Saudi Arabia 2024 Tax Developments – Introduction
As part of Saudi Arabia’s ongoing economic and structural reforms, and in alignment with the Saudi Vision 2030 program, several significant tax developments are anticipated in 2024.
These developments are expected to impact businesses operating within the Kingdom by modifying the current tax framework to better align with international practices and encourage investment.
Key Tax Developments for 2024
New Income Tax Draft Law
Announced by the Zakat, Tax and Customs Authority (ZATCA) on October 25, 2023, this draft law aims to overhaul the existing income tax system.
The new law is designed to enhance tax compliance and transparency, and align Saudi Arabia’s tax framework with international best practices.
The public consultation period ended on 25 December 2023, with further announcements expected soon.
New Zakat and Tax Procedures Draft Law
Similarly, ZATCA has introduced a draft for new Zakat and Tax Procedures Regulations aimed at unifying and regulating the procedures across Zakat and tax systems.
This includes stipulating the rights and obligations of ZATCA and taxpayers. Like the income tax draft law, the public consultation period for this draft ended on December 25, 2023.
Special Economic Zones (SEZs)
Announced in the previous year, four new SEZs have been established, offering multiple tax incentives to encourage business investments.
These incentives include a reduced Corporate Income Tax (CIT) rate of 5% for up to 20 years, 0% withholding tax on profit repatriation, and various customs and VAT benefits.
Formal guidelines are expected to be released soon.
Additional Considerations for 2024
Executive Regulations for Zakat
Effective from January 1, 2024, these regulations aim to enhance the legislative framework for Zakat and clarify payer obligations.
Special Integrated Logistics Zone (SILZ)
Established businesses in the SILZ can enjoy extensive tax incentives, including a 0% CIT rate for 50 years on eligible income. This zone particularly benefits logistics sector businesses.
Regional Headquarters Initiative
Starting January 1, 2024, multinational companies dealing with Saudi authorities or government bodies must establish their Regional Headquarters (RHQ) in Saudi Arabia. This initiative offers a 30-year tax relief, including a 0% CIT rate on eligible activities.
Transfer Pricing for Zakat Payers
With the recent approval of amendments extending transfer pricing principles to Zakat payers, businesses are encouraged to align with these new regulations as they took effect on January 1, 2024.
Tax Amnesty
ZATCA has extended its initiative to cancel fines and exempt penalties to June 30, 2024.
This aims to alleviate the financial burdens businesses may face due to delays in tax-related obligations stemming from the COVID-19 pandemic.
Strategic Implications
Businesses are advised to consider how these new regulations and incentives might interact with the BEPS 2.0 Pillar Two rules, and to evaluate their potential fiscal impacts carefully.
This analysis is particularly crucial for companies planning to take advantage of the tax incentives offered by the new SEZs, SILZ, and RHQ initiatives.
Conclusion
The upcoming tax developments in Saudi Arabia reflect the Kingdom’s efforts to modernize its tax system and foster a more inviting business environment as part of its broader economic diversification goals.
Businesses operating in or entering the Saudi market should prepare for these changes and seek professional advice to navigate the new tax landscape effectively.
Final thoughts
If you have any queries about Saudi Arabia 2024 Tax Developments, or Saudi tax matters in general, then please get in touch.