All About KSA’s RHQ Program

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The Regional Headquarters (RHQ) Program in the Kingdom of Saudi Arabia (KSA) is an important program for multinational companies operating in the Middle East and North Africa (MENA) region. A joint initiative between Ministry of Investment (MISA) and Royal Commission for Riyadh City (RCRC), the RHQ program invites and incentivises multinational companies to establish their regional headquarters in the KSA. Let’s understand the RHQ program in the KSA.

Effective Date

The RHQ program is effective from 1 January 2024. From this date, only the entities with RHQ license are eligible for securing government contracts, subject to certain exceptions.  

Regional Headquarters – Meaning 

Regional Headquarters is considered as a home or center of operations (of any multinational group) established in the KSA and engaged in specified activities like management, support, strategic decision making etc. for its group entities operating in the MENA region. 

Eligibility Conditions 

An entity is eligible for the RHQ program if it meets the following requirements:

• It has presence in at least 2 countries, other than the KSA or any other country where it is headquartered; 
• It is registered in the KSA as having a separate legal identity;  
• It has established a physical office in the KSA;
• It has at least 15 full time employees, including 3 senior directors;
• It must be engaged in permitted activities – mandatory / optional; 
• It cannot engage in revenue generating activities (for instance, sale of goods to general public).  

An entity that meets the above requirements must acquire an RHQ license from the MISA. 

Mandatory / Optional Activities

The RHQ program requires that the entity must engage in the following specified activities:

• Mandatory strategic activities, viz. designing, formulation and monitoring of regional strategy, supporting mergers and consolidations, reviewing group financial performance; 
• Mandatory management activities, viz. marketing (identification of new markets, monitoring existing markets, competitors etc.), financial management, operational management; 
• Optional activities, viz. research and development, IPR services, human capital and training services, IT support services, sales, marketing and customer support services, financial management services, including accounting, auditing and legal services, logistics and warehousing services  etc.

30–year Tax Incentive 

The KSA has introduced a comprehensive 30-year tax incentive package for entities under the RHQ program. The incentive package provides for a 0% rate for corporate income tax and withholding tax related to the approved RHQ activities. Entities can enjoy these benefits from the day they obtain their RHQ license. 

Benefits for KSA Executives

The Premium Residency program for RHQ executives in the KSA offers the executives and their families significant advantages. Holders can live, work, and invest in the KSA with job flexibility and property ownership rights. The program allows vehicle ownership, facilitates family visit visas, and grants the right to invest in the Saudi Capital Market. In the event of the primary holder's demise, the spouse and children retain premium residency rights. Additionally, the initiative provides family-friendly measures, making KSA an attractive destination for foreign executives seeking personal and professional security and flexibility.

Conclusion 

The KSA’s RHQ program, with a strategic 30-year tax incentive and benefits to executives and their families is indeed attractive. Global entities may wish to consider setting up regional headquarters in the KSA and rejig their organization structure.

Related articles covering the same subject matter

• The Strategic Implications of Relocating Regional Headquarters to Saudi Arabia: An In-Depth Analysis

• Saudi Arabia – Tax Measures to Boost Investments and Economy

• Establishing a Regional Headquarters in Saudi Arabia

• Tax Incentives for Regional Headquarters in Saudi Arabia
• The UAE Tax Case Study : Zero Rate for the RHQ in Saudi Arabia and the Emirati Participation Exemption

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