Saudi Arabia Activates Annual Economic Substance Disclosure for Regional Headquarters

KSA, 26 October, 2026: In October 2026, the Zakat, Tax and Customs Authority (ZATCA) issued a user manual for the annual Economic Substance Requirements (ESR) disclosure form applicable to Regional Headquarters (RHQs) in Saudi Arabia. The form became available on the ZATCA Portal in August 2026.

Key Compliance Requirements

The annual disclosure requires RHQs to report information covering:

• Governance: Board members, meeting locations, dates and strategic decisions.

• Employees and Management: Executive details, residency status and employee numbers.

• Business Activities: Mandatory and optional RHQ activities conducted in Saudi Arabia.

• Financial Information: Eligible and non-eligible income, operating expenditure, and assets held or leased in the Kingdom.

RHQs must ensure that their ESR disclosures align with their corporate income tax returns, transfer pricing documentation, financial statements and Ministry of Investment (MISA) reporting.

Potential Penalties

Failure to meet ESR requirements may result in penalties of SAR 100,000 initially and SAR 400,000 for continued or qualifying repeat violations. Continued non-compliance may also put RHQ tax incentives at risk.

What Should RHQs Do?

RHQs should assess their economic substance, maintain evidence of local decision-making and business activities, document board meetings, and reconcile financial and employee information before submitting their annual disclosure.

The ESR framework supports eligibility for the RHQ regime's tax incentives, including 0% corporate income tax and withholding tax on qualifying income, subject to applicable conditions. ZATCA has not expressly clarified all filing deadlines and historical reporting requirements, so businesses should monitor further guidance.

Key takeaway: RHQs should treat economic substance as an ongoing compliance obligation rather than a one-time filing exercise.