Just under a year to go before Saudi’s regional HQ moves comes into effect.
Saudi Arabia’s Regional Headquarter (RHQ) initiative is a service designed for multinational groups seeking to establish their regional headquarters in the Kingdom. The RHQ acts as a unit duly established under Saudi Arabian laws to provide support, manage and provide strategic direction to the branches, subsidiaries, and affiliates operating in the MENA region. The RHQ is established as a separate legal entity in the Kingdom, either as a registered branch of a foreign company or a new company.
What is the Basis of Qualification?
To qualify for the RHQ license, the multinational group must have a minimum presence in two different countries, excluding the Kingdom of Saudi Arabia and the country where the headquarter of the multinational group is located. The group must also provide the necessary documentation, including a copy of the commercial registration or license, copies of commercial registrations or licenses issued in two different countries (excluding Saudi Arabia and the country where the group’s headquarters are located), and annual audited consolidated financial statements for the last financial year.
What Is Required?
The RHQ’s activities are categorized into two groups: mandatory and optional. The mandatory RHQ activities are: strategic direction and management functions, including formulating and monitoring the regional strategy, coordinating strategic alignment, embedding products and/or services in the region, supporting acquisitions, mergers and divestments, and reviewing financial performance. RHQ 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.
- The RHQ must commence mandatory RHQ activities within six months of issuing the license and at least three optional RHQ activities within one year of issuing the RHQ license.
- It must also employ at least 15 full-time employees within one year of issuing the RHQ license, including at least three executive-level employees with the relevant skills and knowledge developed at the headquarters or another regional headquarters of the multinational group.
The RHQ license fee is SAR 2000 annually, and a subscription fee of SAR 10,000 for the first year is payable to obtain services from the Ministry of Investment investors’ relations centers. Subscription for the years following the first year will be free of charge. The entity is obligated to pay the financial consideration for the entire period of the license – if any – as determined by the Ministry when approving the classification mechanism within a period of 60 days from the date of notifying it of the classification and the financial consideration due from it, and in the event of non-payment within the specified period, the license is considered expired.
Cancellation Upon Non-Compliance
The RHQ license is subject to cancelation by the Ministry of Investment if the RHQ fails to commence the mandatory or optional RHQ activities or hiring the minimum number of employees within the stipulated time period. The license is also subject to cancelation if the RHQ ceases any mandatory RHQ activities or a minimum of three optional RHQ activities, or if the RHQ or the multinational group fails to satisfy any of the RHQ license conditions or violates any licensing regulation established by the Ministry of Investment.
How CBD Can Assist
As a trusted corporate services provider in Saudi Arabia, we assist with company formation and secondary registration services in Saudi Arabia. For more information or for support with a company set up in Saudi Arabia, email: KSA@cbdcorporateservices.com or call/whatsapp +971 56 218 4695. We also provide Saudi Arabia visa support.
Authored by Sartaj Mir – Operations & HR Coordinator in Saudi Arabia