3 Key Requirements RHQ Compliance in Saudi Arabia 2026

Saudi Arabia’s Regional Headquarters program is a cornerstone of Vision 2030, attracting foreign multinational companies to establish their regional hub in the Kingdom of Saudi Arabia. The RHQ program is a strategic initiative supporting Saudi Arabia's economic goals. This year the minstry of investment has announced that Saudi Arabia has already overachived the vision2030 target of 500 RHQs where there are already 600+ license issued and 350+ rhq already opened, 90% of them in Riyadh city. While the benefits are significant, so are the compliance obligations. Failing to meet the requirements set by the Ministry of Investment (MISA) can lead to severe penalties. Organizations must adhere to the regulations governing the RHQ program and comply with all relevant laws and regulations to maintain eligibility for incentives and avoid suspension of benefits.

To ensure your regional headquarters operates smoothly and avoids costly fines, here are three critical requirements you must fulfill within your first year of licensing. The RHQ must be established as a legal entity to qualify for the license and access the associated tax benefits and incentives.

The Regional Headquarters License in Saudi Arabia

Setting up a Regional Headquarters (RHQ) in Saudi Arabia is a strategic move for international companies seeking to expand their influence across the MENA region. The process begins with obtaining an RHQ license from the Ministry of Investment (MISA), which requires the applicant to be an international company with at least two branches outside the Kingdom and its main headquarters. RHQ licenses serve as regulatory authorization for foreign companies to establish regional headquarters in Saudi Arabia.

The RHQ license is tailored to support regional administrative and strategic functions, enabling companies to manage their operations and drive growth across multiple markets efficiently. Eligible activities for RHQ benefits are those that align with the national classification of economic activities and qualify for tax advantages, such as strategic supervision, administrative support, and core business functions. The national classification is used as a regulatory framework to determine which business functions are considered eligible for RHQ benefits. The RHQ license is granted exclusively for RHQ activities, and any commercial operations must be licensed under a separate entity. Read our blog to learn more on How to Start a Regional Head Quarter (RHQ) in Saudi Arabia: A Basic Guide

The Recuirments of Regional Headquarters (RHQ) Compliance Saudi Arabia

1. Onboard 15 team members

A fundamental requirement for your RHQ is to demonstrate a tangible economic contribution. This starts with building a local team. RHQ employees must possess the requisite qualifications to meet program standards, ensuring compliance with regulatory expectations.

Within the first operational year, your RHQ must hire a minimum of 15 full-time RHQ employees. At least two of these RHQ employees must be at the senior executive level, such as a CEO, CFO, or other C-suite positions. This rule ensures that the RHQ is not just a “letterbox” company but a substantive entity with decision-making power and a real presence in the Kingdom, providing support to related companies and other related companies within the group.

2. Perform the core activities

Your RHQ license is granted based on the premise that you will be managing and supporting your company’s affiliates across the region from Saudi Arabia. Therefore, you must be actively performing core RHQ functions. RHQs are expected to provide strategic supervision and administrative guidance to their internal business operations across the region. By the six-month mark, RHQs are expected to have commenced all mandatory and optional activities outlined in their license.

International companies with a regional headquarters (RHQ) in Saudi Arabia can manage tasks like budgeting, marketing, and strategic planning without permitting commercial activities. Income from eligible activities is the basis for tax incentives, and RHQs must demonstrate economic substance through adequate operational expenditure.

The regional headquarters (RHQ) is required to perform at least three mandatory activities, which typically include providing strategic direction and management functions. Beyond the mandatory list, there are several optional activities your regional headquarters (RHQ) can engage in, such as sales and marketing support, human resources, or financial management. The key is to prove that your regional headquarters (RHQ) is genuinely operational and serving its intended purpose as a regional command center.

3. Conduct quarterly board meeting at Saudi Regional Headquarters

To solidify Saudi Arabia’s position as the central hub for your regional operations, physical presence and high-level engagement are essential.

Your regional headquarters (RHQ) must conduct its quarterly board meetings in Saudi Arabia. This requirement ensures that key strategic decisions are made within the Kingdom, reinforcing the RHQ’s authority and its central role in your company’s regional structure. It’s a clear indicator to authorities that your commitment to the program is serious and that the regional headquarters (RHQ) is the true epicenter of your regional business.

The regional headquarters (RHQ) must maintain accurate records of their financial transactions and operational expenditures. RHQs must also maintain separate books for eligible and ineligible activities to ensure compliance with Saudi Arabian tax laws. The regional headquarters (RHQ) are required to file annual tax returns and make necessary disclosures to the Zakat, Tax, and Customs Authority (ZATCA).

Tax Incentives and Benefits for RHQs in Saudi Arabia

Saudi Arabia’s commitment to becoming the leading business gateway to the Middle East and North Africa (MENA) region is reflected in its robust package of tax incentives and benefits for multinational companies establishing regional headquarters (RHQs) in the Kingdom. These incentives are a cornerstone of the government’s strategy to attract foreign direct investment and foster a thriving, diversified economy under Vision 2030.

By setting up a regional headquarters in Saudi Arabia, multinational companies can access a range of tax advantages designed to maximize profitability and operational efficiency. Key benefits include long-term exemptions from income tax and withholding tax on eligible income generated from RHQ activities, as well as preferential treatment on customs duties for goods and services supporting regional operations. These tax incentives are available for up to 30 years, providing RHQs with a stable and predictable fiscal environment to plan for sustainable growth.

In addition to direct tax benefits, RHQs in Saudi Arabia enjoy streamlined administrative guidance and support from the Ministry of Investment (MISA) and the Zakat, Tax, and Customs Authority (ZATCA). This ensures that international companies can navigate local tax rules and regulations with confidence, while focusing on their core business activities and regional strategy.

The combination of generous tax incentives, a strategic geographic location, and a pro-business regulatory framework makes Saudi Arabia an ideal destination for multinational companies seeking to establish a regional headquarters and expand their footprint across the MENA region. By leveraging these benefits, your RHQ can play a pivotal role in driving your company’s regional growth and long-term success.

What happen when you fail to meet the RHQ requirments within the first year

MISA is actively monitoring the regional headquarters to ensure they adhere to the regulations. Failing to meet these first-year requirements can result in significant consequences.

• Justification is Required: If your regional headquarters fails to meet any of the above conditions, you must provide a formal justification to the authorities explaining the shortfall. However, submitting a justification does not guarantee a waiver from penalties.

• Financial Penalties:

• A fine of $100,000 \text{ SAR}$ is imposed if your regional headquarters fails to meet either the employee quota or the mandatory activity requirement.

• If an inspection reveals that the regional headquarters (RHQ) is non-operational, a much steeper fine of $400,000 \text{ SAR}$ will be levied.

• If a violation is not remedied within 90 days, or if the same violation occurs again within 90 days, additional penalties may be imposed, and there is a risk of suspension or loss of tax exemptions.

• Loss of Benefits and License: Beyond financial penalties, non-compliance can lead to the withdrawal of all RHQ benefits, including tax incentives and other preferential treatments. In the most severe cases, authorities have the power to cancel your RHQ license entirely, jeopardizing your entire regional operation.

Partner with TASC to Ensure 100% RHQ Compliance

We bring 18 years of regional expertise, which helps global companies establish and operate in Saudi Arabia with full compliance confidence. We have recently successfuly helped multiple regional headquarters with draft responses to MISA survey on regional headquarters requirments compliance.

Connect with our experts today to ensure your RHQ meets every milestone, maximizes its 30-year tax advantage, and builds a lasting presence in Saudi Arabia.

Frequently Asked Questions on the Complaince Requirments of Regional headquarters in Saudi arabia

Q1: When does the "first year" for meeting these compliance requirements officially begin?

The one-year compliance period starts from the date your Regional Headquarters (RHQ) license is issued by the Ministry of Investment (MISA). You should have all requirements, including the hiring of 15 employees, fulfilled by the first anniversary of your license issuance.

Q2: Regarding the 15 employees, do they all need to be Saudi nationals?

The specific RHQ rule mandates hiring 15 full-time employees without stipulating a particular percentage of saudization for the RHQ entity itself. For more information about onboarding expatriate employees to Saudi Arabia, including legal and administrative requirements, you can refer to this comprehensive guide.

Q3: What are considered "mandatory activities" for an RHQ?

Mandatory activities are the core functions that define a regional headquarters. They primarily include providing strategic direction and management functions to your company's subsidiaries or affiliates in the region. This can involve business planning, corporate strategy, financial oversight, and regional coordination.

Q4: Can the quarterly board meetings be held virtually if some board members are overseas?

The regulation requires the board meeting to be "conducted in Saudi Arabia." This is generally interpreted as requiring the key decision-makers and the official proceedings to be physically located within the Kingdom to reinforce Saudi Arabia as the central hub of operations. It is best to plan for physical meetings to ensure full compliance.

Q5: What happens if we hire 15 employees, but someone resigns during the year, and we temporarily drop to 14?

You are expected to maintain the minimum threshold of 15 employees throughout the year. If an employee leaves, your company should act promptly to hire a replacement to ensure you remain compliant at the time of any inspection or review.

Q6: Is the $100,000 \text{ SAR}$ penalty a one-time fine, or can it be applied for each missed requirement?

The current information indicates a fine of $100,000 \text{ SAR}$ is applicable if you fail to meet the employee quota or if you fail to perform the mandatory activities. The fine of $400,000 \text{ SAR}$ is for being non-operational entirely. These penalties can be levied in addition to other consequences like the loss of benefits.

Q7: What kind of justification would be considered acceptable if we cannot meet a requirement?

While there is no exhaustive list, any justification would need to be compelling and demonstrate that the failure was due to significant, unforeseen circumstances beyond your control. For example, extreme global market disruptions or unforeseen regulatory hurdles. However, submitting a justification is not a guarantee that penalties will be waived, and the final decision rests with the authorities.

Q8: Can we get an extension on the one-year deadline if we face delays?

Based on the latest official guidance, the one-year deadline is firm. Companies planning to establish an RHQ should build a robust operational plan to ensure they can meet these critical requirements within the first 12 months of licensing.