Saudi Arabia’s red-hot sands and towering skyscrapers are emerging as a popular destination for international entrepreneurs.
Its strategic geographical position, abundant natural resources, and the ambitious Vision 2030 plan position the Kingdom as a lucrative ground for business expansion or relocation.
This article delves into the various benefits and tax incentives that render Saudi Arabia an appealing choice for global business minds.
Business incentives to move to Saudi Arabia
Central to Saudi Arabia’s allure is its Vision 2030, a strategic framework aimed at reducing the Kingdom’s oil dependency, diversifying its economy, and enhancing service sectors.
This opens numerous possibilities in sectors such as healthcare, education, infrastructure, leisure, and tourism.
The Government’s dedication to economic reform, particularly post its World Trade Organization (WTO) membership, strengthens the business landscape.
The Government’s drive to bolster the private sector as part of its diversification strategy creates numerous opportunities for international enterprises.
Industries like power generation, telecommunications, natural gas, and petrochemicals are particularly promising.
The significant presence of around 10 million foreign workers, predominantly in the oil and service industries, underscores the value of international expertise in the Saudi economy.
Geographically, Saudi Arabia’s location is also advantageous for businesses, offering easy access to major economic centres including Dubai, Qatar, and Kuwait.
In comparison to many of its neighbours, Saudi Arabia boasts a very stable Government under King Salman and his son, Mohammed bin Salman – who the youth call, simply, ‘MBS’.
Tax incentives and double taxation treaties
Saudi Arabia’s appeal is significantly enhanced by its favourable tax regime.
The Government, aiming to diversify its revenue streams beyond oil, has crafted tax policies to foster a conducive business environment.
This includes leveraging double taxation agreements (DTAs) to prevent income from being taxed in two jurisdictions.
With over 50 DTAs, covering countries like the United Kingdom, China, Switzerland, and Japan, Saudi Arabia assures foreign companies of manageable tax obligations.
The ongoing expansion of DTAs to more trading partners further elevates the Kingdom’s attractiveness to a global audience.
For residents of countries under Saudi Arabia’s DTAs, the benefit is that taxation occurs in only one jurisdiction, often under more favourable terms than would be offered back home.
Moreover, with certain exceptions, there are no personal Income Tax liabilities within the Kingdom.
The Corporate Tax rate, (at a competitive 20 per cent), further underscores the financial advantages of establishing a business in Saudi Arabia.
Beyond the DTAs and competitive Corporate Tax rates, Saudi Arabia offers additional tax-related advantages.
For instance, there is no Value Added Tax (VAT) on exports, making it an ideal base for businesses looking to trade internationally.
The recent introduction of VAT at a relatively low rate of 5 per cent for other goods and services is also noteworthy, as it remains lower than in many other countries.
Moreover, the Kingdom has no Inheritance Tax or Capital Gains Tax, which can be particularly beneficial for family-owned businesses and long-term investments.
These tax benefits, combined with the strategic economic reforms under Vision 2030, present a compelling case for businesses considering expansion into the Middle East.
How to navigate the business landscape
While the tax incentives are a significant draw, navigating the business landscape in Saudi Arabia requires an understanding of local laws and regulations.
The Government has been working to streamline business processes and regulations to facilitate easier market entry for foreign companies.
This includes simplifying the process of obtaining business licenses and offering support through various Government agencies dedicated to foreign investment.
The Saudi Arabian General Investment Authority (SAGIA) offers comprehensive services to assist foreign investors, from providing detailed information about the investment climate to helping with the establishment of businesses in the Kingdom.
Additionally, the Government’s focus on digital transformation has led to more efficient and transparent business practices.
Saudi Arabia’s strategic location, combined with its Vision 2030 objectives, robust tax incentives, and ongoing efforts to simplify business operations, make it an increasingly attractive destination for international entrepreneurs and businesses.
As the Kingdom continues to diversify its economy and open new sectors for investment, the opportunities for growth and success in this dynamic market are substantial.
For businesses looking to expand their global footprint, Saudi Arabia offers a unique and promising landscape.
Reanda UK is a subsidiary of leading independent accountancy firm Grunberg & Co Limited. Our aim is to help businesses and individuals to navigate the UK’s world-renowned business and tax infrastructure, and to support them with their international ambitions. To find out how we can help you, please contact us.