Why Multinationals are Setting Up Regional Headquarters in Saudi Arabia 

Establishing a Regional Headquarters is now the easiest way of doing business in Saudi Arabia

As part of its ambitious Vision 2030 program of economic reform, the Kingdom of Saudi Arabia (KSA) is incentivising foreign multinational companies to site their regional headquarters within the desert nation’s new economy. The Regional Headquarters (RHQ) scheme is intended to make doing business in Saudi Arabia as inviting as possible for any business operating in the Middle East.

Let’s look into why so many companies are rushing to set up regional headquarters in Saudi Arabia and explore the process of obtaining an RHQ license.

Why foreign companies are setting up Regional Headquarters in Saudi Arabia

350 RHQ licences have already been issued to foreign multinationals including Apple, Pepsi and Microsoft, with another 450 in the pipeline. But why are so many firms resituating their Middle East operations in the KSA?

1. Strategic geopolitical positioning

The Kingdom of Saudi Arabia is strategically located as a gateway to the Middle East, North Africa, and Asia. This makes it a natural nerve centre for MENA operations. Access to regional markets and connectivity through world-class infrastructure enhance business prospects and operational efficiency. With four special economic zones created in April 2023, the country is actively seeking to grow its presence as a node for investment and business.

2. Saudi government support for global expansion

Establishing a regional headquarters in the Kingdom of Saudi Arabia amplifies a foreign company’s ability to expand and penetrate the regional market in the Gulf. The KSA wants to rival the UAE as the central hub for strategic direction, decision-making, operations, and coordination in the region.

The Saudi government offers many supportive initiatives to motivate companies to invest and set up headquarters in the Kingdom. Multinational companies such as Apple, Google, Microsoft, Siemens, and Pepsico have already bought into the regional headquarters program, along with many others.

3. Alignment with the Saudi Vision 2030

Saudi Arabia’s Vision 2030 aims to diversify and transform its economy, inviting foreign businesses to join the nation’s growth. By aligning with this vision, companies become partners in Saudi Arabia’s development. With over 99% digital penetration, even surpassing global peers such as Japan, the country is well-equipped to support the growth of sectors like fintech and SaaS,

Programs and ecosystems in KSA include Misk Hub, Meta’s Boost Program and MCIT’s Gamechanger Program. With so much digital transformation and economic diversification, the Saudi government has plans to exempt certain companies from commerce fees for three years.

The Regional Headquarters Program: key incentives and benefits

The Saudi government has created some very significant incentives for companies to set up RHQs in the Kingdom.

1. Tax incentives:

   • 30-Year Tax Relief: MNCs establishing their RHQs in Saudi Arabia benefit from a 30-year tax exemption package, which includes a zero percent corporate income tax and withholding tax on RHQ activities.
   • Eligible Activities: The tax incentives apply to income from activities that strengthen the group’s profile in the region and provide strategic supervision and administrative support to subsidiaries and related companies.

2. Saudization exemption:

   • 10-Year Exemption: RHQs are exempt from the Saudization requirements, which mandate a specific percentage of Saudi nationals in a company’s workforce, for a period of 10 years.

3. Visa and residency benefits:

   • Unlimited Work Visas: RHQs can issue an unlimited number of work visas for their employees, facilitating easier relocation and staffing.
   • Premium Residency: The top three executives of the RHQ can enjoy premium residency free of charge, enhancing the attractiveness for global business leaders.

4. Government tenders:

   • Contracting Advantage: As of January 2024, only companies with RHQs in Saudi Arabia can compete for government contracts and access the Public Investment Fund (PIF). This provides a significant competitive edge.

5. Operational support:

   • End-to-End Services: The Ministry of Investment of Saudi Arabia (MISA) offers comprehensive support through its RHQ Care team, assisting with accommodation, government paperwork, and other logistical needs.

6. Professional accreditation waivers:

   • Exemption from Local Accreditation: Employees of RHQs holding valid professional accreditations in their home countries are exempt from needing local professional accreditation.

How to set up your RHQ in Saudi Arabia

Setting up your RHQ requires you to follow a bureaucratic pathway

Requirements:

• International presence: The company must have substantial operations in at least two different countries outside Saudi Arabia and their home country.
• Physical office: A physical office in Saudi Arabia is required, serving as the central command for strategic and managerial functions across the region.
• Employment: The RHQ must employ at least 15 full-time employees within the first year, including at least three high-level executives

The process: 

To acquire a Regional Headquarters (RHQ) license in Saudi Arabia, multinational corporations (MNCs) must follow a detailed process involving several steps and meeting specific criteria. Here is a comprehensive overview of the process:

1. Initial application and documentation

• Submit a License Application: The initial step involves submitting a license application to the Ministry of Investment of Saudi Arabia (MISA).
• Required Documents: The application must include:
  • A certified copy of the commercial registration from the Saudi embassy.
  • Copies of commercial registrations or licenses from at least two different countries, excluding Saudi Arabia and the country of the multinational group’s headquarters.
  • Annual audited consolidated financial statements of the last financial year, attested at the Saudi embassy.

2. Business plan submission

• Detailed Business Plan: Companies must submit a business plan outlining the intended scope of operations and investment plans within the region. This plan should demonstrate the strategic importance of Saudi Arabia as a regional hub and the value the RHQ will bring to the Kingdom.

3. Licensing and registration

• Obtain RHQ license: The organization must obtain an RHQ license through MISA. MISA has simplified the procedural requirements, including waiving the attestation requirements for documents originating outside of Saudi Arabia.
• Legal Entity Registration: Once licensed, the RHQ must be registered as either a branch office or a limited liability company in Saudi Arabia.

4. Operational requirements

• Commencement of operations: The RHQ must start operating within six months of the license being issued.
• Employee requirements: Within one year of issuing the RHQ license, the RHQ must employ at least 15 full-time employees, including at least three C-suite executives.

5. Mandatory and optional activities

• Mandatory Activities: The RHQ must undertake all mandatory activities specified by MISA, which include providing strategic direction and management functions[1][9].
• Optional Activities: The RHQ must also undertake at least three optional activities within the first year. These activities can include sales and marketing support, human resources management, training services, financial management, compliance, and more.

6. Compliance and reporting

• Compliance obligations: The RHQ must comply with various compliance obligations, including registering with the Zakat, Tax and Customs Authority (ZATCA), filing annual corporate income tax (CIT) and/or Zakat returns, and preparing and maintaining accounts for each tax year.
• Economic substance requirements: The RHQ must meet economic substance requirements, such as having adequate premises in Saudi Arabia, holding board meetings in the Kingdom, and incurring operational expenditure proportionate to its activities.

7. Fees and financial considerations

• License fees: The RHQ license has an annual fee of SAR 2,000 and a one-time service fee of SAR 10,000 for the first year.
• Tax incentives: Companies with an RHQ license can benefit from substantial tax exemptions, including a 30-year corporate income and withholding tax exemption and a 10-year exemption from Saudization requirements.

8. Consequences of non-compliance

• License revocation: MISA can revoke the RHQ license if the company fails to commence mandatory or optional activities within the stipulated time periods or does not meet the employee requirements.

By following these steps and meeting the outlined criteria, multinational corporations can successfully acquire an RHQ license in Saudi Arabia and benefit from the Kingdom’s Vision 2030 initiative.

Centuro Global can assist with every stage of your RHQ setup. All you have to do is get in touch.