Setting Up Regional Headquarters in Saudi Arabia: Deadline to Leverage RHQ Benefits Comes Closer
Saudi seems to be even more adamant about international companies gaining their Regional Headquarters license as the deadline comes closer. On two separate occasions, this week Saudi reiterated their commitment to international firms to locating their regional headquarters in the Kingdom. Saudi Minister of Finance Mohammed Al-Jadaan spoke to Reuters saying, “The deadline is not new, and yes it will be implemented”. Later on, another interview by CNBC was released with Faisal Al-Ibrahim, Saudi Minister of Economy and Planning reminding companies about the due date and the benefits of establishing an RHQ.
Top multinationals seek unique opportunities in MENA. By setting up regional headquarters in Saudi Arabia. With the help of a local partner, these businesses are accessing exclusive projects ripe with promise.
Saudi Arabia’s mission towards less oil-dependent strategies is reflected in boosted support for privatization. As a result, and in line with the projected goals for Saudi Vision 2030, the Saudi government has been rolling out policies to motivate multinationals to set up their regional headquarters in Saudi Arabia.
Tech giants such as Apple, Google, Microsoft, and Siemens have already witnessed firsthand the deep well of opportunities that the Kingdom is shaping up to be. These global enterprises have set up shops in Saudi Arabia through their respective RHQs, and the ripple effect is attestable. Google, for example, has expended around 3.25 billion USD in the Saudi market in 2021 alone.
As the 1st of January, 2024, the deadline for gaining the RHQ license, comes closer, our Director of Expansion, Alex Nicholls, sat down with Dubai Eye’s Business Breakfast hosts for today’s episode to spotlight the importance of setting up a regional headquarters in Saudi.
International Companies On The Move
In conversation with Dubai Eye’s presenter, Brandy Scott, AstroLabs Alex highlighted the overall progress of companies establishing their regional headquarters in Saudi, stating that 162 companies have already set up their RHQ in the third quarter of 2023, and the Kingdom is looking to welcome over 200 businesses with their RHQ license by end of the year, as discussed with government officials at Saudi’s Ministry of Investment (MISA).
MISA has played a pivotal role in this process, issuing RHQ licenses to foreign businesses, a prerequisite for any foreign MNC, that has at least 3 branches worldwide, seeking to operate within the Kingdom. These licenses, while not permitting commercial activities, enable RHQ-related tasks, such as budgeting, marketing, and strategic planning. For companies needing to execute specific projects, such as construction endeavors, acquiring a commercial license is necessary to execute their commercial activities, in addition to their RHQ license is a necessary step.
Intriguingly, the necessity of RHQ licenses extends beyond business activities. Key projects initiated by the Public Investment Fund (PIF), including NEOM and other government ventures, also mandate RHQ licenses for execution. However, there is still some ambiguity regarding the precise applicability of RHQ licenses in such scenarios.
To navigate this transformative landscape, Alex strongly advises companies with ongoing projects to initiate discussions with a local market entry partner, ensuring a smooth and successful licensing process in line with Saudi Arabia’s evolving business landscape. As we get closer to the due date, we are seeing companies from Tourism, Construction, Industrial, and Manufacturing industries taking the lead as pioneers in securing this license to initiate a significant presence in the Kingdom.
How to Set Up Regional Headquarters in Saudi Arabia?
For a unit to be considered an RHQ and be licensed as one, it has to fit a number of criteria.
To start, the RHQ needs to operate as a registered foreign company or branch in Saudi Arabia and have at least 2 subsidiaries or branches located outside the Kingdom and the multinational’s country of incorporation.
The RHQ must have a physical presence and should only be used for regional administrative purposes. An RHQ does not conduct any kind of commercial activity. Any commercial operation is to be handled by MISA-licensed affiliates.
In practical terms, an RHQ is in service of its subsidiaries and affiliates in MENA, providing them with strategic direction and management operations.
Your RHQ License Comes with Perks
A continually growing number of multinationals are setting up their RHQs in the Kingdom for a good reason. An RHQ license provides certain facilitations that allow the company to operate with ease within Saudi territories.
The most striking benefit is perhaps that of the 30-year exemption from corporate and withholding taxes related to the approved RHQ activities.
Other benefits include a 10-year exemption from Saudization. Saudization is a policy that requires private companies to hire a certain percentage of Saudi talent.
Another exemption is one on visa limit, supported by an acceleration in issuance. Professional accreditation is waived for RHQ license holders as well.
Benefits such as spouse work permits, an extension in dependent age (pushed up to 25 years), and end-to-end services also apply.
Contributing to the Kingdom’s Future
Perhaps the most interesting advantage for a multinational expanding through RHQ is government tendering. License holders will be eligible to bid on ongoing and future projects affiliated with the Saudi government.
By 2030, Saudi Arabia is striving for 267 billion USD in government revenues, 2 trillion USD worth of Public International Fund assets, and enough jobs to ensure a 5% decrease in unemployment.
This presents a great deal of opportunities, considering the Kingdom’s assertive development strategy, which calls for the expertise and ambition of big businesses across multiple sectors. In that light, it is necessary for global businesses to find a solid local partner who can assist them in establishing their base of operations. This is where our expansion teams come in.
AstroLabs offers businesses step-by-step guidance on how to expand in Saudi Arabia through RHQ, joining the likes of Apple and Google. We walk you through the required procedures so you can be directly engaged in promising commissions and collaborations in Saudi Arabia and have the chance to contribute to ambitious and impactful giga-projects.
Tune into a detailed walkthrough of setting up your RHQ in Saudi Arabia, with our Partnerships and Expansion Manager, Saad Syed below: