On 5 December 2023, the Ministry of Investment of Saudi Arabia (MISA) announced the greatly anticipated tax incentives for the Kingdom of Saudi Arabia (KSA) regional headquarters program (RHQ Program). With less than one month to go until the deadline, the news has only added to the momentum, where so far 180 RHQ licences have been issued to companies by MISA, surpassing MISA's 160 target.

The RHQ Program seeks to attract multinational companies (MNCs) operating in the Middle East and North Africa (MENA) region to establish their regional headquarters (RHQ) in KSA. The process was formalised on 27 December 2022, when the KSA Council of Ministers issued a decision approving the "Controls on the contracting of government entities with companies that do not have regional headquarters in the Kingdom and the related parties" (the Controls). These Controls detail the 1 January 2024 deadline that prevents all government entities from contracting with companies that do not have an RHQ in KSA and their related parties, with only limited exceptions available. The Controls importantly define "government entities" as all agencies, ministries, public bodies, departments, institutions and independent agencies with a public legal personality. Hence, they cover the largest cross section of business in KSA.

As of 1 January 2024, companies eligible to participate in the RHQ Program, but which have not established their RHQ for MENA in KSA, will not be able to enter into contracts with KSA government entities.

Eligibility for the RHQ Program

The RHQ Program applies to MNCs in the MENA region, with operations in at least two countries other than KSA and the country of their first incorporation.

MISA is tasked with preparing a list of names of companies with an RHQ in KSA for the deadline, and will maintain such list on the Etimad portal (i.e. the unified electronic portal for government procurement).

Key regulatory requirements

Those MNCs wishing to participate must:

• obtain an RHQ licence from MISA;
• employ a minimum of 15 full-time employees including at least three C-level executives within one year of the licence being issued;
• not engage in revenue-generating activities and instead operate as the "centre of administrative control" in the MENA region;
• limit their RHQ activities to the full list of mandatory functions (as set out by MISA) and at least three optional activities; and
• have all their existing MENA entities report to their RHQ in KSA once it is established (the RHQ must commence its operations within six months of the licence being issued).

Incentives and benefits

Whilst the shortlist of benefits offered by MISA are yet to be finalised, the current benefits offered by MISA presently include:

• a 10-year exemption from Saudisation requirements for the RHQ;
• the ability to issue unlimited number of visas to RHQ employees;
• generation of employment opportunities for dependants of RHQ employees through the Ajeer portal;
• exemption from professional accreditation requirements for RHQ employees holding valid accreditations in their home countries; and
• 30 years of tax relief (0%) on corporate income and withholding taxes related to the RHQ that begin from the time the licence is issued.

Process of establishing an RHQ

The process of setting up an RHQ in KSA includes two primary stages:

• applying for the MISA licence; and
• incorporating the RHQ entity either as a branch office or as a limited liability company in KSA.

To ease the process for investors, MISA has simplified the procedural requirements of obtaining a licence by waiving the attestation requirements generally applicable on documents originating from outside KSA. MISA is also collaborating closely with the Ministry of Commerce to accelerate the commercial registration process in KSA.

For further information, please contact our RHQ team on: Project.RHQteam.UKIME@dentons.com

This article is also available in Arabic, click here to download.