hold an RHQ licence and meet specific conditions, like maintaining enough assets and employing a certain number of full-time staff in Saudi Arabia. This programme can be ideal for companies with substantial business interests in the Middle East and North Africa.

Who Should Consider It?

If you’re part of a multinational business planning to expand in the region, setting up your headquarters in Saudi Arabia could lead to significant tax savings over time.

Incentives for Investment in Less-Developed Regions

The Saudi government offers generous tax relief to encourage investment in regions that could benefit from economic development.

These incentives apply to six specific areas: Ha’il, Jazan, Najran, Al-Baha, Al-Jouf, and the Northern Territory. By establishing projects in these areas, investors can take advantage of tax deductions for up to ten years.

Benefits Include:

• 50% tax deduction on training expenses for Saudi employees.
• 50% deduction on salaries paid to Saudi nationals.
• 15% deduction on non-Saudi capital shares, as long as specific conditions are met.

Additional deductions may apply if the business invests over SAR 1 million or employs five or more Saudi nationals in key roles.

Who Should Consider It?

If your business is open to establishing operations outside the major cities, these regions offer strong incentives for long-term savings.

Customs Duty Exemptions

Saudi Arabia offers duty exemptions on machinery and raw materials for approved projects, provided these items aren’t available locally. This exemption can cut down on import costs, making project setups more affordable.

Eligibility and Application

You must apply before importing these goods and meet specific criteria to qualify. This is particularly helpful for investors in manufacturing or industries requiring specialised equipment.

Who Should Consider It?

Businesses in industrial or manufacturing sectors, or those needing specialised imported machinery, stand to gain the most from this benefit.

Financial Support and Loan Programmes

Saudi Arabia also has various financial support options to ease project funding.

These programmes are tailored to help certain high-priority industries, offering reduced interest rates, long repayment terms of up to 25 years, and grace periods between 4-6 years.

This financial assistance aims to stimulate economic growth and development per Vision 2030. Sectors like renewable energy, technology, and manufacturing are among the primary beneficiaries of these loans.

Who Should Consider It?

These supportive loan terms would greatly benefit investors with projects in Vision 2030-aligned sectors that require significant upfront capital.

Employment Support Programmes

Saudi Arabia is keen on boosting local employment, and as an investor, you can benefit from this drive.

The government offers employment support programmes that help reduce costs associated with hiring and training Saudi nationals.

Key Programmes Include:

• Tamheer Programme: Provides on-the-job training for Saudi graduates, with monthly financial support of SAR 3,000 during the training period.
• Professional Certification Support Programme: This reimburses costs related to Saudi employees obtaining professional certifications, which is a great way to upskill your team while enjoying tax benefits.

Who Should Consider It?

Companies focused on hiring locally can reduce their staffing costs significantly while contributing to Saudi Arabia’s employment goals.

Tax Credits and Exemptions for Hiring and Training

To further incentivise the hiring and training of Saudi employees, the government provides tax credits on payroll and training expenses.

Investors can claim a 50% tax credit for ten years on salaries paid to Saudi employees and on expenses related to their training.

This tax credit is especially beneficial for companies firmly committed to employing Saudi nationals and developing their skills. Not only does it save on costs, but it also aligns with the government’s goal of creating more job opportunities for locals.

Who Should Consider It?

If your business plans to hire and train a large Saudi workforce, these credits substantially reduce costs over the long term.

Premium Residency Programme

For foreign investors seeking more freedom and flexibility, Saudi Arabia’s Premium Residency Programme is an option to explore. This allows foreign nationals to live, work, own property, and conduct business in Saudi Arabia without a local sponsor.

The programme offers either a one-year renewable residency for SAR 100,000 or permanent residency for SAR 800,000.

Benefits:

• The ability to recruit workers.
• Ownership of real estate and businesses.
• Near-equal rights with Saudi citizens in most areas.

Who Should Consider It?

High-net-worth individuals seeking long-term residency and investment freedom in Saudi Arabia will find this programme particularly advantageous.

Double Taxation Avoidance Agreements (DTAs)

Saudi Arabia has entered into Double Taxation Avoidance Agreements (DTAs) with various countries, which help prevent investors from being taxed on the same income twice.

These agreements can provide significant tax relief and stability, especially for foreign investors with ties to countries with DTAs with Saudi Arabia.

Who Should Consider It?

Foreign investors or companies based in DTA countries can benefit from these agreements, making their investments in Saudi Arabia even more tax-efficient.

A Thriving Investment Environment

Saudi Arabia’s diverse tax benefits and incentives reflect the country’s commitment to fostering a thriving investment environment.

By taking advantage of these opportunities, investors can significantly reduce costs and improve the profitability of their ventures. However, navigating the specifics can be complex.

That is why consulting with tax professionals and legal advisers is always a good idea to ensure you meet all requirements and get the most from available incentives.

Investing in Saudi Arabia can be rewarding and cost-effective with the right strategy.