A. Wherever contained herein, the following terms and expressions shall have the meanings ascribed thereto unless the context otherwise requires.

B. Notwithstanding Paragraph (A) of this Article, any term or expression used in these Tax Rules which is not defined in this Article shall have the same definition provided in the Royal Decree and in the relevant Tax Laws.

1. These Tax Rules are for the purpose of prescribing the provisions related to Tax Incentives available for Regional Headquarters.

2. Subject to the conditions and limitations of these Tax Rules, the tax treatments including the Tax Incentives pursuant to these Tax Rules shall only be applicable to the Regional Headquarters.

3. Regional Headquarters may not be exempted or excluded from the Tax and Zakat Laws in the Kingdom except in cases provided for by Tax Incentives by Royal Decree as set forth in these Tax Rules.

Regional headquarters that meet the qualification criteria issued by The Governing Body shall be granted the following Tax Incentives.

1. Zero percent (0%) income tax on the Eligible Income.

2. Zero percent (0%) withholding tax on payments made by the Regional Headquarters to non-residents, with respect to the following:

   1. Dividends.

   2. Payments to related persons.

   3. Payments to unrelated persons for services that are necessary for the Regional Headquarters activities.

C. The withholding tax exemption pursuant to Paragraph (B) of this Article shall not apply in any of the following cases.

1. If the payment made by the Regional Headquarters relates to Non-eligible Activities.

2. Cases of avoidance prescribed in Article 12 of these Tax Rules.

D. The tax treatment applicable to the Regional Headquarters' income from Non-eligible Activities, shall be determined in accordance with the relevant Tax Laws of the Kingdom.

E. The provisions of valid agreements in the Kingdom and international obligations shall apply to the Regional Headquarters.

1. Tax incentives, as set forth in Article 3 of these Rules shall be applied to the Regional Headquarters eligible activities by The Governing Body for a period of thirty (30) years subject to renewal.

2. The period for granting Tax Incentives to the Regional Headquarters starts from the date of obtaining the license of the Regional Headquarters to carry out Eligible Activities to the date of any of the following:

   1. The 30-year period lapses.

   2. The Entity ceases to be regional headquarters for any reason.

Notwithstanding the eligibility criteria required by The Governing Body, Regional Headquarters must satisfy all of the following Economic Substance Requirements:

1. The Regional Headquarters must hold a valid license issued by The Governing Body, and shall only carry out activities that are within the scope of such license.

2. The Regional Headquarters must have adequate premises in the Kingdom that are suitable for its business activities.

3. The activities of the Regional Headquarters shall be directed and managed in the Kingdom, which include holding board meetings for the Regional Headquarters where strategic decisions shall be made.

4. The Regional Headquarters must incur operational expenditures in the Kingdom, which shall be commensurate with the activities of the regional headquarters.

5. The Regional Headquarters must generate revenues from the eligible activities in the Kingdom

6. The Regional Headquarters must have at least one director that is resident in the Kingdom.

7. The Regional Headquarters must employ an adequate number of full-time employees in a tax year, in proportion to the level of activity carried out by the Regional Headquarters.

8. The Regional Headquarters' employees must have the requisite qualifications and skills necessary to execute their duties and fulfil their responsibilities.

Regional Headquarters shall register with the Authority in accordance with the procedures prescribed in the relevant Tax and Zakat Laws

1. Regional Headquarters shall file tax and Zakat returns in accordance with the provisions of the relevant Tax and Zakat Laws.

2. Regional Headquarters must file an annual report, using the prescribed form provided by the Authority and according to the procedures specified by it, for the purpose of verifying compliance with the Economic Substance Requirements

1. For the duration of the Regional Headquarters license, the Regional Headquarters must prepare and maintain accounts for each Tax Year, including the partial Tax Year commencing on the date of obtaining the Regional Headquarters license and ending on the last day of that entity's Tax Year.

2. If at any time during a Tax Year the Regional Headquarters carries on Non-eligible Activities, that Regional Headquarters must maintain separate accounts for the Non-eligible Activities. The allocation of income to Eligible Activities shall take place as if these are independent from the other activities of the Regional Headquarters.

1. The Authority shall be entitled to carry out all its powers for the administration under the Law, including obtaining information and conducting examination activities in respect of Regional Headquarters in the Kingdom, in accordance with the procedures and provisions outlined in the relevant Tax and Zakat Laws.

2. The Authority monitors and verifies the fulfilment of the Economic Substance Requirements by Regional Headquarters yearly.

3. Regional Headquarters may submit a request for a ruling to the Tax Authority to provide an interpretation or clarification on taxation matters related to these Tax Rules and Tax Laws in the Kingdom.

1. In case of non-compliance with the Tax and Zakat Laws requirements, penalties outlined in the relevant Tax and Zakat laws shall be applicable to the Regional Headquarters.

2. Regional Headquarters has the right to object to the assessments, reassessments and penalties raised by the Authority, and it has the right to appeal and file a grievance in the ways stipulated in the relevant Tax and Zakat Laws.

Notwithstanding any penalties stipulated in the Tax laws, in the event that the Regional Headquarter does not fulfil any of the Economic Substance Requirements during the duration of its license, the Authority shall notify the Regional Headquarters of the violation attributed thereto and grant it a corrective period of ninety (90) days from the notice date and in the event of failure to remedy, the following shall apply:

1. Impose a SAR 100,000 fine provided that the violation is remedied within ninety (90) days from the date of imposing the fine.

2. In the event of failure to remedy the violation within ninety (90) days from imposing the fine specified in paragraph (1) above, or in the event that the Regional Headquarter repeats the same violation for which the fine in paragraph (1) above within (3) years from the date from imposing the fine, a SAR 400,000 fine is imposed provided that the violation is remedied within ninety (90) days from the date of imposing the fine.

3. In the event that the violation persists after the fine prescribed in paragraph (2) of this Article have been imposed, the Authority in coordination with The Governing Body may consider suspension of Tax Incentives.

1. The Regional Headquarters must comply with the Transfer Pricing Bylaws issued by the General Authority for Zakat and Tax Board -previously- Resolution No (6-1-19) dated 25/05/1440 H corresponding to 31/01/2019 G and any amendments to it, and must ensure that all transactions with its related persons are conducted at arm's length.

2. The Authority in coordination with The Governing Body may revoke the Tax Incentives for the Regional Headquarters in any of the following cases:

   1. The Regional Headquarters intentionally submitted false or misleading information or declarations to the Authority.

   2. The Regional Headquarters has intentionally misapplied these Tax Rules or misused Tax Incentives to take advantage or assist others take advantage from the Tax Incentives in relation to non-eligible activities, and activities not licensed by The Governing Body.

   3. The Regional Headquarters provided payments to non-residents on behalf of persons that do not qualify for Tax Incentives.

C. In the event that the Tax Incentives are revoked in accordance with paragraph (B) of this Article, the Authority shall issue the tax assessment and apply the applicable penalties in accordance with the Tax Laws in relation to the tax years in which the cases mentioned in paragraph (B) of this Article are fulfilled.

D. The provisions of Anti-Avoidance and Tax evasion prescribed in the relevant Tax Laws shall apply to the Regional Headquarters.

For the purposes of all international treaties, conventions, or other agreements to which the Kingdom is a party, the Regional Headquarters are deemed residents of the Kingdom to the extent they satisfy the residency requirements in the Income Tax Law.

Regional Headquarters remains subject to all Tax and Zakat Laws, unless the Royal Decree explicitly prescribe otherwise

The Authority shall issue detailed guidance or explanatory material with respect to the provisions of these Tax Rules.

These rules shall enter into force after publication in the Official Gazette.