The Kingdom of Saudi Arabia has introduced the Regional Headquarters (RHQ) program to entice multinational businesses to establish an official presence within the country, a vital part of the nation's economic diversification plan, Vision 2030. Effective January 1, 2024, international businesses lacking regional headquarters in Saudi Arabia may encounter limitations in contracting with government and semi-government agencies or institutions.
Purpose of the RHQ Program
The RHQ program aims to support, manage, and offer strategic direction to subsidiaries and affiliates operating within the MENA region. This initiative aims to minimise economic leakage, promote knowledge transfer, enhance spending efficiency, ensure government procurement originates from the Kingdom, and generate job opportunities for Saudi nationals.
Advantages of Relocating RHQ to Saudi Arabia
Companies engaged or potentially involved with the Saudi government and semi-government entities should consider establishing their headquarters in Saudi Arabia to potentially maximize the opportunities and projects available in the Kingdom. Failure to establish a regional headquarters in Saudi Arabia by January 1, 2024, might restrict international businesses from contracting with government and semi-government agencies or institutions and accessing Saudi government funds.
Minimum Requirements for RHQ
Companies qualify for the RHQ program if they have two subsidiaries in the MENA region in addition to the subsidiary located in Saudi Arabia and the global headquarters. Company size or turnover does not influence eligibility. Within its first year of operation, the RHQ in Saudi Arabia must have a minimum of 15 employees, including at least three senior directors, and at least two subsidiaries reporting to the HQ.
Location and Saudisation Quota
The RHQ can be situated anywhere in Saudi Arabia, and there is no Saudisation quota for the first 10 years.
Saudi Arabia is offering a comprehensive tax incentive package, which includes a 30-year exemption from corporate income tax and withholding tax on approved activities. International companies relocating to Saudi Arabia stand to benefit from these tax exemptions starting from the issuance of their licenses.
There may be potential benefits for RHQ employees, such as spousal work permits, an extended dependent age limit to 25 years, waiver of professional accreditation rules, and visa issuance acceleration.
In conclusion, the Regional Headquarters program in Saudi Arabia represents a strategic opportunity for multinational businesses to establish a robust presence in the country, aligning with the nation's economic diversification goals. With its aim to foster growth, enhance spending efficiency, and create employment opportunities for Saudi nationals, this initiative outlines clear benefits, exemptions, and guidelines for companies considering establishing their headquarters in the Kingdom.
To receive expert support on this initiative and understand what compliance priorities need to be considered for your business please contact our Saudi Arabia team.
This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. This article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained within this article without obtaining specific professional advice. Please contact Equiom Group to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees, and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.