Good business thrives on a robust strategy that will operate with confidence in a new market. The new guidelines for Regional Headquarters (RHQ) in Saudi Arabia came into effect on 1st January, 2024, and we're well-placed to help organisations of all sizes assess their approach to the new criteria.
It's no longer possible to seek growth or long-term partnership on a satellite business model, here in the Kingdom. There are exceptions to the rules, but if you are eligible for an RHQ and want to bid for KSA Government contracts, then your business must have an RHQ that's operating to set criteria.
What constitutes an RHQ?
The Ministry of Investment (MISA) uses this description: a regional headquarters is "... a unit of a multi-national group duly established under the laws of Saudi Arabia for the purpose of supporting, managing, and providing strategic direction to its branches, subsidiaries and affiliates operating in MENA region."
We're confident there'll be future updates to this policy, but for now, these are MISA's headline criteria:
The multi-national must have a minimum presence through subsidiaries or branches in two different countries, excluding the Kingdom of Saudi Arabia and the country in which its parent HQ is located.
A multi-national with a MENA RHQ is not exempt.
The RHQ must be established as a separate legal personality in the Kingdom of Saudi Arabia, either as a company or as a registered branch of a foreign company.
The RHQ shall not directly conduct commercial operations that generate revenue other than RHQ License activities.
The RHQ must commence the mandatory RHQ activities within six months of receiving a License.
The RHQ must commence at least three optional RHQ activities within one year of receiving the RHQ License.
The RHQ must have at least 3 employees of Executive Director level and Vice-President level.
The RHQ must employ at least 15 full time staff, conducting RHQ activities, within one year of issuing the RHQ License (including the senior level executives mentioned).
Declared incentives for the RHQ programme include Saudisation exemptions, visa limit exemptions, dependents opportunities.
The intent by MISA is clear. Growth comes through commitment, and the most successful businesses will be those with strategies that align to Vision 2030 - long-term goals, extended growth. Many of our clients pushed ahead last year, setting up an RHQ well in advance of the new legislation coming into force. Others were more cautious. It's clear, an RHQ can be a cost centre that has no tax applied other than on the profits of its own activities.
AEI Saudi can help with RHQ
For more than a decade, we've been helping clients to research, resource and set up their businesses in Saudi Arabia. We can offer dedicated support to navigate the new criteria, including Transfer Pricing and appropriate Arm’s Length remuneration for all RHQ activities.
To find out more, and to start a conversation about the best way to approach setting up a Regional Headquarters in the Kingdom, contact us.