Saudi Arabia Regional Headquarters Program: RHQ License, Tax Incentives & Government Contract Access

Why the RHQ Program Matters for Multinationals

Since January 1, 2024, multinational companies seeking Saudi government contracts must have a Regional Headquarters (RHQ) in the Kingdom. This requirement applies to contracts across giga-projects like NEOM, Red Sea Global, and Diriyah Gate, as well as standard government procurement through the Etimad platform. Companies without an RHQ are effectively locked out of over USD 1 trillion in planned government investment.

The RHQ Program has exceeded its Vision 2030 targets. By Q2 2025, over 650 companies had established their regional headquarters in Saudi Arabia, surpassing the original goal of 500 by 2030. The program offers qualifying companies a 30-year tax holiday on corporate income and withholding taxes, 10-year exemption from Saudization requirements, and premium residency for top executives.

This guide covers RHQ eligibility requirements, mandatory and optional activities, the 30-year tax incentive structure, economic substance requirements, and the penalties for non-compliance. The RHQ program pairs well with the recently updated laws regulating company ownership in the Kingdom with the introduction of the 100% foreign-owned LLC for certain activities. However, the RHQ program stands out as qualifying companies are eligible for the aforementioned 30-year tax break and 10-year Saudization exemption.

What Is a Regional Headquarters?

A Regional Headquarters is a legal entity established under Saudi law to support, manage, and provide strategic direction to a multinational company's branches, subsidiaries, and affiliates operating in the MENA region.

The RHQ serves as a center of administrative control, not a commercial operation. All revenue-generating commercial activities must be conducted through separate MISA-licensed affiliates (Service, Commercial, or Industrial licenses).

The RHQ Program is a collaboration between the Ministry of Investment of Saudi Arabia (MISA) and the Royal Commission for Riyadh City (RCRC). While an RHQ can technically be located anywhere in Saudi Arabia, Riyadh is the intended destination, with over 90% of RHQs established in the capital.

An RHQ can be incorporated as either a branch of the foreign parent company or as a Saudi Limited Liability Company (LLC). The RHQ license is distinct from a standard MISA trade or service license and carries specific activity restrictions and compliance requirements.

RHQ Eligibility Requirements

To qualify for an RHQ license, a multinational company must meet the following criteria:

International Presence: The company must have subsidiaries, branches, or affiliates operating in at least two jurisdictions other than Saudi Arabia and its country of incorporation. This demonstrates the multinational character required for the program.

Regional Activity: The company must be active in the MENA region and engage in strategic direction, management functions, or support functions through its regional operations.

Physical Office: The RHQ must maintain a physical office in Saudi Arabia. This cannot be a virtual office or serviced address. The office space must be proportional to the activities carried out and suitable for conducting board meetings and strategic decision-making.

No Commercial Operations: The RHQ cannot conduct commercial operations that generate revenue (other than fees for RHQ services to affiliates). All commercial activities must be handled by separately licensed affiliates.

Mandatory and Optional RHQ Activities

The RHQ license specifies both mandatory activities (which must be performed) and optional activities (of which at least three must be selected and activated within the first year).

Mandatory Activities: Strategic Direction and Management

Every RHQ must perform the following strategic direction functions: formulate and monitor the regional strategy, coordinate strategic alignment across subsidiaries and affiliates, embed products and services in the region, support acquisitions, mergers, and divestments, and review financial performance of regional entities.

Management functions include: business planning, budgeting, business coordination, identification of new market opportunities, monitoring of the regional market, competitors, and operations, marketing plan for the region, and operational and financial reporting.

These mandatory activities must commence within six months of the RHQ license being issued.

Optional Activities: Support Functions

The RHQ must select and activate at least three optional activities within the first year. Available options include:

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 Systems, and Research and Development.

The selected activities define the scope of the RHQ's operations and must be genuinely performed from Saudi Arabia to meet economic substance requirements.

Staffing Requirements

Within the first year of operations, the RHQ must employ at least 15 full-time employees. Of these, at least three must be at executive or senior level (such as Regional Managing Director, Vice President, CEO, CFO) who perform strategic management activities on behalf of the RHQ's branches and affiliates in the region.

The three C-suite executives should be the most senior executives in the MENA region and administratively linked to all executives of subsidiaries and branches in MENA. At least one executive must be a Saudi resident. All RHQ employees must have relevant experience aligned with the RHQ's activities, with MENA as their minimum scope of coverage.

RHQ employees must be permanently dedicated to RHQ work, maintain valid work permits in Saudi Arabia, receive full salaries to their Saudi bank accounts via the RHQ's local bank account, and maintain Saudi Arabia as their main residence.

There is no nationality restriction on RHQ employees, and the RHQ benefits from a 10-year exemption from Saudization (Nitaqat) requirements. The RHQ also receives unlimited work visas for employees and access to work visas for Saudi nationals in restricted professions.

30-Year Tax Incentives

The Zakat, Tax and Customs Authority (ZATCA) published the RHQ Tax Rules in February 2024, confirming the 30-year tax incentive package for qualifying RHQs. The incentives apply from the date the RHQ license is issued.

What Is Exempt

Corporate Income Tax: 0% income tax on eligible income from eligible activities (versus the standard 20% rate for foreign-owned entities).

Withholding Tax: 0% withholding tax on dividend payments made by the RHQ to non-residents and on payments to related persons (as defined under the Transfer Pricing Bylaws).

What Is Not Exempt

The 30-year tax holiday applies only to corporate income tax and withholding tax. The following taxes continue to apply:

Value Added Tax (VAT): Standard 15% VAT applies. The RHQ must submit VAT returns on a quarterly or monthly basis.

Zakat: General Zakat rules continue to apply to the extent applicable based on ownership structure.

Real Estate Transaction Tax (RETT): Standard RETT applies to any real estate transactions.

Eligible Activities for Tax Incentives

Eligible income is defined as income from the main activities of the RHQ toward strengthening the group's profile in the region and providing strategic supervision, administrative guidance, and support for the internal business of the company and related entities. This aligns with the National Classification of Economic Activities code 701011 (Activities of head offices).

If the RHQ engages in activities outside the scope of its RHQ license, these are considered ineligible activities. Income from ineligible activities is subject to standard corporate income tax rates, and separate accounts must be maintained.

Economic Substance Requirements

To maintain tax incentives, the RHQ must satisfy economic substance requirements (ESR) and submit annual reports to ZATCA verifying compliance. The ESR ensure the RHQ is a genuine operational entity, not merely a shell company.

Physical Premises: The RHQ must have adequate premises in Saudi Arabia suitable for its business activities. The office may be owned or leased, but must be proportional to the activities carried out.

Direction and Management: The activities of the RHQ must be directed and managed in Saudi Arabia. This includes holding board meetings physically in Saudi Arabia where strategic decisions are made.

Adequate Employees: The RHQ must employ an adequate number of full-time employees in proportion to the level of activity carried out.

Transfer Pricing Compliance: The RHQ must comply with Transfer Pricing Bylaws and ensure all transactions with related parties are conducted at arm's length. Given the tax incentives available, tax authorities in jurisdictions transacting with the RHQ will likely place higher scrutiny on transfer pricing arrangements.

Compliance Requirements and Penalties

Ongoing Compliance

The RHQ must register with ZATCA for tax purposes, file annual tax or Zakat returns, submit an annual Economic Substance Report using ZATCA's designated form, and prepare and maintain audited financial statements for each tax year throughout the license period. Withholding tax forms must be submitted annually even if there is no tax to declare.

Penalties for Non-Compliance

If the RHQ fails to meet economic substance requirements during the license period, ZATCA will notify the RHQ and grant 90 days to rectify the violation. Failure to remedy within this period triggers the following penalties:

First Violation: SAR 100,000 fine, with 90 days to remedy.

Second Violation: SAR 400,000 fine (if violation persists or is repeated within 3 years), with 90 days to remedy.

Continued Non-Compliance: ZATCA, in coordination with MISA, may suspend the tax incentives.

ZATCA may revoke tax incentives entirely if the RHQ intentionally submits false or misleading information, misapplies the tax rules to benefit from incentives on ineligible activities, or makes payments to non-residents on behalf of persons that do not qualify for incentives.

Government Contract Exemptions

While the RHQ requirement is broadly mandatory for government contracting, limited exemptions exist:

Small Contracts: Contracts not exceeding SAR 1 million can proceed without an RHQ.

Projects Outside KSA: Contracts for projects executed outside Saudi Arabia are exempt from the RHQ requirement.

Single Bidder or Emergency: If only one bid meets technical specifications, or in emergencies where required services can only be provided by a company without an RHQ, government entities can award the contract.

25% Price Advantage: A bid from a company without an RHQ can be accepted if it is rated as the highest-quality technical bid and is financially more competitive by at least 25% compared to the second-best bid.

Additional RHQ Benefits

Beyond tax incentives and government contract access, RHQs receive:

10-Year Saudization Exemption: No local hiring quotas for the first decade of operations.

Premium Residency: Top three executives and their families receive premium residency free of charge.

Unlimited Work Visas: No cap on the number of work visas for RHQ employees.

Professional Accreditation Exemption: RHQ employees holding valid professional accreditations in their home countries are exempt from additional Saudi accreditation requirements.

Dependents Benefits: Ajeer program access for dependents of RHQ employees, and relaxed age limit for male dependents' residency extended to 25 years.

MISA Services: Waiver from MISA subscription fees for investor service centers following the first year, and access to end-to-end services at discounted rates with preferential treatment.

License Fees and Timeline

License Fees: SAR 10,000 initial payment in the first year, then SAR 2,000 annual renewal. The license is valid for 1 to 5 years.

Processing Time: RHQ licenses are expected to be issued within 30 days with a complete application.

Key Deadlines: 6 months from license issuance to complete full incorporation and commence mandatory activities. 1 year to hire 15 employees, appoint 3 C-suite executives, and activate at least 3 optional activities.

How We Support RHQ Establishment

Our team guides multinational companies through the complete RHQ establishment process. We assess your eligibility based on international presence and regional activity, advise on the selection of optional activities aligned with your business model, manage the MISA application and licensing process, coordinate with ZATCA on tax registration and compliance setup, and prepare economic substance documentation and transfer pricing frameworks.

For companies with existing UAE operations, we advise on regional structuring that positions your RHQ alongside your UAE entities. Many clients maintain UAE holding structures while establishing Saudi RHQs to access government contracts and regional management incentives in both markets.

Contact Gravity Power Management Consultancies to discuss your RHQ requirements and begin the licensing process.

Article Written By:

Martin Kocher,

Investment Structuring Expert

Dubai, United Arab Emirates

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Disclaimer: Thank you for reading our article! This content is for informational purposes only and does not constitute legal, tax, or investment advice. Please consult qualified professionals for guidance specific to your situation.