How to set up a regional headquarters in Saudi Arabia
Saudi Arabia is in the midst of an economic transformation. Historically, reliant on the revenues generated by its vast oil reserves, the country is now taking bold steps to diversify and liberalise its economy, guided by its comprehensive Vision 2030 blueprint.
One of the key initiatives driving this transformation is the Regional Headquarters Programmer, a strategic endeavor designed to encourage established international companies to relocate their regional headquarters to the Kingdom. The programme, set to become law by January 1, 2024, is of paramount importance for companies aiming to collaborate with the government, as it constitutes a mandatory condition for their eligibility in government contracts.
This article looks at the how the Saudi government is incentivizing participation in the RHQ programme and how to go about registering an RHQ in the Kingdom.
The RHQ programme: A closer look
The RHQ programme came about in February 2021, after the Saudi government announced that it would limit contracting with foreign companies that did not have regional headquarters in the country. By February of the following year, The Ministry of Investment Saudi Arabia (MISA) had published further guidance on the programme with details on the incentives and benefits available. Shortly after that, it formalised its current set of restrictions, limiting Saudi government bodies from partnering with foreign MNCs that have not established regional headquarters in the KSA. Moving forward from January 2024, MISA, in collaboration with the Ministry of Finance and the General Authority for Foreign Trade, will compile a list of companies that don’t have Regional Headquarters in the Kingdom. This list will undergo regular updates and will be made available on the unified government procurement electronic portal. Consequently, companies falling into this category will not be eligible for government projects, except in certain specific situations. These include:
- Companies whose operations in the KSA do not exceed 1million Saudi riyals.
- Companies competing for government contracts with no other bidders.
- Companies partnering with the KSA government on projects where the work and procurements are located outside the country.
- Companies who are the exclusive providers of work or procurements necessary for a government project.
- Emergencies which can only be remedied by direct purchases from a company without an RHQ in the KSA.
In any of the above circumstances, the company in question would have to submit an exemption application which would then need to be reviewed and approved by an exemption committee put together by the Ministry of Finance.
What are the benefits of participating in the RHQ programme?
Aside from the obvious eligibility to bid on government contracts, there are a number of other benefits and exemptions that companies can gain through participation in the RHQ program. These include:
- 50-year tax ‘holiday’
- Exemption from Saudization requirements for a period of 10 years
- Eligibility for work visas for professions normally restricted only to Saudi nationals
- Eligibility to obtain unlimited work visas for employees under the RHQ entity
- Exemption from professional accreditation requirements normally applied in the Kingdom
- Allowance of spousal work permits and age of male dependents increased to 25 years old.
- Waiver of MISA subscription fees
- Access to MISA ‘end-to-end services
How to get a regional headquarters licence in Saudi Arabia
To secure an RHQ license in Saudi Arabia, companies need to fulfill the following criteria:
- Submission of a duly completed RHQ licence application form.
- Attested commercial registration of the applicant company.
- A well-structured business development plan.
- Evidence of legal presence in a minimum of two countries, excluding Saudi Arabia and the country of the multinational company’s incorporation.
- Submission of annual audited financial statements for the fiscal year preceding the application date.
- Establishment of the RHQ as a distinct legal entity, officially registered as a foreign entity within the Kingdom of Saudi Arabia.
- The RHQ should refrain from engaging in any commercial activities in KSA but must maintain a physical presence within the country, operating as a central administrative authority in the region.
- The RHQ must commence operations within six months of licence issuance and incorporate three licensed activities in its inaugural year of operation.
- A minimum workforce of 15 employees is required, including at least three at the C-Suite level.
It’s important to note that additional documents or specific criteria may apply, contingent on the particular tier of the RHQ licence under consideration.
How can Global Link help?
Global Link has over 16 years’ experience working with local and global businesses, providing bespoke consultancy services for company incorporation in Dubai and the wider UAE.
We can help you set up an RHQ in Saudi Arabia, guiding you through the licensing process, liaising with all government authorities on your behalf and advising you on how to structure your operations in the most tax efficient manner.