The deadline set by Saudi Arabia for foreign companies to establish their regional offices in the Kingdom, or risk losing government contracts worth hundreds of billions of dollars, has come into effect today, Monday, with several exceptions. The Kingdom's official gazette stated that exceptions include contracts valued at less than one million riyals ($266,681), contracts executed outside the Kingdom, agreements with companies that are the sole providers of their services or goods, and emergency situations that can only be addressed by a foreign company without a regional office.
Companies without regional offices can still compete in government tenders; however, government entities can only approve their bids if the proposal is technically superior and priced at least 25% lower than the next best bid or in the absence of competing offers. The Saudi Cabinet approved the contracting regulations last week but did not disclose details at that time.
Foreign companies rushed to prepare for the deadline but complained about the lack of clarity regarding tax regulations and jurisdiction. Tax incentives, including a 30-year exemption from corporate income tax, were announced less than a month before the deadline. Saudi Investment Minister Khalid Al-Falih indicated in November that 180 companies had agreed to establish their regional offices in Riyadh.
