Saudi Arabia’s Regional Headquarters Program: What companies have to keep in mind starting from 1 January 2024

published on 10 February 2023 | reading time approx. 3 minutes

In order to implement its “Vision 2030” initiative, the Ministry of Investment Saudi Arabia (MISA) and the Royal Commission for Riyadh City (RCRC) developed the Regional Headquarters Program. The RHQ Program aims to encourage global established companies to relocate their regional headquarters in the Kingdom of Saudi Arabia and to reduce the oil-dependency of Saudi Arabia’s economy. The Program targets especially companies, that want to start or continue business with Saudi Arabia’s authorities and governmental bodies. It is considered as another step of Saudi Arabia’s efforts to elevate Riyadh into a global top economy by the year 2030.

Any foreign investor who wants to contract with the government, must have his regional Headquarter in Saudi Arabia, in order to be eligible to these government contracts. This is expected to be in law by 1 January 2024 and will have a big impact on investments between government entities and foreign based businesses.

Definition & applicability

MISA defines Regional Headquarters as “a unit of multinational group, duly established under the laws of the Kingdom of Saudi Arabia, for the purpose of supporting, managing and providing strategic direction to its branches, subsidiaries and affiliates operating in the Middle East North Africa (MENA) region.”

The RHQ Program applies, if the investor and his RHQ meet the following requirements:

The investor must have at least two subsidiaries or branches of the multinational group in two different countries besides Saudi Arabia and its country of incorporation
The RHQ must have a separate legal personality and operate as a registered foreign company in the Kingdom of Saudi Arabia
The RHQ must have a presence of a physical office and act as a central administrative authority over the region without conducting any commercial operations
Start its RHQ operations within 6 months from the date of the issuance of the license and establish 3 optional license activities chosen in the first year of the operation
Hire at least 15 employees of which at least 3 must be at the corporate executive level

Benefits for the companies

As a potential investor, you might be interested in the benefits of a headquarter in Saudi Arabia. The RHQ Program provides certain benefits to qualified companies, such as visa limit, Saudization and tax exemptions.

Since RHQ entities are not intended to conduct commercial activities or generate revenues, they are exempt from income tax, which is generally based at 20 percent of the profits and benefit from an exemption on payment of withholding tax (WHT), that varies from 5-20 percent. These Tax Exemptions are only applicable to companies in special economic zones (SEZ), such as: King Abdullah Economic City (KAEC) and Kind Abdulaziz Financial District (KAFD). Currently the zones are still regulated by conventional Saudi Arabian laws. Nevertheless, it is expected that these could be subject to autonomous regulations in the future.

As mentioned above, a potential investor should also consider “Saudization” and an exemption of it. Saudization requires certain employers to hire a large proportion of its employees or in some cases only Saudi nationals. The percentage of Saudi nationals is determined by the size of the affected company. Employers need to act in accordance with the Saudization to avoid high fines for noncompliance with the rules.

Companies that want to expand their business to the Kingdom of Saudi Arabia and contract with government entities should consider the above mentioned advantages and participate in the “Saudi Vision 2030”. Please do not hesitate to contact our local expert, if you need any assistance with your licensing process or if you want to discuss your business options in the Kingdom of Saudi Arabia!