The Saudi Regional Headquarters Programme: The 30-Year Tax Deal and the Contract Rule Behind It

Saudi Arabia’s Regional Headquarters programme is two things at once, and both matter. It is one of the most generous tax offers in the region, a 30-year holiday on corporate income tax and withholding tax for a group’s regional base. It is also, since the start of 2024, a condition of winning most Saudi government contracts. For any group with real ambitions across the Middle East and North Africa, and for the Bahrain-based businesses weighing where to anchor a regional structure, the RHQ programme has moved from an incentive to consider into a decision to take a position on.

What the RHQ programme is

The programme is run by the Ministry of Investment of Saudi Arabia (MISA), in coordination with the Ministry of Finance and ZATCA, the Zakat, Tax and Customs Authority. It licenses a multinational group to locate its regional headquarters for the Middle East and North Africa in the Kingdom. The RHQ is the entity that provides strategic direction and management to the group’s entities across the region, and it holds a dedicated licence from MISA that defines the activities it is permitted to carry on.

The headline offer, the 30-year tax package, was announced on 5 December 2023, and the programme has been operating since. It is aimed squarely at the regional head offices that, until now, have tended to sit in other Gulf hubs.

The 30-year tax deal

For a licensed RHQ, the incentive is substantial. It pays 0% corporate income tax on its eligible income, the income from its approved RHQ activities. On withholding tax, the relief covers dividends, payments to related persons, and payments to unrelated persons that are necessary for the RHQ’s activities, all at 0%. The package runs for 30 years from the date the RHQ licence is granted, and is subject to renewal.

The word that carries the weight is eligible. The 0% rate applies to income from the licensed RHQ activities. Income that falls outside those activities is taxed at the standard rates. So the incentive rewards a group for genuinely running its regional headquarters functions from the Kingdom, not for parking unrelated profit there.

The contract rule, which is the real forcing function

The tax deal is the attraction. The procurement rule is the pressure. Since 1 January 2024, Saudi government entities will not enter into contracts with a multinational company that does not hold an RHQ licence in the Kingdom. For any group that sells to, or wants to sell to, the Saudi public sector, and given the scale of government and government-linked spending under Vision 2030, that is most of the market, the RHQ is no longer optional.

The rule is not absolute. There are exemptions, including contracts with a value under SAR 1 million, work that is performed outside Saudi Arabia, and certain single-bid, emergency, or clear technical-superiority situations. But for a group pursuing meaningful government or semi-government work, the exemptions are edge cases rather than a way around the requirement.

Substance is the catch

The RHQ is not a brass plate, and the rules are written to make sure of it. To hold the licence and keep the tax benefit, the RHQ has to meet economic substance conditions in Saudi Arabia: an adequate number of full-time employees for the level of activity, premises suitable for the business, and operational expenditure in the Kingdom proportionate to what the RHQ does. It has to be directed and managed from Saudi Arabia, with at least one resident director. And it has to carry on all the mandatory activities MISA specifies, built around the strategic direction and management of the regional group, plus a minimum of three optional activities from the permitted list.

That is a real cost and a real commitment. The tax relief is generous precisely because the substance behind it has to be genuine, and a group that treats the RHQ as a registration exercise rather than a functioning head office is exposed on both the licence and the tax position.

What it means for GCC and Bahrain-based groups

For a group already based in Bahrain or elsewhere in the Gulf, the RHQ programme frames a strategic question rather than a simple form-filling one. Access to Saudi government work now depends on it. The tax offer is strong. But the substance requirements mean real people, real premises, and real functions moving to, or being built in, the Kingdom, and that has to be weighed against the group’s existing regional footprint and where its people and operations actually sit.

The right answer is specific to the group: its exposure to Saudi public-sector work, the functions that genuinely belong in a regional head office, and the cost of establishing and running the substance the incentive requires. It is a decision that benefits from being modelled properly, from both the Saudi side and the group’s home-country side, before a licence application is made.

A note on scope and sources

The position above reflects the RHQ programme rules and the tax incentives announced by MISA, the Ministry of Finance, and ZATCA as they currently stand, and the government procurement rule in effect from 1 January 2024. Eligibility, the licensed activities, the substance conditions, and the procurement exemptions all depend on the detail and on the guidance in force, so any specific case should be confirmed against current MISA and ZATCA guidance rather than assumed from a general guide.

SRR Consultants provides advisory in Saudi Arabia and supports accounting and compliance across the Kingdom, including helping GCC and Bahrain-based groups assess the RHQ decision, the substance it requires, and the reporting that follows.