5 Mandatory Regional Headquarters (RHQ) Activities in Saudi Arabia

The Regional Headquarters (RHQ) license is a cornerstone of Saudi Arabia’s strategy to attract foreign direct investment and establish itself as a premier destination for multinational companies. This specialized license allows multinational companies to set up a Saudi Regional Headquarters, providing them with a platform to oversee and coordinate their operations across the Middle East and beyond. 

One of the primary advantages of the RHQ license is access to significant tax incentives, including exemptions from income tax and withholding tax on qualifying activities. These incentives are designed to create a more favourable business environment and reduce the overall cost of doing business for international companies. In addition to tax benefits, the RHQ license comes with economic substance requirements, ensuring that the RHQ is genuinely managing and supervising regional operations from within Saudi Arabia.  

To qualify for an RHQ license, a multinational company must meet specific eligibility criteria. This includes having at least two subsidiaries or branches outside Saudi Arabia and the parent country, maintaining a physical office in the Kingdom, and demonstrating the capacity to perform both mandatory and optional RHQ activities. The license enables companies to engage in a range of strategic functions, such as strategic supervision, administrative guidance, and human resources management, while also allowing for optional activities that can further support regional operations. 

The Regional Headquarters Activities in Saudi Arabia 

The range of activities permitted under the RHQ license is defined by both mandatory and optional activities, with eligibility often determined by the national classification of economic activities. This guide breaks down these activities based on official MISA guidelines, the process for obtaining a regional headquarters license, and how to stay compliant while maximising your operational advantage, in line with Saudi Arabia’s ongoing efforts to attract multinational groups and international investment through regulatory reforms. Saudi Arabia's strategic initiatives, including the RHQ program, are designed to foster a favorable environment for multinational groups seeking to establish a regional presence. 

A) The RHQ Mandatory Activities 

1. Strategic Direction and Regional Oversight 

• Formulate and monitor the regional strategy: The RHQ must define the medium- and long-term direction for the multinational’s operations in the Middle East & North Africa (MENA) region (or broader if approved). 

• Coordinate strategic alignment: Ensure that all regional subsidiaries, branches and affiliates are aligned with the parent company’s strategic goals in terms of market entry, product/service positioning, resource allocation, and governance.  

• Embed products and/or services in the region: The RHQ needs to drive the localisation or regional adaptation of the group’s products/services, essentially making Riyadh the hub for making those offerings relevant in the region. 

• Support acquisitions, mergers and divestments: The RHQ must be actively involved in major corporate development events in the region, such as M&A, joint-ventures, divestments, overseeing the process, aligning with strategy, and ensuring regional footprint consolidation. 

• Review financial performance: The RHQ should review and monitor the financial results of the regional entities, ensuring profitability, cost-control, risk management, and adherence to group financial policies. 

How to implement: 

• Conduct regular board meetings physically in Saudi Arabia to meet compliance, demonstrate local management oversight, and fulfill governance requirements for the RHQ. 

• Develop a regional strategic plan document, including target markets, growth forecasts, investment priorities, and risk mitigation. 

• Monitor and report on KPIs across the region market share, regional revenue growth, new product launches, cost synergies. 

• Review all proposed M&A / JV deals in the region through the RHQ and provide a regional “go/no-go” recommendation to HQ. 

• Maintain a rolling financial dashboard of regional entities that feeds into RHQ management reviews. 

2. Coordination of Regional Operations 

• Business planning: The RHQ must develop operational and strategic business plans for the region, including initiatives, timelines and accountable owners. 

• Budgeting: Preparing regional budgets (revenues, costs, investment) and ensuring subsidiaries adhere to those budgets or provide justifications for variances. 

• Business coordination: Ensuring that regional and local entities are working in concert, e.g., shared services, aligning marketing campaigns, common procurement strategies, unified policies. 

• Identification of new market opportunities: The RHQ should actively scan the region for emerging markets, new customer segments, partnership opportunities and define how the group will enter or expand in them. 

• Monitoring regional market, competitors & operations: The RHQ must maintain real-time intelligence on the region, competitor moves, regulatory changes, market dynamics, and disseminate this intelligence across the group. 

• Marketing plan for the region: The RHQ develops a regional marketing strategy, positioning, promotional campaigns, digital strategy, branding, tailored to regional culture and channels. 

• Operational & financial reporting: Regular reporting to the parent HQ and to Saudi regulators (as required) on regional operations, performance, risk and compliance. This includes submitting an annual report to ZATCA to verify economic substance compliance and support ongoing eligibility for tax incentives. 

• Customs compliance: The RHQ must cooperate with the customs authority for customs-related reporting, adhere to customs regulations, and facilitate inspections to maintain compliance and avoid penalties. 

How to implement: 

• Establish a regional planning cycle (annual + quarterly updates) managed by RHQ. 

• Consolidate budget proposals from regional subsidiaries, review and approve at RHQ. 

• Set up a regional “business coordination office” within RHQ that tracks inter-subsidiary synergies (e.g., shared procurement, logistics). 

• Deploy market intelligence tools, competitor trackers and feed insights into RHQ. 

• Develop and launch a regional marketing calendar from the Riyadh RHQ. 

• Create dashboards and reporting packs for RHQ to submit to HQ and ensure reporting lines flow through the Saudi entity. 

3. Business & Market Development 

What it means: This overlaps somewhat with the above but emphasises growth and regional embedding: 

• Embedding products/services in the region: Adapting the company’s global offerings to regional markets, local language, regulatory compliance, partner ecosystems, localisation of features. 

• Supporting acquisitions/divestments (as above) but in the context of enabling growth or exit in the region. 

• Identifying and developing new channels, customers, geographic expansion, alliances and partnerships in the region. 

How to implement: 

• Perform market feasibility studies for new countries/markets in MENA. 

• Create “go-to-market” roadmaps for regional launches (product adaptation, regulatory approvals, partner onboarding). 

• Ensure compliance with the relevant customs authority when entering new markets or adapting products to local regulations, including fulfilling customs-related reporting obligations and cooperating with customs inspections. 

• Oversee regional M&A process from Saudi RHQ, including due diligence, integration planning, region-wide duplication or synergy realisation. 

• Facilitate cross-regional roll-out of existing products/services through the RHQ (e.g., region-wide version of product with Riyadh as the base). 

• Track development metrics: number of new markets entered, new products launched regionally, regional revenue growth. 

4. Financial Performance Management 

• Review the financial performance of the regional operations: RHQ should consolidate financials (revenues, costs, margins, cash flows) of the region’s subsidiaries/branches, review variances, and propose corrective action. 

• Oversee risk management and financial governance: The RHQ should ensure that regional entities apply consistent financial policies, controls and audit-ready practices. 

• Support treasury / cash-flow management in the region (where applicable), ensuring efficient capital deployment and regional funding models. 

• Ensuring intra-group transactions abide by transfer-pricing rules (since KSA requires RHQs to comply with TP Bylaws) 

How to implement: 

• Set up regular regional financial review meetings, chaired by the RHQ senior team. 

• Deploy a consolidated regional financial model accessible by RHQ, with monthly/quarterly reporting. 

• Create regional risk & control framework (e.g., treasury policies, FX hedging, capital allocation). 

• Ensure the RHQ entity in Saudi maintains books and records for regional operations and complies with Saudi TP and substance rules. 

• Prepare and submit an annual report to ZATCA to demonstrate compliance with economic substance requirements and support ongoing eligibility for tax incentives. 

• Monitor service-charges or cost-recharges to regional affiliates and ensure they are arm’s-length, documented, and reflect actual services rendered by the RHQ. 

5. Regional Management and Reporting 

• Business planning & budgeting (as above) but emphasises the RHQ’s role as the regional “controller”. 

• Developing marketing plans and coordinating regional brand/market efforts. 

• Operational reporting: tracking KPIs, project milestones, logistical/operational issues across region. 

• Financial reporting: aggregating financial data of regional entities and reporting to HQ or board. 

• Ensuring that the RHQ’s board or senior management convenes in Saudi Arabia, with some directors resident in KSA, thereby supporting the “directed & managed in KSA” requirement (part of Economic Substance Requirements) 

How to implement: 

• Constitution of a local board or regional executive committee seated in Saudi Arabia with at least one KSA-resident director. 

• Hosting board/committee meetings physically in Riyadh at least annually (or quarterly), making Riyadh the locus of decision-making. 

• Publishing and circulating regular operational dashboards (projects, KPIs, risk register) via the RHQ. 

• Implementing a corporate governance framework at the RHQ covering regional oversight, subsidiary/sub-affiliate reporting lines, escalation protocols, compliance monitoring. 

• Ensuring that the RHQ entity is active, renting suitable office space, hiring qualified employees, incurring expenditure in Saudi Arabia, supporting the economic substance criteria. 

• Preparing and submitting an annual report to ZATCA as part of ongoing compliance and to demonstrate that economic substance requirements are met. 

B) The Optional RHQ Activities in Saudi Arabia 

Beyond the mandatory RHQ activities, companies have the flexibility to engage in a range of optional activities that further support their regional operations. These optional RHQ activities can include functions such as human resources management, information technology support, and compliance-related services. This flexibility allows RHQs to go beyond providing strategic direction and administrative guidance, enabling them to deliver comprehensive support to their regional entities and adapt to evolving market demands. 

C) Activities Your RHQ Cannot Perform in Saudi Arabia 

An RHQ cannot engage in any revenue-generating commercial activities within Saudi Arabia (i.e., it must not participate in any revenue generating activities of any kind). To conduct commercial operations, companies must obtain separate commercial registrations in addition to the RHQ license. 

Prohibited functions include: 

• Selling goods or services directly. 

• Invoicing clients or distributors. 

• Signing customer contracts on behalf of affiliates. 

All commercial functions must remain with licensed operational entities. 

Partner with TASC for RHQ Compliance and Expansion 

At TASC, we simplify the RHQ setup and compliance process, from legal setup to visa management, payroll, and post-licensing support, including support for companies operating in a special economic zone or with other related companies in the region, we ensure your RHQ meets every milestone with confidence. We also help companies manage global talent mobility, supporting you in navigating international immigration requirements for RHQ employees.  

Book a consultation now with our Saudi RHQ compliance experts.