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Saudi Arabia rolls out regional HQs mandate with exceptions

Last week, the Saudi cabinet sanctioned contract regulations, yet refrained from providing detailed information during the announcement.

Saudi Arabia rolls out regional HQs mandate with exceptions
[Source photo: Anvita Gupta/Fast Company Middle East]

As global economic landscapes evolve, Saudi Arabia intensifies its strategic initiatives to attract businesses, and become the leading commercial, industrial and investment hub for the MENA region.

The country’s deadline for foreign firms to establish their regional headquarters in the kingdom or lose out on hundreds of billions of dollars in government contracts went into effect on Monday. 

The rule comes with exceptions for those contracts – below $266,681 (1 million riyals), deals executed outside the kingdom, contracts with sole-service or commodity providers, and situations of emergency where a foreign company without a regional headquarters is essential, as reported by the state gazette Um Al-Qurra.

Even without regional headquarters, companies can still participate in government tenders, but approval by government agencies is contingent upon being technically superior and 25% more cost-effective than the next best offer, or in the absence of competing offers.

Although the Saudi cabinet approved contracting regulations last week, detailed information was not initially disclosed. 

Notably, the announcement did not specify the number of contracts below $266,681 that a foreign firm can sign with the same government agency.

Foreign companies faced a time crunch in preparing for the deadline amid complaints about unclear tax and jurisdiction regulations. Tax incentives, including a 30-year exemption for corporate income tax, were unveiled less than a month before the deadline.

In November, Saudi Investment Minister Khalid Al-Falih stated that 180 companies had agreed to establish their regional headquarters in Riyadh, positioning Riyadh in competition with the UAE. 

Overall, the law is reflective of broader regional and global dynamics, positioning Saudi Arabia’s move as a formidable contender, challenging the established financial dominance of the UAE.

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