As the global business landscape continues to evolve, Saudi Arabia has emerged as a beacon of opportunity for entrepreneurs and corporations alike. With its strategic location, robust economy, and strong commitment to economic diversification, the Kingdom of Saudi Arabia is positioning itself as an attractive destination for your business expansion in the Middle East, as it is crucial to be present in the local market of Saudi Arabia with your local setup to participate from this significant development of the KSA market.
One vital component of establishing a foothold in this dynamic market is the Regional Headquarters (RHQ).
In this article, we will explore what business owners need to know about this important concept and how to set up an RHQ in KSA, especially considering the new regulations set to take effect in 2024.
Understanding the RHQ
Regional Headquarters (RHQ) is a central hub for a corporation´s regional operations in Saudi Arabia. It is a strategic entity that oversees and manages the company’s activities across the region. Simultaneously, obtaining an RHQ license is crucial to ensure your business operations comply with local regulations.
New Regulations Effective in 2024
Starting in 2024, all foreign companies operating in Saudi Arabia considering entering contracts with government authorities will be required to establish a Regional Headquarters (RHQ) in the country. According to the Ministry of Investments´ current definition, an RHQ is an entity of a multinational corporation established in compliance with Saudi Arabian laws. Its primary purposes include supporting, managing, and making strategic decisions for its affiliated branches and subsidiaries across the MENA region. Importantly, the RHQ is not permitted to engage in commercial business activities.
Key Requirements for an RHQ License
To meet the criteria for an RHQ license, a multinational corporation must fulfil the following conditions:
The RHQ of the multinational company covered by this license must operate as a registered foreign company or a branch in KSA.
The company must have at least two subsidiaries or branches in countries other than Saudi Arabia and its country of origin.
The RHQ must have a distinct legal identity within the kingdom (LLC or Joint Stock Company).
The RHQ must maintain a physical office within the country.
The RHQ acts as the centre of administrative power for the region and is not intended to engage in revenue-generating commercial activities.
It´s worth noting that, according to the Ministry of Investments and State Affairs (MISA), the RHQ can share the same address with other affiliated companies as long as they are physically separated.
Additionally, individuals at the management level of the foreign parent company can generally be appointed to work for the RHQ. Based on our previous experiences, individuals at the management level can be employed in the RHQ and other affiliated companies, provided these individuals hold positions as directors or managers.
Setting up a company in KSA and obtaining the RHQ License goes along with a lot of privileges provided by the Saudi Government:
Benefits of Licensing as an RHQ
10-Year Exemption from Saudization
VISA Restrictions Lifted – Visa processing is expedited
No Specific Approvals Required
Visas for Spouses and Children up to the age of 25
Preferred Business and Concierge Services
Participation in Government Tenders / Public Procurement
Tax incentives and reliefs for RHQ Companies
As businesses in various sectors continue to expand globally, establishing a RHQ in Saudi Arabia is becoming increasingly important, especially considering the new regulations set to take effect in 2024.
