Companies to Operate in the Kingdom of Saudi Arabia without Local Headquarters

The Kingdom of Saudi Arabia (the “Kingdom”) has announced that companies can now operate in the Kingdom without local headquarters as long as (i) their foreign activities do not exceed one million (1,000,000) Saudi Riyals, equivalent to approximately two hundred and sixty-six thousand (266,000) United State Dollars, and (ii) they are competing for government contracts in the absence of any other bidders.

This new regulation exempts companies competing in government contracts bids from the rules that were issued in 2021, requiring foreign companies to have local headquarters in the Kingdom, otherwise they would have been at risk of losing their governmental contracts.  

According to these rules, international businesses without a head office in the Kingdom were not permitted to execute contracts with third parties, institutions, or funds linked with the government or its agencies. The rules have also stated that within 30 days of signing a contract, government organizations dealing with international businesses without a Saudi headquarter had to provide a letter of justification.

According to official sources, government permits were given to nearly 44 businesses back in October 2021 so that they could establish national headquarters. In order to create new industries and diversify the oil-rich economy, Saudi officials anticipate that 480 firms would establish headquarters in the country by 2030.

The Regional Headquarters Attraction Program of Multinational Companies (a 2030 Vision program), is anticipated to have a major positive impact on the Saudi economy, aiming to offer local talent the opportunity to collaborate with global corporations. To support the nation's goals for economic diversification, substantial project announcements across several industries have been made as a result of Vision 2030.

As the nation continues to diversify its economy, according to a study released last month by S&P Global Ratings, investments flowing via the Vision 2030 initiative are expected to boost important areas of the Kingdom's economy, including real estate, tourism, and energy.

Furthermore, it is expected that over the medium and long term, investments in the sectors of telecoms, utilities, food and agriculture, health care, and digital infrastructure will increase significantly.

A recent statement by Finance Minister Mohammad Al Jadaan, and following a growth of 8.5% last year, the real gross domestic product of the Kingdom for this year is expected to increase by 3.1%.

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