Key Points
- Effective January 1, 2024, a law will restrict government contracts for some businesses
- International companies must have regional headquarters in Saudi Arabia to be exempt
- Foreign businesses can't contract with government institutions, agencies, or funds if they do not have regional headquarters in Saudi Arabia
- The Saudi Minister of Investment defines "regional headquarters" as having all executive staff operations and supporting functions in Saudi Arabia
- Headquarters must be located in Riyadh or Dammam and Jeddah with prior government authorization
- Additional information is forthcoming regarding exemptions to the new law
Overview
Starting January 1, 2024, a new law will prevent international businesses without regional headquarters in Saudi Arabia from contracting with institutions, agencies and funds owned by the Saudi government.
What are the Changes?
The forthcoming law will restrict government contracts for international businesses without regional Saudi headquarters. However, companies that are established in the country or relocate their headquarters to Saudi Arabia will be exempt from the requirements.
Who is Affected?
The change applies to certain international companies conducting business in Saudi Arabia.
To satisfy the exemption requirements, international entities must meet the Saudi Minister of Investment's definition of "regional headquarters," which states that companies must move their executive staff operations and all supporting functions to Saudi Arabia. Companies will ideally establish headquarters in Riyadh, but they can also establish headquarters in other locations, including Jeddah and Dammam, with prior authorization from the Saudi government.
What Should Employers and Applicants Know?
The new Saudi law creates restrictions only for international companies without a physical presence in Saudi Arabia. Companies that are already based in Saudi Arabia or seek to establish their presence there are not restricted from government contracts or conducting business with the private sector.
Looking Ahead
The Government of Saudi Arabia has not yet provided details on the exemption requirements for the new law. However, it is expected to issue clarity in the next two years before the law takes effect. Updates will be provided as they become available.
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