Regional Headquarters Licenses in Saudi Arabia

The Kingdom of Saudi Arabia is characterized by a strategic location and a prominent support for foreign investment, making it an attractive destination for investment in the Middle East and has become a preferred destination for global companies to establish regional headquarters, as it provides attractive investment ventures and tax incentives. Therefore, the Royal Commission made it possible for foreign companies to obtain licenses to open regional headquarters within the Kingdom as per the regulating Saudi laws. In this context, the Kingdom issued a decision to stop contracting with any foreign company that does not have an administrative headquarter in KSA.

Required Documentations:

• A copy of the commercial registration of the applicant facility certified by the Saudi Embassy
• Copies of at least two commercial registrations issued in two different countries (excluding KSA and the country in which its head office is located) certified by the Saudi Embassy in the respective countries. 
• The financial statement of the last fiscal year of the applicant facility, certified by the Saudi Embassy in the respective country.
• Complete the e-application form to open a regional headquarters in KSA.

Incentives granted to regional headquarters in Saudi Arabia 

The Kingdom of Saudi Arabia has approved a set of tax exemptions for foreign companies opening regional headquarters in the Kingdom, such as the cancellation of income tax and withholding tax. These incentives are granted for a renewable period of thirty years, starting from the date of obtaining the licenses until the expiry of that period or until the legal entity ceases to be a regional headquarters. The incentives are regulated as follows: 

• Regional headquarters are granted a 0% income tax exemption on qualifying income.
• Regional headquarters are granted a 0% withholding tax exemption on payments made by the regional headquarters to non-residents, as follows:
  • Dividends.
  • Payments to related persons.
  • Payments to unrelated persons for services required for the activity of the regional headquarters.
• Withholding tax exemption is not granted to regional headquarters if the amount paid by them relates to non-qualifying activities, or in cases of tax avoidance.

Regional Headquarters Activities:

There are two types of activities carried out by the regional headquarters; i.e. mandatory and optional activities.

1. Mandatory Activities:

They include strategic direction and management functions. 

Strategic Direction functions include: 

1. Plan and monitor the regional strategy
2. Coordinate strategic alignment
3. Inclusion of products and/or services in the region
4. Support acquisitions, mergers and divestments
5. Review financial performance. 

Management functions include: 

1. Business planning
2. Budgeting
3. Business coordination
4. Identifying new market opportunities
5. Monitoring of the regional market, competitors, and operations
6. Marketing plan for the region
7. Operational and financial reporting.

2. Optional Activities:

They include:

1. Sales and Marketing Support
2. Human Resources, and Personnel Management
3. Training Services
4. Financial Management, Foreign Exchange, and Treasury Centre Services
5. Internal Control Procedures and Compliance
6. Accounting Services
7. Legal Services
8. Auditing Services
9. Research and Analysis Services
10. Advisory/ Consulting Services
11. Operations Control
12. Logistics and Supply chain management
13. International Trading Services
14. Technical Support or Engineering Assistance
15. Network Operations for IT System
16. Research and Development
17. Intellectual Property Rights Management
18. Production Management
19. Sourcing of Raw Materials and Spare Parts.

Rules and Restrictions: 

1. The parent facility shall be licensed in at least two different countries, excluding KSA and the country in which its head office is located, either through subsidiaries or branches. 
2. The regional headquarters shall be established as a legal entity – separate from other multinational company entities inside the Kingdom – as a company or as a registered branch of a foreign company. 
3. The regional headquarters shall not directly engage in activities that generate business revenues other than the approved licensed activities. 
4. The regional headquarters shall commence the mandatory activities within six months of issuing the License. 
5. The regional headquarters shall commence at least three optional activities within one year of issuing the License (The applicant selects the optional activities upon submitting the license e-application). 
6. The staff carrying out mandatory activities shall have the relevant skills and knowledge developed at the main office or another regional headquarters of the parent company; provided that at least 3 employees of which must be at the level of Executive Director and Vice-President. 
7. The regional headquarters is obliged to hire at least 15 full time employees to conduct the licensed activities within one year of issuing the License (including the senior level executives mentioned in the above item). 

License Cancellation:

The regional headquarters License is subject to cancelation by the Ministry of Investment in any of the following situations:

• Failure to commence the mandatory or optional License activities, or to hire the minimum number of employees within the stipulated period of time. 
• The cessation of any of the mandatory activities, or a minimum of three optional activities. 
• The regional headquarters or the parent company ceases to fulfill any of the conditions of the license. 
• Failure to comply with the rules and restrictions of the investment license set forth by the Ministry of Investment. 

Licenses Fees 

• License fees are 2,000 Saudi Riyals yearly.
• License fees for the first year subscription to obtain services from the Investor Relations Centers of the Ministry of Investment are 10,000 Saudi Riyals.
• The yearly subscription in the following years is free of charge.

Service fees for the entire license period, if any, in accordance with what the Ministry determines when approving the classification mechanism shall be paid within (60) days from the date of notification of the classification and its corresponding fees. In case of delay, the service shall be cancelled and the license shall be deemed to have expired

The licenses are applied for through the website (the E-Services Portal), and the service is delivered within a maximum of two working days.