Insights
The regional headquarters: licence, substance and the contracting rule
For a multinational group that sells to government, the regional headquarters now decides access to the contract. It also brings obligations of substance from the first year.
The rule
Since 1 January 2024, government entities generally may not contract with multinational groups that have no regional headquarters in the Kingdom. A route for exemptions was added in 2026, but an exemption is neither automatic nor guaranteed. The new procurement law, in force from 2 January 2027, treats the programme as part of the same system as local content and government purchasing.
- 2021Programme launched
- 1 January 2024The government contracting rule applies
- 2026A route for exemptions
- 2 January 2027New procurement law in force
The incentive, and its limits
The licence carries a 30-year package from the date it is issued: a zero rate of corporate income tax and of withholding tax on qualifying headquarters activities. It does not cover value added tax or zakat, and it covers the headquarters function only; an operating business in the Kingdom is taxed in the ordinary way.
Substance
Within its first year the headquarters employs at least fifteen full-time staff on headquarters functions, three of them senior executives. Most plans are tested here, not at the application.
What we would do now
Design the headquarters entity, the operating companies and the contracts between them together, before the application — so that income sits where it belongs and the incentive survives an audit. One structure paper, settled with the group’s tax advisers, then the application.
Where we come in
Our Corporate & M&A circle carries the entry file from the choice of vehicle to operation, including the regional headquarters route.
This note is general information, not legal advice. It reflects the law as we understand it on the date shown.