The Ministry of Investment Saudi Arabia (MISA) has issued new guidance in respect of its Regional Headquarter (RHQ) Programme, which incentivises companies to set up their regional headquarters in Saudi Arabia by obtaining an RHQ business licence. The licenses are now available.
Last February, the government announced: "The Kingdom of Saudi of Arabia intends to cease contracting with companies and commercial institutions with regional headquarters not located in the Kingdom. The cessation will include agencies, institutions and funds owned by the government and will take effect 1 January 2024."
In October it announced that a total of 44 multinational companies (MNCs) had received licences to move their regional headquarters to Riyadh. Through the RHQ programme, these MNCs now have direct access to the local economy. The programme also provides direct and indirect benefits for Saudi nationals, residents and businesses, by creating local employment opportunities. Every job attracted through the RHQ programme is estimated to create 2.5 jobs indirectly in the base economy.
Fahd Al-Rasheed, CEO of the Royal Commission for Riyadh City (RCRC), said: "The RHQ companies will bring new expertise, research and development, as well as innovation in a wide range of sectors, resulting in knowledge transfer in the medium to long term, and improvement in the local talent pool. By 2030, the programme will contribute $18 billion to the local economy and create around 30,000 new jobs."
"As an attractive city for MNCs, their employees, and their families to relocate, Riyadh is at the centre of the regional headquarters attraction programme of multinational companies. We are undergoing a rapid transformation, as we look to double the city's population and increase its economic footprint threefold by 2030. Four mega projects in the city are in progress to considerably advance quality-of-life rankings globally."
According to the new guidance, an RHQ is defined as "a unit of a multinational group that is 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 the MENA region."
It will act as the centre of administrative power for the multinational group over the MENA region and is required to have at least two subsidiaries or branches located in two different countries other than Saudi Arabia and its country of incorporation.
An RHQ is not intended to conduct any commercial (revenue generating) operations. Any commercial activities in Saudi must be conducted by group affiliates holding a valid Service, Commercial or Industrial Licence, or any MISA licence suitable for commercial operations.
An RHQ must provide mandatory RHQ Licence activities and at least three of the optional RHQ Licence activities to branches, subsidiaries and/or affiliates within the multinational group.
Mandatory RHQ Licence activities include 'strategic direction' activities, which are listed as follows:
- Formulate and monitor the regional strategy
- Coordinate strategic alignment
- Embed products and/or services in the region
- Support acquisitions, mergers and divestments
- Review financial performance
They also include 'management functions' activities, which are listed as follows:
- Business planning
- Budgeting
- Business coordination
- Identification of new market opportunities
- Monitoring of the regional market, competitors, and operations
- Marketing plan for the region
- Operational and financial reporting
The list of optional RHQ Licence activities is much longer, including:
- Sales and Marketing Support
- Human Resources and Personnel Management
- Training Services
- Financial Management, Foreign Exchange and Treasury Centre Services
- Compliance and Internal Control
- Accounting
- Legal
- Auditing
- Research and Analysis
- Advisory Services
- Operations Control
- Logistics and Supply Chain Management
- International Trading
- Technical Support or Engineering Assistance
- Network Operations for IT System
- Research and Development
- Intellectual Property Rights Management Production Management
- Sourcing of Raw Materials and Parts
A multinational group is required to start RHQ operations within six months of its licence being granted and should establish at least three 'optional activities' during the first year of the licence operation. An RHQ is also required to have 15 full-time employees within the first year, of which at least three must be at a corporate executive level – CEO, CFO, vice-president etc.
A unit of a multinational group that is duly established as an RHQ under the laws of Saudi Arabia will enjoy the following benefits:
- 10-year exemption from 'Saudization' regime
- Spousal work permits and the age of dependents extended to 25-years-old
- Waiver of Professional Accreditation rules
- Visa limit exemption and issuance acceleration
- End-to-end services (Business, Personal & Concierge)
- Government Tendering
- KAFD SEZ with additional incentives (estimated Q1 2022)
- Government tendering after 2024
Additional incentives will be available for RHQs established in the King Abdullah Financial District (KAFD) special economic zone from Q1 2022. The KAFD SEZ, which is to offer one million m2 of office space across 65 buildings, will be the centre for RHQs of all major Saudi companies and banks.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
