What should companies know about the Saudi Arabia regional headquarters program?
The Kingdom of Saudi Arabia has launched an initiative called the Regional Headquarters Program (RHQ) to encourage multinational businesses to establish an official presence in Saudi Arabia. The purpose is to support, manage and provide strategic direction to branches, subsidiaries and affiliates operating in the region. What does this mean for companies that currently have their headquarters in another region? What opportunities does the regional headquarters programme provide to foreign companies?
This article provides a brief overview of the Saudi Arabia RHQ program.
What is the Saudi Arabia RHQ program?
In an effort to increase foreign investment in Saudi Arabia, especially in the capital of Riyadh city, authorities have initiated a program which is designed to provide benefits to companies investing in operating their regional headquarters out of Saudi Arabia. It will also limit the capabilities of companies that do not choose to invest in this program.
From 1 January 2024, international businesses without regional headquarters in Saudi Arabia may not be able to contract with agencies or institutions, nor have access to funds owned by the Saudi government. Companies who wish to apply for a business license to conduct business in KSA can do so and will benefit from several exemptions and fee waivers.
Some believe this initiative is a move to compete with surrounding hotspot business cities in the Middle East such as Dubai whilst others suggest that the RHQ program forms part of the Kingdom’s efforts to diversify its economy away from crude oil, as per its Vision 2030 agenda, spearheaded by Crown Prince Mohammed bin Salman.
Saudi government officials explain that the new policy is targeted at limiting the economic leakage and transfer of expertise, in an effort to increase spending efficiency, guarantee that primary government-bought goods and services originate from the Kingdom, and create employment for its youth.
What are the incentives of the Saudi RHQ program?
The policy comes with generalised incentives which include:
- Tax benefits, including a 50-year tax holiday
- Immigration concessions, such as a waiver to the quota system in Saudi nationals' employment
- 10-year exemption from the “Saudization” regime
- Spousal work permits and the age of dependents extended to 25 years old
- Waiver of professional accreditation rules
- Visa limit exemption and issuance acceleration
- End-to-end services (business, personal, and concierge)
- King Abdullah Financial District special economic zone with additional incentives (estimated Q1 2022)
- Government tendering after 2024
Currently, Riyadh the Capital of Saudi is estimated to be home to less than five per cent of regional headquarters in the Gulf, despite having the largest local economy, population, and natural oil deposits. Whilst the program provides many benefits and opportunities, some questions remain as to what constitutes a regional headquarters and if it only applies to companies doing business with the government as well as those in the private sector.
Our recent Centuro GEC 2022 event had an impressive lineup of panellists touching on Saudi Arabia’s significant reforms. The discussion touched on ways to foster growth, diversification, and ample opportunities for foreign investors and companies to boost private sector participation. Watch the full panel session below.
What is the process for relocating to Riyadh?
To apply for an RHQ License, businesses must provide the following documents:- Proof of legal presence in at least two different countries- Annual audited financial statements for the last fiscal year preceding the application date- The business development plan for the RHQBusinesses must also be prepared to commit to their RHQ delivering all the mandatory licensing activities outlined in terms of the RHQ Program, including a detailed business plan (including budget), Financial Reporting and Strategic coordination.
So far, the launch of the RHQ programme has already had some success. Dozens of multinational companies have signed and are applying for licences to move their regional headquarters to Riyadh. These companies operate across diverse sectors including technology, F&B, consulting, and construction. Either way, Program RHQ is likely to have significant economic consequences on the Gulf region and will help to accelerate a foreign investment race between Saudi Arabia and the UAE, as both compete to attract foreign firms.
Centuro Global has extensive corporate structuring experience to guide and assist foreign companies who intend to establish their 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.