Saudi Arabia Refines RHQ Procurement Rule With Formal Exemption Framework: What Businesses Need to Know

Saudi Arabia has formalized exemptions to its Regional Headquarters (RHQ) requirement for government contracts, introducing a structured framework that allows non-RHQ firms to participate in public procurement under defined competitive and technical conditions.

Saudi Arabia has introduced a structured exemption mechanism allowing government entities to award contracts to foreign companies lacking a regional headquarters (RHQ) in the Kingdom under defined conditions. This marks an important evolution of the Kingdom’s public procurement and investment regime, preserving the RHQ requirement central to Vision 2030 while offering calibrated flexibility in strategic procurement.

The development has significant implications for multinational companies, foreign investors, and legal and compliance teams evaluating participation in Saudi government procurement: one of the most dynamic and rapidly expanding demand segments in the Middle East.

Policy context: The RHQ requirement under Vision 2030

Saudi Arabia’s RHQ Program was introduced as part of Vision 2030 to position the Kingdom as the primary business hub for the Middle East and North Africa (MENA). Under the 2024 framework, foreign companies without RHQs in Saudi Arabia were effectively barred from public procurement, forcing many multinational firms to relocate their regional operations to Riyadh or risk exclusion.

The policy was designed with several strategic objectives:

• Attract substantial foreign direct investment (FDI);
• Anchor senior corporate leadership and decision-making within the Kingdom;
• Boost local talent development and job creation; and
• Deepen integration of global companies into Saudi supply chains.

By early 2026, more than 700 multinational companies have established RHQs in Riyadh, surpassing earlier targets, a testament to the policy’s pull effect.

Despite this adoption, the RHQ requirement also introduced operational challenges for government entities, particularly in technically specialised sectors where competitive expertise was scarce among RHQ-licensed bidders.

The exemption framework: What has changed

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In response to market realities, the Local Content and Government Procurement Authority has circulated formal guidance on exemptions. Government entities may now apply for exemption approvals via the Etimad digital platform before issuing tenders or engaging in direct contracting.

The exemption submissions allow state bodies to justify contracting with international companies that do not yet have an RHQ under the following contexts:

• A specific project lacking sufficient RHQ-qualified bidders;
• A group of related projects for strategic delivery; and
• A defined time period to support pipeline continuity.

The underlying intent remains clear: exemptions are not automatic or guaranteed, but a formal process subject to regulatory review and oversight.

Role of the etimad platform

Etimad Platform, the Ministry of Finance’s integrated digital platform, is central to the exemption process. It manages planning, budgets, contracts, payments, tenders, and compliance documentation. Exemption requests must be lodged through Etimad prior to tender issuance or direct procurement steps, reinforcing formal governance rather than ad-hoc administrative tweaks.

Tenders launched prior to the rollout of the exemption service or outside the Etimad system continue under previously established mechanisms.

Criteria for exemptions

Notwithstanding the new flexibility, the Kingdom has maintained clear controls to safeguard public spending and procurement integrity:

1. Competitive conditions for acceptance

Foreign companies without RHQs may now participate in public tenders, and have their bids accepted, if either of the following conditions is met:

• Only one technically compliant offer is received from all bidders; or
• The non-RHQ bid is technically best and at least 25 percent lower in price than the second-best offer.

These conditions are intended to ensure that non-RHQ bidders can only prevail when they demonstrably offer superior value and do not undercut the policy’s broader objectives.

2. Lower-value contract exemption

Government procurement works and purchases with an estimated value below SAR 1 million (US$266,576) are exempt from the RHQ requirement, enabling smaller or less complex transactions to proceed without the administrative burden of relocation, a practical concession for routine contracts.

3. Reporting and oversight requirements

Government entities that contract with non-RHQ companies must document and justify the reasons for such contracting, reinforcing transparency and audit readiness. International experience suggests that these reporting obligations encourage rigorous evaluation ahead of awarding contracts.

Collectively, these criteria preserve the integrity of the original RHQ rule while enabling exceptions where market conditions warrant broader participation.

Why this matters for Saudi Arabia businesses

For foreign companies and investors, the updated framework carries both opportunity and caution:

Expanded participation pathways

Multinationals that previously faced exclusion from Saudi government procurement now have a structured route to participate, particularly in sectors where highly specialised capabilities are essential. Industries where this is most relevant include:

• Advanced technology and digital infrastructure;
• Aerospace and defence supply chains;
• Healthcare and complex medical services;
• Large-scale EPC (engineering, procurement, construction); and
• Sustainable energy and smart infrastructure.

This change reduces the “all-or-nothing” barrier that previously forced relocation decisions purely to access government spend.

2. Continued incentive to establish RHQ

Despite the exemptions, the strategic advantage of having an RHQ remains compelling. An RHQ licence not only unlocks government procurement access but also brings broader incentives, including:

• Extended tax reliefs and withholding tax exemptions;
• Visa and Saudization concessions; and
• Enhanced corporate visibility and market legitimacy.

For companies with long-term growth plans in the Kingdom and the wider Gulf, an RHQ often remains the most sustainable strategic choice.

3. Competitive tender strategy is more complex

Foreign bidders without RHQs must now master a dual strategy:

• Value positioning: Bids must stand out on value and technical merit to satisfy the 25 percent threshold or lack of adequate RHQ competition.
• Early engagement: Exemption requests must be prepared before tender issuance, requiring proactive engagement with government sponsors and informed regulatory guidance.

This raises the bar on bid preparation and local strategy.

Practical advisory guidance

Foreign investors and corporate counsel should consider the following tactical steps.

1. Early regulatory mapping

Conduct detailed mapping of applicable procurement frameworks and exemption criteria for target sectors. Understanding where exemptions are most likely to succeed (such as highly specialised technology or niche services) will improve bid positioning.

2. Local counsel and partner engagement

Partner with Saudi local legal and consulting advisors who understand Etimad processes, technical evaluation standards, and government expectations around local content and procurement documentation.

3. Tender process engagement

Engage early with government entities to anticipate tender pipelines and assess whether qualifying for an exemption is feasible ahead of formal issuance.

4. Value-driven bid structuring

When bidding under exemptions, ensure technical superiority and competitive pricing benchmarks — as non-RHQ bids must clear both thresholds to win.

5. Long-term structural planning

Evaluate the business case for establishing an RHQ not only for government procurement access but also for broader tax, operational, and market presence benefits.

Regulatory and market implications

Saudi Arabia’s calibrated refinement of the RHQ rule reflects a broader trend in economic policymaking: balancing strategic localisation with operational pragmatism. The Kingdom continues to signal openness to global investment while ensuring that localisation objectives (core to Vision 2030) remain intact.

This approach is increasingly recognized by senior industry observers. As one market commentator noted, the rule itself has not been fully reversed but refined to inject controlled flexibility into what was otherwise a rigid procurement eligibility regime.

For foreign enterprises, this represents a maturing regulatory environment, one that rewards structured compliance, local anchoring, and competitive excellence.

Looking ahead

The next stage of implementation will likely focus on:

• Clarification of sector-specific exemption use cases;
• Potential fine-tuning of the SAR 1 million (US$266,576) threshold;
• Continued development of Etimad tools and guidance,
• Integration with other procurement drivers such as local content requirements.

As Saudi Arabia continues to diversify its economy and expand public investment opportunities, foreign companies that adapt quickly to evolving procurement norms will be best positioned to capture value.

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In sum, the exemption framework is not a retreat from Saudi Arabia’s strategic goals but a refined mechanism designed to preserve policy intent while enhancing market efficiency. For global investors, this evolution underscores Riyadh’s commitment to predictable, transparent, and competitive market participation.

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