The first few months after establishing a foreign company in Saudi Arabia involve a particularly concentrated period of compliance. Requirements are spread across different government systems and some only become relevant as the business starts operating, which makes it easy for individual steps to be dealt with later than intended.

The first 90 days after company incorporation are an important period for getting those arrangements in place before they begin to affect the company’s day-to-day operations.

Complete the tax registration 

Following commercial registration with the Ministry of Commerce, ZATCA generates a Tax Identification Number for the new entity. Foreign establishments then need to complete their corporate income tax registration with ZATCA, so the tax account should be checked rather than assuming the initial registration has dealt with everything. Companies should complete corporate tax registration within 60 days of registering with MOC to adhere to tax deadlines.

VAT follows a different timetable because registration depends on the circumstances of the business. Where registration is required, it needs to be considered alongside when the company expects to start making taxable supplies. Mandatory VAT registration is required once the business taxable turnover exceeds SAR 375,000 while voluntary registration is available to businesses between the SAR 187,500 to SAR 375,00 threshold.

This is often where the commercial timetable starts to meet the compliance calendar. A new Saudi operation may be preparing its first customer contracts and invoices while its finance processes are still being established. If VAT applies, the accounting system needs to be ready to deal with it from the start.

National address

National address is required to be registered with Saudi Post (SPL). The national address must be tied to the company’s Commercial Registration and mandatory for key portals registration and bank opening documentation.

Corporate bank account

Although there is no specific legal requirement that newly incorporated companies must open a corporate bank account within a set number of days, in practice, this should be treated as an immediate post-incorporation task as the company cannot effectively operate without one. The corporate bank account is needed to inject share capital, receive customer payments, pay staff salaries and pay ZATCA and government portal fees. The company General Manager should have already obtained their Iqama card and must be physically present in the country to open the corporate bank account.

Prepare human resources for the first hires

Recruitment can begin quickly once a foreign company is established, particularly where staff are being transferred into Saudi Arabia or the business needs a local team before it can start operating fully.

It is important to note that after the companies General Manager, the first hire should be a Saudi National employee.

As people join, employment contracts are documented through Qiwa and the applicable GOSI requirements come into play. These systems are connected to the company’s wider employment position, so the employee records created during the first hires need to be accurate from the beginning.

There is an additional point for companies recruiting in 2026. Since 15 April, electronically documented employment contracts on Qiwa have been used in calculating Saudisation percentages under the Nitaqat programme.

That gives contract documentation a direct connection to the company’s Saudisation position. Nitaqat status can in turn affect access to employment services, including the ability to obtain work visas, which is particularly relevant for foreign companies planning to bring employees into the Kingdom.

The hiring plan therefore needs to take account of the company’s Saudisation position as the team develops. Waiting until an expatriate employee needs a visa can leave much less room to deal with an issue in the workforce structure.

Additionally, employers are required to obtain medical insurance for all company employees by a locally approved provider as Iqamas and residencies can’t be issued without it.

Get payroll compliance right from the beginning 

The first employees also bring payroll and social insurance requirements into the company’s normal monthly administration.

General Organization for Social Insurance (GOSI) records need to reflect the employees working for the company, and payroll needs to be operated in accordance with the requirements applying to the workforce. Wage Protection System (WPS) requirements may also apply as the company begins paying salaries.

Responsibility also needs to be clear internally. Whether payroll is handled by the Saudi company, a local provider or as part of a wider group process, the Saudi records still need to correspond with what is happening locally.

Make sure the ownership record is current 

Foreign companies should also check the beneficial ownership information held for the new Saudi entity. Saudi Arabia’s Beneficial Ownership Rules, introduced at the end of 2025, require companies to identify their ultimate beneficial owners and maintain a dedicated record of that information.

This can require some work for international groups. The immediate shareholder of the Saudi company may itself be another company, with further entities sitting between it and the individuals who ultimately own or control the structure.

The rules generally look first at direct or indirect ownership of at least 25%. Where this does not identify the beneficial owner, other forms of control are considered.

The information used during establishment should therefore be supported by the wider ownership and corporate records and kept current if the group structure changes.

Be ready before the first invoice 

A company preparing to bill its first Saudi customer should already know how the transaction will be treated for VAT and how the invoice will be generated.

This can require changes to systems already used elsewhere in an international group. An accounting platform that works for the parent company does not automatically produce invoices that meet Saudi requirements, although in many cases the existing system can be configured appropriately.

Where the entity falls within the Saudi e-invoicing requirements, invoices need to be generated through a compliant electronic solution. Companies notified that they fall within a Phase Two wave will also need to integrate their solution with ZATCA’s Fatoora platform by the applicable deadline.

Sorting this out before invoicing begins avoids having the finance team redesign the process once transactions are already being recorded.

What should be in place after 90 days? 

There is no single Saudi rule requiring every foreign company to complete the same set of actions within 90 days. The timing will depend on when the company starts trading, whether it has employees and which requirements apply to its business activities.

Some businesses will also have sector-specific licences or regulatory requirements that sit outside the general post-setup process.

Using the first 90 days to get these requirements working alongside the business can prevent routine post incorporation compliance issues from becoming obstacles as the Saudi operation develops.

Sovereign PPG supports clients with company formation, company registration and operational readiness in Saudi Arabia. We provide a full suite of services including hiring employees and ongoing compliance requirements around accounting, bookkeeping and government portals maintenance.

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The Ministry of Commerce in Saudi Arabia has introduced penalties to companies that fail to disclose their UBO information or fail to submit the required annual confirmation. The UBO declaration and the initial Beneficial Ownership rules were introduced as a requirement in Saudi Arabia in 2025. Subsequent changes were introduced with specific penalties for non-compliance in February 2026.

Where in the UAE, UBO disclosure is a mandatory requirement as part of the incorporation process, companies generally cannot complete the incorporation process without having completed the UBO filing.

In Saudi Arabia we have found that the distinction here is that while companies are required to file the UBO information at the time of incorporation, the company must also confirm or make updates to the UBO information at the time of the Commercial Registration (CR) renewal. It is important to note that UBO registration and annual confirmations have no charge but failing to submit this information on time can result in hefty fines for the business.

Violations are penalized based on number of offenses. For example, the first violation means the company will receive a warning and be given 30 days to rectify the non-compliance. However, the company ignores this request, and no changes are made within the 30-day period, the company will be charged the following penalty based on the company’s relevant share capital.

1. Below SAR 500K – SAR 4K penalty
2. SAR 500K – 2.5 million – SAR 20K penalty
3. Above SAR 2.5 – 5 million – SAR 40K penalty
4. Above SAR 5 million – SAR 80K penalty

For repeated violations within a one-year period from the previous violation, the previous fine shall be doubled up to a maximum of SAR 500K penalty amount.

For existing companies in Saudi Arabia that were incorporated before the UBO regulations or penalties for non-compliance were introduced, check that you have completed the required filing. If not complete, your business could be subjected to fines. For new companies entering the Saudi market, this notice is to bring you awareness that UBO filing is now a mandatory part of the incorporation process.

All companies in Saudi Arabia must ensure that any changes to ownership structures or parent company information are reflected in their local UBO records.

For more information of penalties, visit the Ministry of Commerce website:  

وزير التجارة يصدر قرارًا بشأن مخالفة عدم الإفصاح عن بيانات المستفيد الحقيقي

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Saudi Arabia’s tax system has developed considerably over the past decade as the Kingdom has introduced new taxes and modernised the way they are administered. Businesses now have a wider range of tax obligations than many investors initially expect, particularly when operating across borders or expanding into the Saudi market. Saudi Arabia has an extensive network of Double Taxation Agreements (DTAs) designed to prevent double taxation and reduce withholding taxes on cross-border payments. As of 2025/2026, the Kingdom has 60+ tax treaties in affect.

Unlike many jurisdictions, Saudi Arabia applies different tax regimes depending on the nature of the business, its ownership structure and the type of transaction involved. A single business may therefore deal with several different tax obligations during the course of a financial year, each with its own compliance requirements.

Saudi Arabia’s Tax System

The Saudi tax system is administered by the Zakat, Tax and Customs Authority (ZATCA), which oversees the collection of taxes and Zakat as well as broader tax compliance. One feature that often surprises foreign investors is the distinction between Corporate Income Tax and Zakat.

Corporate Tax generally applies to foreign companies operating in Saudi Arabia and to the foreign ownership portion of mixed-ownership businesses. Zakat is a separate obligation that applies to Saudi and GCC shareholders engaged in commercial activities. Where a company has both Saudi and foreign ownership, the two regimes can apply alongside one another according to the ownership percentages.

Another important point is that Saudi Arabia does not levy personal income tax on employment income. In Saudi Arabia, an individual is generally considered a tax resident if they have a permanent residence in the Kingdom and are present for at least 30 days in a tax year or are present for at least 183 days or more during a tax year. It is important to understand how this might apply to your obligations in your home country.

Instead, businesses are more likely to encounter Corporate Income Tax, Value Added Tax, Withholding Tax and, where relevant, other sector-specific taxes during the course of their operations.

Corporate Tax and Zakat

For many investors, one of the first questions is which regime will apply to their business.

Corporate Income Tax Law is generally charged at 20% of adjusted net profits attributable to foreign ownership, although some industries are subject to different rates under specific legislation. Zakat is calculated differently because it is based on the Zakat base rather than taxable income and profit. Mixed-ownership companies may therefore calculate both obligations as part of the same reporting cycle.

That position is not always fixed. Ownership structures can change over time as new investors join a business or existing shareholders dispose of their interests. Those changes may affect how the business is taxed, so keeping corporate and accounting records current becomes an important part of ongoing compliance.

Value Added Tax in Saudi Arabia

Value Added Tax (VAT) applies to most goods and services supplied in Saudi Arabia and is currently charged at 15%. Businesses that meet the registration threshold of SAR 375,000 are required to register for VAT, issue compliant tax invoices and submit VAT returns within the prescribed deadlines.

Preparing the return is only one part of the process. The figures reported to ZATCA depend on accurate accounting records, supported by invoices that meet the Kingdom’s e-invoicing requirements under the Fatoora system. As businesses grow, maintaining those records consistently often becomes just as important as preparing the return itself.

Withholding Tax

Paying overseas suppliers or service providers can bring another obligation into the picture. Businesses making certain payments to non-residents may also have responsibilities under the Saudi Withholding Tax regime. The responsibility for deducting and remitting the tax rests with the Saudi payer rather than the overseas recipient.

The applicable rate depends on the nature of the payment, which means accurate classification is important. Saudi Arabia has also entered into numerous double taxation treaties that may reduce the amount of tax payable where the relevant conditions are satisfied. Applying treaty relief generally requires supporting documentation, including evidence of the recipient’s tax residence.

Tax compliance throughout the year

It’s easy to think about tax as an annual exercise, but most compliance takes place throughout the year. Accounting records are updated as transactions take place. VAT returns are prepared at regular intervals (monthly or quarterly) and filed within 30 days after the end of the period. Payments to overseas suppliers may give rise to Withholding Tax, while year-end financial information forms the basis for Corporate Income Tax or Zakat calculations.

These obligations are closely connected because they rely on the same financial information. An error in the accounting records can affect more than one tax obligation, while complete and accurate records make it much easier to respond to questions from ZATCA or support a future audit.

How Sovereign can help

With over thirty-five years of experience supporting international businesses, Sovereign provides accounting and tax services for companies operating in Saudi Arabia and across the Middle East.

We help clients establish effective accounting processes, meet their ongoing tax obligations and prepare the information required for Saudi Arabia Income Tax, VAT, Withholding Tax and Zakat compliance including registering for the required tax and audit portals (ZATCA) and tax filing requirements that Saudi Arabia imposes. Our teams also work closely with auditors, the Saudi government, regulatory authorities, helping businesses maintain accurate records as their operations develop.

To find out more about our accounting and tax services, please contact your local Sovereign office.

The post What Businesses Need to Know About the Saudi Tax System appeared first on The Sovereign Group.

Saudi Arabia is one of the most compelling jurisdictions in the Middle East and globally for technology‑driven and innovation‑led businesses. Across software, AI, information technology, fintech, cybersecurity, industrial manufacturing, and advanced services, international companies are increasingly choosing the Kingdom as a core operational hub.

What’s consistent across successful market entries is practical alignment with regulatory clarity, scale of opportunity, speed of execution, and strong demand from both government and private-sector buyers.

Foreign investors can set up their business by first obtaining a Ministry of Investment Saudi Arabia (MISA) investment license and then proceeding with full commercial registration from the Ministry of Commerce. MISA and the Ministry are very encouraging of international investors aligning their business activities with the digital economy, investing heavily in infrastructure to support digital transformation.

The post Saudi Arabia Digital Transformation: How Tech, AI and Advanced Industries Are Succeeding appeared first on The Sovereign Group.

The Saudi government approved a landmark new law regulating real estate ownership by non-Saudis, which was published on 25 July in the official gazette. This Law of Real Estate Ownership by Non-Saudis will come into force 180 days after publication, anticipated in January 2026.

The law repeals the previous 2000 Law of Real Estate Ownership and Investment by Non-Saudis and introduces a structured framework allowing non-Saudi individuals and entities, whether residents or non-residents, to own or acquire real estate rights within specially designated zones across the Kingdom.

This reform aligns closely with Saudi Arabia’s Vision 2030 goals, which seeks to attract foreign capital, expand the real estate market and promote urban development, all while maintaining regulatory safeguards.

Under the new framework, ‘non-Saudi’ is defined broadly to include anyone without Saudi citizenship, as well as foreign legal entities. The Council of Ministers retains flexibility to expand this definition to ensure that various types of foreign investors can be accommodated.

The Council of Ministers, in coordination with the Real Estate General Authority and other bodies, will identify specific geographic zones where non-Saudis are permitted to acquire property or property rights. These zones are expected to include high-demand urban areas, such as in cities like Riyadh and Jeddah, but not sensitive cities and regions like Makkah and Madinah. Outside the approved zones, foreign ownership will generally not be allowed.

Foreign investors may obtain a range of real estate rights under the new law, including full ownership of property, as well as lesser rights such as long-term leaseholds, usufruct rights, easements and similar interests. The Council of Ministers may impose regulatory conditions and limits.

Foreign residents will be permitted to own properties within the designated zones, as well as one residential property in the Kingdom for personal use, outside of the designated zones. Foreign-owned business entities – listed and unlisted foreign companies, licensed investment funds and special-purpose vehicles – will be permitted to acquire real estate necessary for their business activities and to house their employees, subject to Saudi Capital Market Authority regulations.

All real estate purchases or rights acquisitions by non-Saudis will have to be registered with the competent authority and recorded in the national Real Estate Registry to be legally effective. The new law also authorises the Real Estate General Authority to levy a real estate transfer fee on disposals of property by non-Saudis, up to a maximum of 5% of the property’s value.

Companies and investors should monitor the detailed Implementing Regulations that will set out the procedures for registration, fee mechanisms, the boundaries of allowed zones and conditions on various property rights. These will be issued within 180 days of the law’s publication.

The post Saudi Arabia’s New Rules on Real Estate Ownership for Non-Saudis appeared first on The Sovereign Group.

This digital transformation strategy forms part of the Kingdom’s Vision 2030 to cut paperwork, speed up processing and create a more efficient setting for business. It is the government’s aim to become one of the top five digital governments worldwide.

For businesses, portals such as GOSI, ZATCA, Mudad and Qiwa, are now the primary means of meeting legal and regulatory requirements. The following sections outline their respective functions, relevance to day-to-day operations and place within Saudi Arabia’s broader reform agenda.

How portals streamline business operations

For most businesses, these portals have replaced in-person visits to multiple ministries with a single secure login. Employers can now issue work permits, update contracts and pay social insurance contributions without leaving the office. Tax returns are filed online, fees are settled instantly, and approvals often arrive in hours rather than weeks.

By centralising and digitalising processes, these platforms have cut out layers of bureaucracy that once slowed operations, while also providing businesses with a clear and documented pathway to meet their labour, tax and regulatory obligations.

Key portals overview

Each platform serves a distinct purpose within this wider digital framework, but together they cover almost every core compliance requirement that a company will encounter in Saudi Arabia.

GOSI
The ‘General Organisation for Social Insurance’ portal is where employers must register staff for Saudi Arabia’s social security system. It handles the calculation of contributions for Saudi and expatriate employees, tracks payments and offers reporting functions for workforce management.

Information submitted here is also checked against other government databases, making it an important part of broader compliance oversight. HR teams need to keep GOSI entries accurate and up to date because errors can delay end-of-service settlements or result in penalties.

ZATCA
The ‘Zakat, Tax and Customs Authority’ portal manages filings and payments for corporate tax, VAT and zakat, as well as customs procedures. Companies must use it to register, submit returns, pay amounts due and oversee import or export documentation through a single account.

Its integration with customs and logistics systems enables real-time verification of declarations, which helps reduce clearance times at borders and improves the accuracy of tax and duty calculations.

Mudad
Mudad is a digital payroll and compliance platform developed by the Ministry of Human Resources and Social Development (MHRSD) to manage wage protection obligations across private companies. It was specifically designed to support small and medium-sized enterprises (SMEs), which form a large share of the Saudi economy.

The platform brings together payroll functions of businesses with requirements from the MHRSD, the GOSI and other financial institutions. Mudad’s payroll system provides automated calculations and integrates directly with Saudi banking channels to ensure that salaries are transferred securely to employee accounts.

It also handles batch processing for multiple employee payments and sends automated reminders and reporting for wage file submissions. By moving payroll reporting into a centralised and auditable format, Mudad has replaced manual submissions for many employers and offers a clearer process for both companies and regulators.

Qiwa
Qiwa provides a single point of access for employment services, from contract registration to Saudisation tracking and workforce approvals. The platform offers a range of services that benefit both businesses and employees, including employment contract authentication, issuance and renewal of work permits and visas, and occupation changes. It also allows businesses to manage records in one place. Previously these procedures required visits to a number of different labour offices. Qiwa is linked to Saudisation compliance indicators, so the quality of the information entered has a direct impact on an organisation’s hiring permissions and work permit renewals.

Positioning of portals in the compliance landscape

Each portal covers its own regulatory function, but the systems are connected. Records entered in Qiwa link to social insurance data in GOSI. Payroll information sent through Mudad is used in compliance checks by the MHRSD. Tax and zakat submissions in ZATCA can be cross-referenced with customs and corporate registration records.

Most filings, payments and approvals are only accepted through their respective portals, and deadlines are enforced automatically. The systems are also tied to other government databases, allowing authorities to cross-check information across ministries. For companies, this means that keeping accurate and up to date records in one portal may have direct implications for compliance in another.

Benefits and challenges of integration

Connecting the portals builds a single, consistent record that runs across several government systems. This cuts duplication because once data is entered it can be accessed by other platforms. It also boosts accuracy, with cross-checks between systems highlighting errors before they create compliance problems. Linked systems can also speed up processes such as onboarding staff, making salary payments and filing tax returns.

However, integration can also bring challenges. If data is entered incorrectly in one portal, the error may spread to others, affecting multiple compliance areas. Smaller companies without dedicated HR or finance teams may find the range of interconnected requirements complex to manage. Technical updates or downtime in one system can temporarily disrupt related processes elsewhere, so it’s important for businesses to plan for contingencies and maintain regular oversight of their records.

How can Sovereign PPG help?

Managing Saudi Arabia’s government portals effectively is now essential for both compliance and operational efficiency. Every step, from entering data to meeting filing deadlines, can affect more than one connected platform. Companies that know the processes, keep accurate records and plan for points of integration are less likely to face delays, penalties, or disruptions.

Sovereign PPG can help businesses navigate this environment by ensuring filings are accurate, deadlines are met, and portal activity aligns with broader compliance needs. To discuss your Saudi operations or to explore support options across the UAE, Bahrain, Oman or Qatar, contact Sovereign PPG at sovppg@SovereignGroup.com, call +971 (0)4 456 1761 (Dubai) or +971 (0)2 448 5120 (Abu Dhabi), or complete the enquiry form below.

The post The importance of government portals in Saudi Arabia appeared first on The Sovereign Group.

Saudi Arabia offers a range of visa categories to suit various employment needs:

• Employment Visa (Iqama): this is the primary visa required for long-term work in Saudi Arabia. It grants the right to live and work in the country for a period of one to two years, depending on the employment contract. Employer sponsorship is required, and the visa is renewed annually to match the terms of the employment contract.
• Business Visit Visa: this visa is suitable for short business trips, such as visits to attend meetings or conferences. It is valid for up to 90 days but does not permit full-time employment.
• Temporary Work Visa: this visa is suitable for short-term projects and permits multiple entries within a 12-month period. It is valid for up to 90 days and allows employers to sponsor foreign workers on a project basis.
• Premium Residency (Saudi Green Card): launched in 2019, the Saudi Premium Residency programme allows expatriates to live, work and own property in Saudi Arabia without a sponsor. It offers two distinct options – permanent residency for a one-time fee or renewable residency for an annual fee.

Who Is Eligible for a Saudi Work Visa and What Are the Requirements?

For companies looking to employ foreign professionals on a long-term basis, the Employment Visa (Iqama) is the primary route. It involves the following key requirements:

• Sponsorship – Only a registered Saudi employer can initiate the work visa application on behalf of the foreign employee.
• Employment Contract – a signed contract between the registered Saudi employer and the employee is required, setting out the terms of employment. This must be certified by relevant Saudi authorities.
• Educational and professional qualifications – certified copies of academic and professional credentials must be submitted and authenticated by the Saudi Arabian Cultural Mission.
• Medical examination – a licensed physician must provide a report confirming the absence of contagious diseases, necessary for visa approval.
• Police clearance – a recent police report certifying a clear criminal record.

How Do You Apply for a Saudi Work Visa?

The process involves collaboration between the employer and employee and the following steps:

1. Employer Registration – the first step is for the Saudi employer to register with the Ministry of Interior and open an immigration file. This step formally establishes the employer’s ability to sponsor foreign employees.
2. Applying for the Work Visa – once registration is complete, the employer must submit a Work Visa application to the Ministry of Human Resources and Social Development (HRSD). This application should include all necessary supporting documents to ensure that the Ministry has everything needed for swift review.
3. Receiving Visa authorisation – When the HRSD approves the application, it will notify the Ministry of Foreign Affairs, which will issue a Visa Authorisation Number to allow the prospective employee to move forward with the application. This typically takes around two weeks.
4. Employee’s Application Submission – using the Visa Authorisation Number, the prospective employee is then required to submit a visa application to the Saudi embassy or consulate in their home country, together with any required documents to complete their file.
5. Issuance of the Work Visa – providing that all the required documentation is in order, the embassy will issue the visa, typically within one to three weeks. At this point, the employee is officially approved to enter Saudi Arabia and begin their work journey.
6. Entering and Applying for the Iqama – the final step is for the employer to apply for a residence permit (Iqama) within 90 days of the employee’s arrival in Saudi Arabia. The Iqama serves as the primary ID in Saudi Arabia and is essential for daily activities, from opening a bank account to verifying legal status.

To ensure a smooth process, employers should keep thorough up-to-date records of all visa-related documents and monitor visa and Iqama expiration dates to avoid costly lapses. For employees who need to travel outside Saudi Arabia, securing an Exit/Re-Entry Permit from the Ministry of Interior in advance –typically a one-week process – is essential for avoiding any disruptions.

How Much Does a Saudi Work Visa Cost?

The cost of a Saudi work visa can vary based on several factors, including the type of employment, the length of stay and the employee’s nationality. In general, Saudi employers are expected to cover the costs associated with their employees’ work visas and residence permits.

The fees vary depending on the company’s national workforce percentage:

• Companies employing 50% or more Saudi nationals – the total cost of a Work Visa and Residence Permit will be around SAR7,200 (c. USD2,000), which includes:
  • Iqama (Residence Permit) SAR750
  • Work Permit SAR6,000
  • Medical Insurance SAR 450
• Companies employing 50% or more non-Saudi nationals – the total cost of a Work Visa and Residence Permit will be around SAR8,400 because the Work Visa fee increases to SAR7,200, while Iqama and medical insurance fees remain the same.

How can Sovereign PPG help?

With extensive knowledge of the Saudi market and strong connections with local authorities, Sovereign PPG can streamline the Work Visa and Iqama application process, ensuring compliance with all labour and immigration requirements. Whether you need assistance with obtaining Work Visas, managing employee sponsorship or handling immigration approvals for your team in Saudi Arabia, we are here to help.

The post How to Apply for a Saudi Work Visa appeared first on The Sovereign Group.

Whether you’re new to the market or looking to stay ahead of your obligations, this guide breaks down UAE taxation into its essentials, giving you a clear understanding of the main taxes and providing the insight you need to keep your business running smoothly and compliantly.

Overview of Dubai’s Tax Framework

Corporate Tax

Corporate tax (CT) became effective for financial years starting on or after 1 June 2023. It applies at a standard rate of 9% on taxable profits above AED375,000. Businesses with taxable profits below this threshold are taxed at 0%.

This regime aligns the UAE with global practices, ensuring compliance with international frameworks like the OECD’s Base Erosion and Profit Shifting (BEPS) initiative, but it also offers one of the lowest corporate tax rates globally.

While most companies in the UAE fall under this regime, there are notable exemptions:

• Businesses engaged in the extraction of natural resources, which remain subject to emirate-level taxation.
• Qualifying Free Zone entities that meet specific conditions, such as not conducting business with the UAE mainland, may also benefit from a 0% rate on qualifying income.
• Certain government and public benefit organisations are exempt entirely.

Value Added Tax (VAT)

Introduced in 2018, VAT applies at a standard rate of 5% on most goods and services in the UAE. Unlike many jurisdictions, VAT compliance is straightforward, with businesses required to register if their annual taxable supplies exceed AED375,000. Voluntary registration is also permitted for businesses generating AED187,500 or more.

Key transactions subject to VAT include:

• Goods sold and services provided within the UAE.
• Imports of goods into the UAE.
• Certain services deemed consumed within the UAE, such as those provided to non-residents in specific cases.

Free Zones add a layer of complexity to VAT, with designated zones treated as outside the UAE for VAT purposes in certain scenarios. Transactions within these zones may be VAT-free, but businesses must still register and file returns if thresholds are met.

Other Taxes

Dubai’s tax framework remains business-friendly by excluding several taxes commonly seen elsewhere:

• No personal income tax: Salaries, dividends and other personal earnings are entirely tax-free, a factor that continues to attract talent from around the world.
• No capital gains tax: Gains on investments, real estate or securities are not subject to taxation, making Dubai a preferred choice for investors.
• No withholding taxes: Payments such as dividends, interest or royalties made to foreign entities are not taxed, ensuring smooth cross-border transactions.

Additionally, Dubai imposes customs duties, typically at a rate of 5%, on imported goods. Specific categories, such as alcohol and tobacco, carry higher rates. Excise taxes are also in place for products like sugary drinks, energy drinks and tobacco to encourage healthier consumption.

Key Tax Obligations for Businesses in Dubai

Registration and compliance

All businesses in Dubai must register with the Federal Tax Authority (FTA) for corporate tax, but only those with annual taxable profits exceeding AED375,000 are subject to the 9% tax rate. Registration must be completed through the FTA portal before the applicable deadline for the company’s financial year.

For VAT, registration applies to businesses with an annual turnover exceeding AED375,000, while those earning above AED187,500 but below AED375,000 have the option to register voluntarily.

Corporate tax returns must be filed within nine months of the end of the financial year, while VAT returns are typically due either monthly or quarterly, depending on the business’s turnover. Missing deadlines can result in significant penalties, starting from AED1,000 for initial delays and escalating for repeated offences.

Reporting requirements

Maintaining detailed and accurate records of income, expenses and taxable transactions is essential for compliance. For VAT, businesses must submit returns that clearly outline input VAT (on purchases) and output VAT (on sales), ensuring proper reconciliation. Corporate tax filings require detailed financial statements that are prepared in line with international accounting standards, supported by evidence of all deductible expenses and applicable exemptions.

Large businesses file VAT returns monthly, while smaller entities generally follow a quarterly schedule. Ensuring compliance with these reporting requirements minimises the risk of audits and financial penalties, which can disrupt operations and damage reputation.

Common mistakes in UAE corporate tax filings

Despite these clear regulations, businesses in the UAE often stumble over the details which can lead to costly errors. Typically, these might include:

• Inaccurate records: incomplete or poorly maintained records lead to tax miscalculations, audits and penalties. Keep detailed documentation, including invoices and receipts, and store them for the required five years to stay audit ready.
• Expense misclassification: misclassifying expenses – such as entertainment or interest, which have deductibility limits – can inflate taxable income. Ensure that you categorise costs accurately and claim only business-related expenses to avoid any issues.
• Missed deadlines: late registration or filing comes with strict penalties. Register with the FTA as soon as you qualify and use reminders or software to track deadlines.
• Incorrect tax calculations: misjudging tax liabilities often stems from misunderstanding deductions or applying the wrong tax rates. Regular reviews and expert advice can prevent costly errors.
• Overlooked tax incentives: many businesses miss out on tax benefits, such as small business relief or Free Zone exemptions. Stay informed to maximise all potential savings.
• Related-party transactions: payments to directors or shareholders must follow the ‘arm’s length’ principle (i.e., for fair market value). Ensure pricing reflects market standards and maintain proper documentation to avoid disputes.

How can Sovereign PPG assist?

Sovereign PPG has both a deep understanding of UAE tax regulations and direct connections with government entities and Free Zone authorities. Having a trusted team to manage your accounting and bookkeeping requirements is essential. We ensure that client businesses stay compliant, handling everything from corporate tax registration to ongoing compliance and reporting.

If you need support with tax or VAT, or any other matter related to company set-up, restructuring, local partner or PRO support in Abu Dhabi, Dubai, the wider UAE, Oman, Qatar or the KSA, then please do get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi. Alternatively, email us at info@sovereigngroup.com or complete the contact form below. We will be delighted to assist you.

The post Understanding taxes in Dubai: a guide to the essentials appeared first on The Sovereign Group.

View our webinar below designed to provide you with the essential knowledge and practical guidance to navigate the region’s dynamic business landscape successfully and decide if the UAE, Qatar, Oman, Bahrain or Saudi Arabia is the right choice for your business.

• Overview of Middle East business setup
• Legal, regulatory, and economic factors shaping the region’s business and investment climate
• Overview of Taxes and Compliance requirements in each country and across the region
• Sectors ripe for growth and how to leverage them for your business success
• Strengths and challenges each jurisdiction faces
• Challenges and advice for Companies working in multiple GCC countries

The region has experienced a surge in new business. Should you be considering expansion? Absolutely.

International expansion involves unfamiliar legislation, regulations, and processes, as well as legal and tax considerations. Proper groundwork and execution are essential to gain and sustain competitive advantage and successfully manage growth.

Speakers:

James Swallow, Commercial Director – UAE & Oman

Nazar Musa, CEO – Qatar & Saudi Arabia

Anas Al Adawi, Sales Director – Bahrain

The post Webinar – Doing Business in the Middle East – Insights for Foreign Investors appeared first on The Sovereign Group.

In January 2021, Saudi Arabia implemented a significant new programme for multinational companies (MNCs) in the Kingdom, announcing that any MNC looking to win contracts with Saudi government entities would have first to establish a regional headquarters (RHQ) in the country.

The move was part of Saudi’s broader Vision 2030 plan, a long-term strategy to bolster the country’s fiscal position and diversify its economy away from dependence on oil. The strategy provides international firms with the opportunity to invest in the country, particularly in its non-oil sectors.

In 2024, the RHQ mandate is now in full effect. As of 1 January, MNCs without an RHQ in Saudi Arabia are no longer eligible to bid in government tenders above SAR1 million (USD266,000).

Over 350 MNCs have obtained RHQ licences, with most choosing Riyadh as their base of operations. The capital city is already an economic business hub and is fast becoming a regional headquarters destination for international companies, with big names like Amazon, Google, Microsoft and PepsiCo already having a presence there.

RHQs are not permitted to engage in commercial activities directly, so their focus has to be on regional management and support functions to serve their operations in the Middle East and North Africa (MENA) region.

There are several regulatory requirements that companies seeking an RHQ in Saudi Arabia must meet. These include obtaining an RHQ licence from MISA, hiring at least 15 full-time employees within a year of getting the licence, having key personnel, including C-level executives, based in the Kingdom, and ensuring that all entities within the MENA region report to the Saudi RHQ.

For a company to qualify as a MNC and apply for the RHQ programme, it must have a presence in at least two countries outside of its headquarters jurisdiction and KSA, be active in the MENA region, and engage in strategic direction, management functions, or support functions through its branches, subsidiaries, or affiliates within the MENA region.

These rules may deter some companies from expanding into the region, given the cost and logistical challenges involved. Setting up a new office, navigating local regulations and hiring qualified staff are all factors to be considered against the benefits.

However, the Saudi government has introduced several incentives to make the RHQ programme more attractive to MNCs. One of the biggest is a 30-year exemption from corporate income tax (CIT) and withholding taxes on eligible RHQ activities. Companies that establish an RHQ can also enjoy other non-tax benefits, including:

• 10-year exemption from ‘Saudization’ requirements.
• Unlimited numbers of visas for employees.
• Dependents of RHQ employees can seek employment opportunities in the KSA.
• Employees of RHQs holding valid professional accreditations in their home countries are exempt from the need to acquire additional local accreditations.

These benefits, as well as the opportunity to bid on government contracts worth over SAR1 million, make the Kingdom an attractive destination for companies looking to expand their regional presence. With Riyadh at the centre of this transformation, the city is fast becoming a business hub not only for Saudi but for the GCC and MENA regions.

The RHQ programme in Saudi Arabia is gaining momentum in 2024. According to recent data from the Ministry of Investment in Saudi Arabia (MISA), over 125 new RHQs were set up in the first quarter alone, a 477% increase year on year that demonstrates the confidence that global companies have in Saudi Arabia’s long-term economy.

To address this influx, the Saudi government has provided more clarity on eligibility and compliance to the RHQ programme, and more resources to help MNCs to set up. This is expected to continue to attract more international companies in the coming months and years.

It is worth noting that RHQs must be established either as a registered branch or as a subsidiary. It is not permitted to conduct RHQ functions from an existing operational entity in KSA. To fulfil the RHQ requirements, MNCs that are already operating in the Kingdom through another entity must either incorporate a branch or a new legal entity.

For MNCs, the decision to have an RHQ in Saudi Arabia is a strategic one. The benefits of government contracts, tax exemptions and a favourable regulatory environment have to be carefully weighed against the costs of relocating, hiring and complying with local regulations. But as Saudi Arabia implements Vision 2030 initiatives, companies that are part of the economic transformation will reap the biggest rewards.

Sovereign Saudi Arabia has extensive experience navigating the Kingdom’s regulatory landscape and enjoys strong relationships with key government agencies. We can streamline the process of establishing your RHQ, handling everything from licensing to visas and employment matters efficiently.

If you need assistance with setting up an RHQ in Saudi Arabia, contact James Elliot-Square, Regional Business Development Manager at Sovereign, below.

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Ten years after the launch of China’s Belt and Road Initiative (BRI) in 2013, relations between China and the two main Gulf Cooperation Council (GCC) powers – Saudi Arabia and the United Arab Emirates – have developed far beyond the oil trade to embrace a wide range of new sectors.

Trade data over the past six years illustrates this shift. China and the Middle East traded USD507.2 billion of goods in 2022, which was double the level traded in 2017. China’s trade with the Middle East rose 27% in 2022, far surpassing the 15% growth of trade with Southeast Asian nations, and the 5.6% and 3.7% growth with the EU and the US respectively.

In the context of China’s BRI, Saudi Arabia and the UAE have partnered with Chinese companies on key port and industrial zone projects to reinforce their central position on global trade routes. These projects include a terminal at Khalifa Port in the UAE, as well as Yanbu, Jizan and Jeddah ports on Saudi Arabia’s Red Sea coast.

Saudi Arabia, the world’s largest oil exporter, is seeking foreign funding for its ambitious economic transformation and plans to become an industrial hub in the Middle East, while the region is gaining appeal for Chinese companies that want to explore overseas markets in the face of growing trade barriers with the US.

China is involved in some of the Gulf’s biggest renewable energy projects. Chinese firms are supporting the construction of two of the world’s largest solar-energy projects in the UAE – the Mohammed bin Rashid Al Maktoum Solar Park and the Noor Abu Dhabi solar plant. China’s Silk Road Fund also acquired a 49% stake in the Saudi renewable-energy company ACWA Power, which now serves as the Kingdom’s main investment arm in renewable energy projects across the region.

In particular, Saudi Arabia is seeking cooperation with Chinese companies in the automotive sector, a a key focus of its national industrial strategy, which emphasises developing the car industry and incorporating innovative technologies.

In June 2023, the Saudi government signed a USD5.6 billion deal with Chinese electric car maker Human Horizons to establish a research, development and manufacturing joint venture in Saudi Arabia. Chinese electric vehicle (EV) start-up Enovate also entered a joint venture with the Saudi Sumou Holding in 2022 to establish a USD500 million manufacturing plant in the kingdom.

In September, Saudi’s Minster for Industry and Mineral Resources Bandar Alkhorayef leads a delegation to visit Guangzhou, Hong Kong and Singapore, which is designed to improve relations and explore joint venture opportunities.

The programme in China includes meetings in Guangzhou, capital of the southern Chinese province of Guangdong, with EV maker GAC Group, lithium battery producer General Lithium and communication tech giant Huawei.

“The visit of the delegation to China aligns with our objective to become a key automotive hub in the region and a leader in innovative and eco-friendly vehicle solutions,” said Alkhorayef in a statement.

It added that the talks with Huawei were to discuss opportunities for collaboration in “innovative smart solutions” and leveraging ‘Fourth Industrial Revolution technologies’ (4IR technologies, such as advancements in artificial intelligence, robotics and the ‘Internet of Things’.

“Saudi Arabia aims to attract high-quality investments in 12 promising industrial sectors, including automotive, pharmaceuticals and food, supported by a stimulating investment environment,” the statement said.

“The visit is expected to result in partnerships that [focus] on mutual growth through high-quality investments, sustainable development, and economic diversification, particularly in strategic industrial sectors.”

According to figures from Saudi Arabia’s Ministry of Industry and Mineral Resources, China is Saudi’s biggest trading partner, with trade exceeding USD100 billion in 2023. The data also showed that Chinese investment in Saudi Arabia last year included US5.6 billion in original equipment manufacturing for the automotive industry and USD5.26 billion in the minerals sector, with semiconductor investment amounting to USD4.26 billion.

In Hong Kong, the delegation will meet with the city’s chief executive as well as with Hong Kong’s top industrial leaders and visit Hutchison Ports, Cyberport and Johnson Electric.

In Singapore, the Saudi delegation the delegation will meet with key government figures, including the Deputy Prime Minister and the Minister of Trade and Industry, and explore opportunities at Tuas Port, the world’s largest automated port. Meetings with A*STAR and the Singapore Manufacturing Federation will further highlight Saudi Arabia’s commitment to integrating advanced technology and automation in its industrial sectors.

“The visit to China by such a senior Saudi Minister further demonstrates the growing relationship between the two countries,” said Sovereign Trust (Hong Kong) Managing Director Alan Fong. “The BRI appears to be bearing fruit, resulting in closer trade links and the substantial investments in Saudi Arabia last year.

“The annual Belt and Road Summit will take place in Hong Kong later this month, and this will further reinforce the commitment from the Chinese Government to improve global trade amongst the participating countries,” he added.

The UAE has also emerged as a pivotal partner in China’s trade and commercial engagements within the Middle East. It is China’s second-largest economic partner in the Middle East, after Saudi.

In 2023, the UAE’s imports from China were valued at USD55.68 billion, while its exports to China amounted to USD39.31 billion. The UAE’s primary exports to China include mineral fuels, oils, distillation products, plastics, organic chemicals, copper and precious stones.

Investment between the UAE and China is also robust, spanning various sectors across logistics, transportation, industry, technology, artificial intelligence, renewable energy and food security. Between 2012 and 2022, Chinese foreign direct investment (FDI) in the UAE reached USD11.88 billion. China is the third largest investor in the UAE, with its FDI constituting 5% of the UAE’s total global FDI inflows by the end of 2020.

The UAE and China have also pursued several joint ventures and projects, particularly in free trade zones and industrial projects. The China-UAE Industrial Capacity Cooperation Demonstration Zone in Khalifa Economic Zone Abu Dhabi (KEZAD), launched in 2019, has attracted investments from around 20 Chinese enterprises totalling over USD1.6 billion.

The Khalifa Port in Abu Dhabi, part of the KEZAD, serves as a significant hub for Chinese investments. The COSCO Shipping Ports Abu Dhabi Terminal, part of Khalifa Port, serves as the regional centre for China’s global network of ports.

The Dubai Traders Market, developed by Dubai port operator DP World in a joint venture with the Zhejiang China Commodity City Group (CCC Group), aims to give merchants and enterprises access to wholesale pricing with reduced supply chain expenses, aligning the UAE with BRI goals. It includes the Yiwu Market UAE, covering over 200,000 square meters with showrooms and bonded warehouses.

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According to the latest data from the General Authority for Statistics, the net flow of FDI reached SR9.5 billion ($2.53 billion) in the first three months of this year, up from SR9 billion recorded during the same period last year.

Saudi Arabia reported a 5.6% rise in net flow of foreign direct investment in the first quarter of 2024 to SR9.5 billion (USD2.53 billion) up from the SR9 billion recorded during the same period last year, according to the General Authority for Statistics.

FDI inflows during the first quarter amounted to around SR17 billion, an increase of 0.6% over the SR16.9 billion recorded in the first quarter of 2023, but FDI outflows fell to SR7.5 billion, a drop of 5.1% compared to SR8 billion in Q1 2023.

These figures reflect the Kingdom’s drive to enhance its investment environment and support economic growth in line with the objectives its Vision 2030 economic blueprint and the goals set out in the National Investment Strategy.

The Saudi government has enacted substantial legal, economic and social reforms aimed at stimulating inflows of foreign direct investment and improving the retention of foreign capital within the Kingdom.

Launched in 2021, NIS looks to develop comprehensive investment plans across various sectors, such as manufacturing, renewable energy and transport, as well as logistics, tourism, digital infrastructure and healthcare. It is targeting an increase in annual FDI flows to over USD100 billion and annual domestic investment to over USD453 billion by 2030.

According to the World Investment Report released earlier this month by the UN Conference on Trade and Development (UNCTAD), Saudi Arabia attracted USD65.1 billion in FDI in the three years post-pandemic until 2023, placing it among West Asia’s top recipients. But the Kingdom’s FDI outflows totalled USD73.1 billion over the same period, with USD16 billion recorded last year. This places Saudi Arabia in the top 20 global economies for FDI outflows.

The UN report also noted a 55% annual increase in the value of international project finance deals in the Kingdom in 2023, totalling USD22 billion. Additionally, Saudi Arabia saw 389 announced greenfield projects in 2023, totalling USD29 billion, reflecting a 108% annual increase in value.

“Sovereign Saudi Arabia has had an influx of inquiries for consultancy and technology business setup. Technology companies make up 37% of the inquiries we received in the last Quarter, as Saudi pushes its digital transformation vision. Opening new tech-driven opportunities in education, online services, and enhancing business viability and visibility.” James Elliot-Square, Regional Business Development Manager at Sovereign Corporate Services.

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