Saudi Arabia has recently announced its plans to formalise a structured exemption framework to its Regional Headquarters (RHQ) requirement, aligning with evolving SA RHQ requirements and allowing government entities to award government contracts to foreign companies without a regional headquarters in Saudi Arabia under defined competitive and technical conditions. The rule introduced in 2024 remains in force, but what will change is how it can now be applied within the regulatory framework.
The exemption mechanism, administered through the Etimad government procurement platform, supports the wider government procurement authority framework and enables government entities and government agencies to proceed with non RHQ bidders where market conditions justify it, including limited competition, pricing advantages or project specific requirements. More than 700 multinational companies have already established regional headquarters in Saudi Arabia, reinforcing its position as a strategic regional hub for international companies operating across the Middle East.
In practice, foreign companies lacking an RHQ now have a clearer and more structured route into government tenders and public tenders, including direct contracting procedures and initiating direct contracting procedures, where previously the position was far more restrictive.
Policy context: RHQ under Vision 2030
The regional headquarters programme, led by the Ministry of Investment, forms part of Saudi Arabia’s Vision 2030 strategy to position Riyadh as a base for multinational companies and regional operations. The regional headquarters program continues to support regional headquarters relocation and the establishment of headquarters in Saudi Arabia, strengthening local content and aligning management functions closer to the regional market.
The objective was to attract foreign companies, enhance private sector participation, and build long term operational and financial reporting capabilities within the Kingdom. This also supports financial management, strategic direction, broader regional strategy, region support acquisitions, and functions such as marketing support and the development of an operations marketing plan across the Middle East.
For many multinational companies, this includes aligning the regional headquarters with the foreign parent entity, managing relationships with related parties, supporting digital transformation, and improving overall financial performance across regional operations.
While the policy delivered strong results, certain sectors particularly those requiring specialised technical support faced limitations due to a smaller pool of RHQ based bidders. This impacted competition across government tenders and public tenders, highlighting the need for a more flexible exemption process within the regulatory framework.
How the exemption framework operates
Under the updated approach, government entities will be able to apply for exemptions before initiating public tenders or direct contracting procedures, subject to defined governance and oversight through Etimad and aligned with government operations.
Requests may cover individual projects, groups of projects, or a defined time period, with all applications reviewed within a structured approval process rather than discretionary decision making. The exemption process ensures transparency, spending efficiency, and accountability across government bodies.
Core criteria
- Non RHQ bids may be accepted where there is only one technically compliant bid
- A bid may be considered where it is technically strong and at least 25 per cent lower in estimated value than competing proposals
- Contracts below SAR 1 million are exempt from the RHQ requirement
Government entities must also document and justify decisions, ensuring audit visibility, spending efficiency, and compliance with procurement regulations across government agencies.
What this means in practice
For multinational companies and international companies, participation in government procurement is now more accessible without an immediate RHQ setup, particularly in specialised sectors or where pricing advantages apply. However, the threshold remains high.
Companies must demonstrate strong technical capability, including a technically compliant bid, commercial advantage, and early engagement with government bodies, especially when initiating direct contracting procedures.
Strategic considerations
The introduction of exemptions does not remove the importance of establishing a regional headquarters in Saudi Arabia. Instead, it reinforces it.
Companies with a regional headquarters in Saudi Arabia or holding an RHQ license remain better aligned with government procurement expectations, benefit from tax incentives, and face fewer barriers when bidding for government contracts. These structures also support regional operations, management functions, local content requirements, and compliance with regulations such as withholding tax.
For businesses evaluating long term positioning in the Kingdom, establishing a regional headquarters in Saudi Arabia remains the more stable and strategic route, particularly for accessing government tenders and supporting regional market growth.
Outlook
Saudi Arabia’s approach represents a refinement of the regional headquarters RHQ model rather than a policy shift. The objective of positioning the Kingdom as a leading regional hub and strategic location connecting global talent and investment remains unchanged.
The introduction of a formal exemption process supports flexibility in government operations while maintaining focus on strengthening the private sector, attracting multinational companies, and expanding regional headquarters activity across the Middle East.
As the framework evolves, businesses should treat the exemption process as a conditional pathway and assess their regional strategy, market entry, and long term presence in Saudi Arabia accordingly.
How Sovereign can help
Sovereign Group supports businesses in navigating SA RHQ requirements, obtaining an RHQ license, and establishing a regional headquarters in Saudi Arabia. We provide guidance on regulatory framework alignment, tax, compliance, and operational setup to support expansion across Saudi Arabia and the wider Middle East.
