Goldman Sachs has officially obtained a license to establish its regional headquarters in Riyadh, Saudi Arabia. This comes in response to Saudi Arabia’s recent regulatory changes which mandate that foreign companies set up local headquarters to qualify for government contracts.
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Saudi Arabia is actively seeking to reduce its economic reliance on oil by drawing in foreign investors. This initiative is part of the Vision 2030 planned at transforming the Kingdom into a global investment hub.
The Saudi Cabinet approved new regulations requiring foreign companies to establish their regional headquarters in Saudi Arabia or risk losing out on government contracts. These rules came into effect earlier this year.
Companies that comply with the new mandate and set up a regional base in Saudi Arabia are offered tax benefits. These include a 30-year exemption from corporate income tax.
Goldman Sachs is set to become the first Wall Street bank to establish its regional headquarters in Riyadh.
The New York-based investment bank already has offices in Doha, Riyadh, and Dubai. Recently, it also opened a new office in the Abu Dhabi Global Market (ADGM).
In March, global investment management firm Franklin Templeton opened an office in Riyadh after securing the necessary licenses from Saudi Arabia’s Capital Market Authority.
The firm now offers a wide range of investment solutions to Saudi clients leveraging its $256 billion global alternatives platform.
Several other finance firms are also expanding their presence in Saudi Arabia. These include Moelis & Co., Lazard, JPMorgan Chase & Co., and Rothschild.
The Saudi government has set a clear deadline for foreign firms to establish their regional headquarters in the Kingdom.
Failure to comply with this mandate results in the loss of eligibility for government contracts, which are valued at hundreds of billions of dollars.
Companies that set up regional headquarters in Saudi Arabia must employ a minimum of 15 staff members in their local offices.
Riyadh is positioned to become a central hub for business in the region. By attracting major global firms Saudi Arabia plans to bolster its economy and create a more robust economy.
The Saudi government has been investing heavily in infrastructure and support systems to facilitate the establishment of regional headquarters for foreign firms. This includes modern office spaces, technological advancements, and streamlined regulatory processes.
The market has reacted positively to Saudi Arabia’s new regulations and incentives. The commitment of 180 companies to establish their regional headquarters in Riyadh as announced by Investment Minister Khalid Al-Falih in November 2023.
Goldman Sachs is preparing to set up its Middle East regional hub in Saudi Arabia responding to an ultimatum from the kingdom requiring global corporations to bring their headquarters within its borders or face losing business opportunities there.
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The New York-based investment bank received a license from the Saudi Ministry of Investment to establish headquarters in Riyadh, according to Bloomberg.
While details remain scarce regarding the timeline and the number of employees to be relocated, the bank’s decision is a shift in the Middle Eastern financial landscape.
Goldman Sachs’s global head of asset and wealth management, Marc Nachmann addressed the growing significance of the Middle East at the Qatar Economic Forum last week.
He noted that companies based in the region constitute about 7% of the MSCI Emerging Markets Index, a figure he predicts could increase to 10%. Goldman’s private wealth management arm already operates from bases in Dubai and Tel Aviv.
The Regional Headquarters (RHQ) Program jointly launched by Saudi Arabia’s Ministry of Investment and the Royal Commission for Riyadh City in February 2021 went into effect at the start of this year.
This initiative mandates multinational corporations to incorporate their regional headquarters within Saudi Arabia if they wish to conduct business in the country.
Companies participating in the RHQ program benefit from a 0% corporate tax and withholding tax rate for 30 years on all activities related to their Saudi-based headquarters.
Currently 70% of the Fortune 500 companies with Middle East headquarters are based in Dubai, according to data from Infomineo.
The Saudi Investment Minister, Khalid Al-Falih announced earlier this month that over 400 international companies had obtained regional licenses in the country.
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Saudi Crown Prince Mohammed bin Salman’s Vision 2030 strategy which plans to diversify the Saudi economy away from its oil dependency. This includes investments in other sectors such as clean energy, entertainment, sports, and tourism.
Saudi Arabia has earmarked $40 billion to invest in artificial intelligence technology partnering with top U.S. financiers including Andreessen Horowitz.
The kingdom has funneled billions into Silicon Valley over the last decade supporting major companies like Lyft and Uber and contributing to SoftBank’s Vision Fund which has invested in Slack, WeWork, GM Cruise, and others.
Saudi has also made strides in sports, most through the LIV Golf tour launched in 2021. Backed by the Saudi Public Investment Fund, this tour features 54 players including golfers like Phil Mickelson and Dustin Johnson, who reportedly received over $200 million to join.
In 2021 Saudi authorities introduced regulations requiring companies to have a regional base in the kingdom to qualify for state contracts.
The deadline for multinationals to establish regional headquarters in Saudi Arabia was January 1, 2024. Companies failing to comply risk losing access to government contracts.
Some multinational corporations have expressed concerns about the regulatory environment in Saudi Arabia.
The kingdom only disclosed details on tax breaks last December, just a month before the relocation deadline.
Dubai and Abu Dhabi both offer free zones for financial services with independent regulators unlike Riyadh’s King Abdullah Financial District which lacks its own regulator and is governed by the Saudi Central Bank and the Capital Markets Authority.
In April, BlackRock, the world’s largest asset manager with $10.5 trillion in assets under management opened an investment firm in the Saudi capital. Supported by $5 billion in capital from the Public Investment Fund.
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