Published: Jan 12, 2022

Kingdom of Saudi Arabia: Regional Headquarters Programme

The Regional Headquarter (“RHQ”) Programme is a ‘Vision 2030’ initiative jointly developed by the Ministry of Investment Saudi Arabia (“MISA”) and the Royal Commission for Riyadh City (“RCRC”), with the objective of inviting global companies to establish or relocate their regional headquarters in the Kingdom of Saudi Arabia.

It is a major development strategy for the Government of the Kingdom of Saudi Arabia, as it seeks to transform Riyadh into one of the top 10 city economies globally by the year 2030.  The Board of the RCRC has confirmed the Government’s proposal to double the current population of Riyadh to between fifteen and twenty million, while increasing the number of visitors to more than forty million by the year 2030.

MISA has now issued the first set of guidelines for companies wishing to participate in the RHQ Programme and the team at Al Tamimi & Company has extensive corporate structuring experience to provide guidance and assistance to foreign companies who propose to establish their RHQ in the Kingdom of Saudi Arabia.

Definition and Key Considerations

Pursuant to the initial guidelines, MISA defines RHQ as “a unit of a multinational group, duly established under the laws of the Kingdom of Saudi Arabiafor the purpose of supporting, managing, and providing strategic direction to its branches, subsidiaries and affiliates operating in the Middle East North Africa region.”

To be eligible for the RHQ Programme, the investor must have at least two (2) subsidiaries or branches of the multinational group in two (2) different countries other than the Kingdom of Saudi Arabia and its country of incorporation (i.e. its official headquarters).

In addition and amongst other requirements, the RHQ must:

  • operate as registered foreign company in the Kingdom of Saudi Arabia;
  • have a separate legal personality in the Kingdom of Saudi Arabia;
  • have a presence of a physical office and act as a centre of administrative power over the region; and
  • not conduct any commercial operations (i.e. activities that generate revenue).

RHQ Activities

The RHQ must provide and be licensed to carry out:

  • Mandatory RHQ Licence activities, which includes inter-alia:

–    strategic direction activities (which includes for example, formulating and monitoring regional strategy); and

–    management functions (which includes for example, business planning).

  • At least three optional activities (which includes for example, sales and marketing support and human resources and personnel management).

Additional Licence Conditions

  • The Multinational Group must start its RHQ operations within six (6) months from the date of issuance of the licence and establish the three (3) optional activities chosen in the first year of the licence operation.
  • The RHQ must have a minimum number of employees and corporate executives.

RHQ Incentives

While the practical implication is yet to be confirmed, MISA has indicated that the following types of incentives will apply:

  • Saudisation exemptions;
  • Visa limit exemptions;
  • End to end business services;
  • Spouse and dependent work permits; and
  • Other benefits/incentives.

RHQ Implications

Importantly, the Government of the Kingdom of Saudi Arabia has announced that foreign investors wishing to secure government contracts, must have their RHQ in the Kingdom of Saudi Arabia, in order to be eligible to secure these government contracts – (this is to be in law by 1 January 2024).

How this will be managed or implemented on a practical level is yet to be seen, but we have no doubt that this requirement will materially alter the investment landscape in the Kingdom of Saudi Arabia over the coming years.

How We Can Help

Al Tamimi & Company is actively monitoring these significant developments and the team is in regular contact with MISA officials so that we remain at the forefront of these regulatory changes.

Please contact our Saudi based corporate structuring team for any queries and we would be delighted to assist with the regulatory applications to obtain the RHQ Licence.

Key Contacts

Hesham Al Homoud

Partner, Head of Corporate Structuring - Saudi Arabia

h.alhomoud@tamimi.com

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