The Regional Headquarters (RHQ) regime in Saudi Arabia is a strategic initiative by the Ministry of Investment (MISA) and the Royal Commission for Riyadh City (RCRC) to attract multinational companies to set up their regional headquarters. This initiative aligns with Saudi Arabia’s Vision 2030, which focuses on the diversification of the economy and reducing dependency on oil. For small companies, mid-sized businesses, or corporate enterprises looking to expand their presence in Saudi Arabia, understanding the RHQ regime with the guidance of a law firm in Saudi Arabia is highly essential.
This article will walk you through the entire RHQ process, covering key aspects such as company formation in Saudi Arabia, obtaining a Saudi investment licence, understanding companies’ law and other regulations across the nation.
What is the RHQ (Regional Headquarters) Regime?
The Saudi government designed the Regional Headquarters (RHQ) regime in Saudi Arabia as a strategic initiative to attract multinational corporations to establish their regional headquarters within the Kingdom. The primary objective of this regime is to strengthen Saudi Arabia’s position as a central hub for business operations in the MENA (Middle East and North Africa) region.
The government’s vision for implementing the RHQ regime aligns with Saudi Arabia’s broader economic diversification goals under the Vision 2030 framework. By offering a favorable environment and numerous incentives for multinational corporations, Saudi Arabia aims to enhance its economic stability, drive foreign investment, and create a vibrant business ecosystem.
- a) Tax Breaks
A 30-year 0% corporate income tax and withholding tax.
- b) Visa Benefits
Exemptions from Saudization percentage requirements, work visas for restricted professions, and an allocation of 250 visas from day one.
- c) Administrative Support
Simplified processes and access to MISA’s “end-to-end” services at discounted rates.
- d) Family Benefits
Dependents of RHQ employees can work and apply for jobs through the AJEER program, with extended residency age for male dependents up to 25 years.
- e) Government Tendering
Easier access to government contracts.
By establishing an RHQ with the assistance of lawyers specializing in company formation in Saudi Arabia, organizations can better manage their operations across the Middle East and North Africa (MENA) region.
Step-by-Step Process for Setting Up RHQ Regime in Saudi Arabia
- a) Initial Research and Planning
Before getting into the depths of company formation, it’s crucial to conduct thorough research with the professionals. Understand the market dynamics, legal requirements, and benefits of the RHQ regime. Consulting with a reputable law firm in Saudi Arabia can provide valuable insights and ensure compliance with local regulations.
- b) Choosing the Right Business Structure
An RHQ must be either a registered branch of a foreign company or a subsidiary of a multinational company established in Saudi Arabia. Selecting the appropriate structure is crucial for company registration.
- c) Securing a Saudi Investment License
To operate in Saudi Arabia, foreign companies must obtain a Saudi investment license from the Saudi Arabian General Investment Authority (SAGIA). This license is essential for legally conducting business in the region. The application process involves:
- Copies of at least two commercial registrations or licenses from different countries (excluding Saudi Arabia and the country of the headquarters).
- The parent company’s commercial registration or license located outside the MENA region.
- A global corporate financial statement audited for the latest finished year or the one before.
- A completed RHQ License Online Application Form.
- d) Company Registration
Once you have secured the Saudi investment license, the next step is company registration in Saudi. This involves registering your company with the Ministry of Commerce and Investment (MCI). The registration process requires the following things from the corporate entity:
- Submitting the Articles of Association: This document outlines the company’s purpose, structure, and operational guidelines.
- Paying the Registration Fees: There are various fees associated with the company registration process, including name reservation and publication fees.
- Opening a Bank Account: A local bank account is required to execute financial transactions within the region.
- e) Compliance with Company Law
Complying with and following the company law in Saudi Arabia is crucial for the smooth operation of your business. The law covers various aspects, including corporate governance, financial reporting, and labor regulations.
Required RHQ Activities in Saudi Arabia
- a) Strategic Direction
Develop and oversee regional strategies, ensure strategic alignment, integrate products and services, assist with acquisitions, mergers, and divestitures, and evaluate financial performance.
- b) Management Functions
Business planning, budgeting, business coordination, identifying new market opportunities, monitoring regional market and competitors, marketing plans, and operational and financial reporting.
Optional RHQ Activities in Saudi Arabia
Sales and marketing support, HR and personnel management, training services, financial management, compliance and internal control, accounting, legal, auditing, research and analysis, advisory services, operations control, logistics and supply chain management, international trading, technical support, IT system operations, R&D, intellectual property management, production management, and sourcing of raw materials.
Benefits of the RHQ Regime in Saudi Arabia
- a) Strategic Location
Saudi Arabia’s central location in the MENA region makes it an ideal hub for regional operations, with a dedicated headquarters in the kingdom.
- b) Economic Incentives
Companies and enterprises can benefit from tax breaks, reduced tariffs, and other financial incentives. Consult attorneys with knowledge of Saudi investment licenses to learn more about possible incentives.
- c) Access to Emerging Talent
Saudi Arabia is making significant investments in education and training, cultivating a highly skilled workforce across diverse industries.
- d) Thriving Market Potential
With a large and growing consumer base, Saudi Arabia offers significant market opportunities for all sizes of businesses.
Challenges and Considerations with the RHQ Regime
- a) Cultural Differences
Understanding and respecting local customs, legal complications, and business practices is essential for success. The corporate entity needs to rely on a law firm in Saudi Arabia to stay aware and deal with such potential challenges.
b) Regulatory Environment
Understanding and handling the regulatory scope can be complex. Partnering with a law firm to get valuable guidance around all sorts of regulatory parameters.
c) Infrastructure
While Saudi Arabia is rapidly expanding and developing its infrastructure, there may still be limitations in certain areas for company headquarters. The government authorities can help guide the proper region for infrastructure locations.
Conclusion
Hence, the RHQ regime in Saudi Arabia is an essential initiative that offers significant benefits for multinational corporations. By following the outlined process for company formation in Saudi Arabia, securing a Saudi investment license, and complying with the company law, businesses can successfully establish their regional headquarters and tap into the growing opportunities within the region.
To ensure a smooth and efficient process, it is highly recommended to engage with reputable lawyers. As Saudi Arabia continues to implement this visionary plan, the RHQ regime will play a crucial role in attracting foreign investment and promoting economic growth. For corporations looking to expand their regional presence, understanding and utilizing the RHQ regime can provide long-term benefits.
How Can SB Saudi Lawyers Help With RHQ Establishment in Saudi Arabia?
SB Saudi Lawyers (AlSuwaiket and AlBusaiyes Law Firm), a leading law firm in Saudi Arabia, can provide invaluable assistance in understanding and handling the RHQ regime. With our extensive expertise in company formation in Saudi Arabia and deep knowledge related to relevant legalities, we ensure that businesses comply with all legal requirements. Our team of attorneys can simplify the process of company registration, help secure a Saudi investment license, and offer ongoing legal support to maintain compliance with the corporation.
Contact and partner with SB Saudi Lawyers to confidently establish your regional headquarters in Saudi Arabia, utilizing our local knowledge and professional network to reduce risks and maximize the benefits of the RHQ regime.
