A European technology company has its regional headquarters in Dubai and a Saudi distributor that has sold its systems for years. The distributor submitted a bid in a SAR 4 million government tender and was told the offer may not be accepted “because the parent company has no regional headquarters in the Kingdom”.
The direct answer: a regional headquarters (RHQ) is not a general requirement for doing business in Saudi Arabia, but it matters when contracting with government entities. The Rules for Government Entities Contracting with Companies that Have No Regional Headquarters in the Kingdom, in force since 19/6/1445H (January 2024), restrict the acceptance of offers from covered companies and their related parties, such as agents and distributors, except in specific cases or where the estimated cost does not exceed SAR 1 million.
Does a foreign company need a regional headquarters to work in Saudi Arabia?
Foreign companies are sometimes told they must open a regional headquarters in Saudi Arabia before doing any business. That is wider than the reality. The rules regulate contracts between government entities and companies that have no regional headquarters in the Kingdom, and their related parties. Carrying on the business activity itself is governed by its own licences.
So if your client is a government entity, check the contracting rules. If your business is with the private sector, check the licence for your activity and its requirements.
Which companies are covered by the regional headquarters rules?
The rules, published in the official gazette Umm Al-Qura on 13/6/1444H (6 January 2023), define a covered company as a foreign company that has no regional headquarters in the Kingdom, has a regional headquarters in the Middle East and North Africa region, and is included in the list prepared and circulated to government entities. Foreign nationality alone is not enough; look for the company's name on the list.
Is a Saudi agent or distributor covered by the rules?
The definition of a related party includes an agent, distributor, supplier or service provider of the covered company in relation to its goods or services. So signing the contract with a Saudi establishment does not settle the question; what matters is where the product or service comes from.
When is the company's offer accepted in a public tender or direct contract?
The rules do not stop a covered company or a related party from submitting an offer in a public tender, but acceptance of the offer is limited to two cases: it is the only technically acceptable offer, or it is the best offer after the overall technical evaluation and at least 25% cheaper than the second-best offer.
Limited tenders and direct contracting have other cases, such as the absence of another qualified competitor that is not covered, exclusivity of the goods or service, or emergencies.
| Type of deal | What to check |
|---|---|
| Public tender | Conditions for accepting the offer: the only technically acceptable offer, or the best technically and 25% or more cheaper |
| Limited tender or direct contract | The case that allows the invitation: no qualified competitor, exclusivity, or emergency |
| Exception request | Submitted by the government entity before tendering, through the Etimad platform (the government procurement portal) |
Which work is exempt from the regional headquarters rules?
The rules exempt works and purchases whose estimated cost does not exceed SAR 1 million, and works carried out outside the Kingdom. The Minister of Finance may, in the public interest, change the amount or cancel this exemption. The government entity, not the company, may request an exception for a specific project or period before the tender is issued, stating the reasons, the projects and the expected cost; the request itself is not an approval.
A Saudi distributor wants to supply a government entity with the systems of a covered company, worth SAR 4 million.
Being Saudi does not settle the matter, because it is a related party of the covered company.
In a public tender its offer will be accepted only if it is the only technically acceptable offer, or the best technically and 25% cheaper than the second-best offer.
If the estimated cost were SAR 800,000, the deal would fall outside the rules altogether.
This is general information based on the official Arabic texts of Saudi laws, which prevail over any translation. It is not legal advice for your specific case.
Practical solutions for the company and the contracting entity
If you are a foreign company or its distributor:
- First check whether your company is on the list, and whether your relationship with it makes you a related party.
- Decide whether your clients are government entities or the private sector, because the requirements differ.
- If the government market matters to you, compare the cost of setting up a regional headquarters with the size of the contracts you expect.
- If your offer is rejected, ask for the reason and check whether your case falls within the permitted acceptance cases.
If you are the government entity or the main contractor:
- Check the list and the estimated cost before issuing the tender.
- If the product is exclusive or no alternatives are available, consider an exception request in good time, before the tender is issued.
- Record the basis for accepting the offer or for direct contracting in the file.
Knowing where you stand under these rules can save you costs or protect your contracts. Send us on WhatsApp your company structure, your relationship with the parent company and the type of clients you serve, and we will explain your position.
Need advice on your own case?
Every case turns on its own facts and documents. Send us a short summary and we'll arrange a session with a licensed Saudi lawyer who will tell you clearly where you stand.
Frequently asked questions
Does every foreign company need a regional headquarters to work in Saudi Arabia?
No. The rules concern contracting with government entities. The requirements for carrying on the activity are set by its licences.
Is a local supplier or distributor always exempt?
No. It may be a related party if it supplies the goods or services of a covered company.
Does the company submit the exception request itself?
No. The government entity submits the request before the tender is issued, through the exception request service on the Etimad platform.
Are small deals subject to the regional headquarters rules?
Works and purchases with an estimated cost of SAR 1 million or less are exempt, and the Minister of Finance may change the amount or cancel the exemption.
General information, not legal advice. The official Arabic texts of Saudi laws prevail over any translation. Disclaimer