Saudi Arabia’s new regional headquarters mandate goes into effect

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Saudi Arabia‘s deadline for foreign firms to establish their regional headquarters in the kingdom or lose out on hundreds of billions of dollars in government contracts went into effect on Monday as did several exceptions to the rule.

The exceptions include contracts below SAR1m ($266,681), contracts executed outside of the kingdom, deals with companies that are the sole providers of their service or commodity, and emergencies that can only be addressed by a foreign company without regional headquarters, Um Al-Qurra reported previously.

Companies without regional headquarters can still compete for government tenders, but government agencies will only be able to approve them if they are technically superior and 25 per cent cheaper than the next best offer, or if there are no competing offers.

The Saudi cabinet announced its approval of contracting regulations last week, but did not release details at the time.

It did not specify what how many contracts below SAR1m a foreign firm could sign with the same government agency.

Foreign companies had rushed to prepare for the deadline. Tax incentives, including a 30-year exemption for corporate income tax, were announced than less than a month ahead of the deadline.

In November, Saudi Investment Minister Khalid Al-Falih said that 180 companies had agreed to establish their regional headquarters in Riyadh.