Saudi Arabia – Draft Rules on Regional Headquarters (RHQ): A Call to Multinational Enterprises

New Regulatory Framework for RHQs: Tax Relief, Substantive Presence, and Streamlined Licensing

Saudi Arabia has released the long-awaited draft of the «Rules Regulating the Licensing and Supervision of Regional Headquarters of Multinational Companies,» issued pursuant to Cabinet Resolution No. (338) dated 23/4/1445H. This regulatory framework, currently open for public consultation, forms part of the Kingdom’s ambitious Vision 2030 strategy to establish Saudi Arabia as the prime regional base for multinational enterprises (MNEs) operating in the Middle East and North Africa (MENA) region.

Far beyond mere tax incentives, the draft Rules introduce a binding, structured regime that combines regulatory clarity with strict compliance obligations and long-term benefits. The most salient features include the following.

30-Year Tax Holiday

Entities licensed as RHQs will enjoy a 0% income tax rate and a 0% withholding tax rate on dividends, related-party payments, and payments for services essential to RHQ activity. These tax incentives are granted for a period of 30 years, renewable under conditions set by the Ministry of Investment.

Operational Substance Requirements: RHQ Functions and Compliance

At the core of the RHQ regime lies the requirement for substantial and sustained business presence in the Kingdom. Licensed RHQs must activate both mandatory and optional activities as defined in Article 7 of the Rules:

Mandatory Activities (to be activated within the first year):

• Preparation and implementation of the regional strategy;
• Strategic coordination of the MNE’s operations in the region;
• Selection of products and services offered in the region;
• M&A support;
• Financial performance review;
• Budget planning for regional operations;
• Coordination of business units across MENA;
• Market research and competitor analysis;
• Identification of new market opportunities;
• Marketing strategy development;
• Preparation of operational and financial reports.

Optional Activities (minimum of three to be activated): These include, among others:

• Research, development and innovation;
• Sales and marketing;
• Human resources and training;
• Financial management, foreign exchange and treasury services;
• Legal consultancy, compliance, internal audit;
• Logistics, IP management, production, and technical support.

The selected optional activities must be aligned with the MNE’s global business strategy and must be regionally anchored.

Additional Substantive Requirements

• Minimum of 15 employees in the first year;
• At least 3 senior executives must be based in the Kingdom and must represent the top decision-making authority for the region;
• RHQ staff must reside in Saudi Arabia, be dedicated full-time, be licensed locally, and receive remuneration through Saudi bank accounts;
• RHQ operations must be exclusively performed within the Kingdom.

Licensing Process and Timing

The licensing process is clearly defined. Upon submission of the required documentation (commercial records, financials, activity plans), the Ministry of Investment will process the application within 30 working days.

True Regional Authority and Kingdom-Centric Operations

Licensed RHQs must hold administrative authority over all regional branches and subsidiaries. The RHQ must operate as the highest strategic, executive, and administrative authority in the MENA region. Furthermore, all RHQ-related activities must be carried out exclusively from within the Kingdom.

Localization Requirements

To ensure genuine local presence, the RHQ regime mandates:

• Saudi residency and work permits for all RHQ personnel;
• No hybrid or remote models from abroad;
• Local registration of intellectual property and commercial identifiers;
• Internal reporting and supervision obligations anchored in Saudi Arabia.

Is RHQ Establishment Mandatory or Optional?

While the RHQ license remains optional in principle, it is effectively mandatory for all multinational companies intending to contract with Saudi public sector entities.

As of 1 January 2024, the Saudi government will only consider public procurement contracts from companies that have an RHQ presence in the Kingdom, unless an express exemption is granted. Companies operating purely in the private sector without government contracts remain unaffected, but will nonetheless benefit from the RHQ regime if they choose to participate.

This regulatory shift creates a strategic filter: those seeking to participate in Saudi Arabia’s transformation across infrastructure, health, energy, and education must establish a fully embedded regional presence in the Kingdom.

Conclusion: High-Reward, High-Compliance Environment

The draft Rules represent a bold step in reshaping the MENA business landscape. Saudi Arabia is setting the bar high: generous tax relief and fast-track licensing are tied to substantive commitments in structure, personnel, and governance. For MNEs willing to assume regional leadership from within Saudi borders, the opportunity is as attractive as it is demanding.