Saudi Arabia is one of the largest GDP markets in the Middle East and North Africa (MENA) region. Its strategic location has helped support access to the world’s largest markets. Furthermore, it works as a link connecting three continents, making it an ideal destination for foreign investors to consider a regional headquarters program for a business setup in Saudi Arabia.
In this article, let us look at an important investment initiative in KSA. The regional headquarters program is one of the main achievements of the kingdom in the last couple of years.
Saudi Arabia’s Regional Headquarters Programme
The Regional Headquarters Programme is a joint initiative between the Ministry of Investment and the Royal Commission for Riyadh City, created as part of Saudi Arabia’s Vision 2030 and the National Investment Strategy. It will enable and facilitate the ambitious growth plans of regional organizations.
Since its inception, 2024 has seen massive expansion as foreign companies have set up regional headquarters in Riyadh. This is not only due to government support for contracting, but the Kingdom’s ambitious vision has also helped. Infrastructure development and an improved investment environment, as well as massive incentive programs such as tax exemptions and the elimination of income and withholding taxes for approved activities for regional headquarters, have made the Kingdom a magnet for global expertise and talent.
Tax Regulations for Regional Headquarters
According to decisions issued by the Saudi Investment Commission, regional headquarters that fulfill the qualification criteria are granted the following tax incentives:
- 0% income tax on qualifying income.
- 0% withholding tax on payments made by the regional headquarters to non-residents, subject to the following: dividends, payments to related persons, and payments to unrelated persons for services required for the activity of the regional headquarters.
These tax incentives are granted for a renewable period of 30 years, and the term of the Regional Headquarters tax incentives starts from the date of obtaining the Regional Headquarters license to the date of any of the following: expiration of the 30 years, or the entity ceases to be a regional headquarters for any reason.
Conditions for Tax Incentives for Regional Headquarters
The regional headquarters must fulfill all of the following conditions:
- The regional headquarters must have a valid license with no activities other than those listed in the license.
- The RHQ must have significant assets, including business offices, to carry out the licensed activities.
- The activities and the board of directors’ meetings must be inside Saudi Arabia.
- The Regional Headquarters must incur sufficient operating expenses to carry out the activities of the Regional Headquarters.
- At least one of the RHQ’s directors must reside in the Kingdom.
- The regional headquarters has a sufficient number of full-time employees during the tax year. The jobs are commensurate with the activities of the regional headquarters.
If conditions are missed during the license’s validity, the authority will notify the RHQ of the violation. The authority announces a correction period of 90 days from the date of notification. A fine of SAR 100,000 will be imposed if the violation is not corrected. If the regional headquarters repeats the same violation within 3 years from the fine date, a second fine of SAR400,000 will be imposed. The correction period of 90 days will be granted from the fine date.
The process of establishing a regional headquarters in Saudi Arabia
A regional headquarters acts as the administrative center of a company in a particular country. It oversees the company’s operations and management within that country. In Saudi Arabia, the government has issued that, as of January 2024, it will cease contracting with any foreign company without a headquarters in Saudi Arabia. This targeted companies in the Middle East and North Africa (MENA) region. Including the UAE, Kuwait, Bahrain, Oman, and Qatar. In addition to Yemen, Iraq, Jordan, Palestine, Lebanon, Syria, Egypt, Sudan, Libya, Tunisia, Algeria, Mauritania, and Morocco.
Licensing requirements for regional headquarters in Saudi Arabia
To obtain a license to operate in Saudi Arabia, foreign multinational companies wishing to relocate their regional headquarters to the Kingdom must submit the following documents:
- Commercial register copy, legalized by the Saudi Embassy.
- At least two legalized commercial registers from two different countries (not including Saudi Arabia or the company’s home country).
- A certified financial statement of the company.
- Online application form for establishing a regional headquarters in Saudi Arabia.
Partnering with Business Link Experts
Obtaining a regional headquarters license or setting up a company in Saudi Arabia is not difficult. However, it is complex for new investors in KSA. Business Link’s consultants utilize their long-standing relationships with the investment authority, are committed to providing comprehensive support. The partnership with Business Link deepens your understanding of the Saudi market. Our consultants also support you with recruitment, managing financial operations, and managing all governmental dealings for your regional headquarters. Our team of business setup experts has over 15 years of local and global experience. We take pride in helping you set up your business, following all Saudi legal requirements.
Get your free consultation with our business formation experts in Saudi Arabia.
