Establishing a regional headquarters in Saudi Arabia offers new business opportunities and challenges.
Dec 11, 2023
In an increasingly interconnected global economy, the strategic positioning of a regional headquarters (RHQ) is crucial for multinational corporations aiming to expand their footprint across diverse markets. With its ambitious economic reforms and investor-friendly initiatives, Saudi Arabia presents unparalleled opportunities for companies seeking a pivotal regional presence.
Let’s delve into the significance of having a regional headquarters in Saudi Arabia, obtaining an RHQ license, the impending consequences post-January 1, 2024, and the benefits this move offers international companies.
The Importance of a Regional Headquarters in Saudi Arabia for foreign companies
1. Strategic Geopolitical Positioning
The Kingdom of Saudi Arabia is strategically located as a gateway to the Middle East, North Africa, and Asia, rendering it a prime location for RHQs. 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 positioning itself as the global epicentre 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 a regional market. It is a central hub for strategic direction, decision-making, operations, and coordination across diverse geographies. 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, focused on economic diversification and transformation, encourages companies to contribute to the kingdom’s growth story. Becoming affiliated with this vision positions businesses as partners in the nation’s development. More than 99% penetration enables the country to be set to support the growth of digital-focused sectors such as fintech, Saas and many more. This penetration is much higher than some global peers, including Japan, which stands at 86% in 2023. Furthermore, with investments in the most significant infrastructure projects such as AlUla, the world’s largest living museum, NEOM, and other innovative city projects, the country is increasing its digital readiness at a fast pace.
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
How to Obtain an RHQ License
Requirements:
- Submitting a detailed business plan outlining the intended scope of operations and investment plans within the region.
- Demonstrating Saudi Arabia’s strategic importance as a regional hub and the value your Regional HQ will bring to the Kingdom of Saudi Arabia.
- Fulfilling criteria set by relevant regulatory authorities and complying with legal and financial standards.
- Companies seeking an RHQ license in Saudi Arabia can apply through designated Saudi government agencies responsible for business licensing.
- The process involves submitting necessary documentation, undergoing assessments, and adhering to regulatory procedures.
Consequences of Not Establishing an RHQ by January 1, 2024
After January 1, 2024, companies without an RHQ in Saudi Arabia will likely face limitations and restrictions accessing specific incentives, tax relief, and advantages offered to foreign companies operating through regional headquarters. Such companies might miss strategic opportunities and advantages to international entities with established regional headquarters. It will also not be possible to bid for government contracts in the country to enable you to win new business.
The RHQ program also restricts government agencies from contracting with any related parties to those companies that do not have their RHQ in the KSA.
Any company that wishes to benefit from attracting new business or partnering with Saudi government agencies will require an RHQ license.
Benefits of Obtaining an RHQ License
1. Tax Incentives and Relief— Companies with Regional headquarters in Saudi Arabia can benefit from substantial tax exemptions for 30 years, enhancing profitability and financial flexibility.
2. Operational Efficiency — Centralising operations through a Regional HQ streamlines decision-making, fosters efficient resource allocation and facilitates smoother management of regional strategies and initiatives.
3. Access to Business Ecosystem — Establishing an RHQ in Saudi Arabia grants access to a business-friendly ecosystem, favourable regulatory frameworks, and world-class infrastructure, fostering a conducive environment for growth and innovation.
4. Winning Government Contracts— Access to various government agencies contracting projects and incentives through local presence.
Conclusion
The importance of having a regional headquarters in Saudi Arabia extends beyond strategic positioning—it aligns with economic visions, unlocks growth opportunities, and offers various incentives and advantages.
Obtaining an RHQ license involves meeting specific criteria and compliance standards, ensuring businesses contribute to the kingdom’s economic trajectory. Embracing this opportunity positions companies for regional success and signifies collaboration with Saudi Arabia’s journey towards a diversified and prosperous economy.
Centuro Global has extensive corporate structuring experience to guide and assist any business that intends to establish its RHQ in the Kingdom of Saudi Arabia. Don’t hesitate to get in touch with us with any queries. We would be delighted to assist with the regulatory applications to obtain the RHQ License.
