Published: January 2023
In early 2022, the Ministry of Investment Saudi Arabia (“MISA”), together with the Royal Commission for Riyadh City implemented the Regional Headquarters (“RHQ”) Programme, with the primary objective of transforming the Kingdom of Saudi Arabia (“KSA”) into a major global economy – part of the country’s impressive Vision 2030 Initiative.
The RHQ Programme is open to companies operating across all industries/sectors and KSA has seen a significant interest in companies seeking to establish their RHQ in KSA.
Al Tamimi & Company has previously issued a briefing on the structure of the RHQ Programme, proposed benefits and overall implications.
By participating in the RHQ Programme, Multinational Groups (being a group of entities operating in one or more jurisdictions with its foreign parent/headquarters outside of the Middle East North Africa Region) will obtain a number of key benefits. Perhaps the most significant benefit/privilege however, would be the ability of the Multinational Group to be eligible for and participate in contracts with Saudi Government Agencies (including Ministries, Authorities, Government Bodies etc.).
There was initially some uncertainty as to how this would apply in practice, but in a very recent and important development, the Council of Ministers (by Royal Ascent) has passed a Resolution No. 377, dated 03/06/1444H (corresponding to 27/12/2022G), which provides and sets out the “Guidelines for Government Contracts with Companies and Related Parties Without Regional Headquarters in KSA” (“ Guidelines”).
Some key features/provisions of the Guidelines include the following:
1. Government Agencies (in carrying out their works and procurements), may not contract companies or any related party that do not have their respective RHQ in KSA, except in the following limited circumstances:
- where the estimated cost of the works and procurements is less than one million Saudi Arabian Riyals (SAR 1,000,000); or
- where the works and procurements are conducted outside KSA.
2. Multinational Groups (or related parties) without their RHQ in KSA are not precluded from submitting bids for any public tender put forward by Government Agencies, provided that such Agencies only accept these bids in either of the following cases:
- there is only one technically accepted bid; or
- the bid submitted by the Multinational Group that does not have its RHQ in KSA, is the best technical bid after the overall evaluation and in financial terms is twenty five percent (25%) less than the value of the second-best bid.
3. Government Agencies are only permitted to invite Multinational Groups (or related parties) that do not have their RHQ in KSA to participate in limited tenders in either of the following cases:
- there is only one qualified bidder (other than companies or related parties that do not have their RHQ in KSA); or
- there are extenuating circumstances that can only be addressed by inviting companies or related parties that do not have their RHQ in KSA.
4. Government Agencies are only permitted to invite Multinational Groups (or related parties) to participate in direct purchases in either of the following two cases:
- the works or procurements are exclusively available at the company or the related party that does not have its RHQ in KSA;
- there are extenuating circumstances that can only be addressed by direct purchases from the company or the related party that does not have its RHQ in KSA.
5. A Committee (reporting to the Ministry of Finance) will be formed to consider any applications for exemptions brought by the relevant Government Agency.
How can we help?
For further guidance please contact Al Tamimi Saudi based Corporate Structuring team who will be able to assist and advise on all of aspects relating to this update.
Key Contacts
Hesham Al Homoud
Partner, Head of Corporate Structuring - Saudi Arabia
h.alhomoud@tamimi.com
Ahmed Mahomed
Senior Counsel
a.mahomed@tamimi.com
Omar Alhumaid
Senior Counsel
o.alhumaid@tamimi.com