Saudi Arabia, known for its’ huge oil industry, has become an ideal location for foreign businesses to expand, thanks to its’ welcoming government authorities and the exciting initiatives. The company incorporation process in general is mostly long and complex and requires the assistance of a team of experts who have experience and in-depth knowledge of the procedure and execution. Aligning with the complex legal and regulatory requirements of the region can also be a daunting task, especially for foreigners who are unfamiliar with the local laws. It is imperative to understand and conduct research on the requirements for the business type and activities you would like to carry out.
What Are the Conditions for Setting Up a Foreign Company with 100% Ownership in KSA?
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Types of companies |
Types of companies in Saudi Arabia include: · Limited Liability Company (LLC) · Joint Stock Company (JSC) · Branch of a foreign company · Regional Headquarters · Technical and Scientific Services Office (TSO) |
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Minimum share capital |
SAR 100,000 (approx. USD 26,000) |
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Minimum number of shareholders |
LLC: At least one shareholder is required for setting up a business in Saudi Arabia, with a maximum of 50 shareholders JSC: Normally 2 shareholders, 1 shareholder is accepted with minimum share capital of SR 5,000,000 Branch: Not applicable
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Minimum number of directors |
Minimum 1 |
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Corporate tax rate |
20% |
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VAT rate |
15% |
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Zakat rate |
2.5% |
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Shareholders annual meeting required |
At least one annual meeting must be held no later than 4 months from the end of the financial year. |
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Full foreign ownership allowed |
100% ownership subject to Ministry of Investment in Saudi Arabia (MISA) approval. |
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Tax exemptions |
Foreign investors are not liable for Zakat. |
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Capital requirements |
LLC: Determined by the Ministry of Investment in Saudi Arabia (MISA) JSC: SR 500,000 OR SR 5,000,000 (for single shareholder) Branch: SR 500,000 Technical and Scientific Services Office (TSO): No minimum capital requirement. |
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Filing of annual tax return |
Required |
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Appointing auditor |
Required |
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Hiring staff |
Yes, hiring staff is allowed |
What Are the Documentation Requirements for Setting Up a Company in Saudi Arabia?
Based on the company structure, the documentation requirements may vary. You can start by notifying and legalising the pre-incorporation documents required, as listed below:
- Parent company constitutional documents such as the Memorandum and Articles of Association (MOA and AOA)
- Parent company license Or Certificate of Incorporation
- Board Resolution
- Power of Attorney
- Audited financial report for the last financial year
Once the process is started, the following documents will be required:
- All above documents duly translated into Arabia and attested from the embassy of KSA in the country of origin or apostilled
- Passport copy of the General Manager
What Are the Types of Legal Structures Available for Saudi Arabia Company Registration?
Choosing the right legal structure for your business is crucial and this requires proper due diligence and research to ensure everything is done based on the business needs. Below is a breakdown of the types of legal licenses available in Saudi Arabia:
1. Limited Liability Company (LLC)
A Limited Liability Company (LLC) in Saudi Arabia is the most common type of legal entity for foreign investors as it provides flexibility and ease of establishment. It also provides limited liability protection for its shareholders.
What are the capital requirements for a Limited Liability Company (LLC) in Saudi Arabia?
There is no specified minimum capital requirement for an LLC entity in Saudi Arabia, however, some business activities may require a minimum capital.
What are the shareholder requirements for a Limited Liability Company (LLC) in Saudi Arabia?
A minimum of one shareholder is required and a maximum of 50 shareholders are allowed to form an LLC in Saudi Arabia.
2. Joint Stock Company (JSC)
A Joint Stock Company (JSC) is generally suitable for large-scale businesses seeking public investment.
What are the capital requirements for a Joint Stock Company (JSC) in Saudi Arabia?
The capital requirements for a JSC in Saudi Arabia depend on the chosen business activity, but it is generally SR 500,000.
What are the shareholder requirements for a Joint Stock Company (JSC) in Saudi Arabia?
A JSC in Saudi Arabia requires a minimum of two shareholders, with no maximum number of shareholders. Also, state-owned JSCs and JSCs with a capital exceeding SAR 5 million are allowed to be established by only one shareholder.
3. Branch of a foreign company
A branch of a foreign company in Saudi Arabia is essentially a subsidiary of the parent company. It allows 100% foreign ownership for an existing international foreign company to operate and be legally present in the region.
It is required that the foreign company in Saudi Arabia match the same business activities as its’ parent company. Once the company is incorporated, the Saudi branch is limited to carrying out the commercial activities allowed by the licensing authority.
What are the capital requirements for a branch of a foreign company in Saudi Arabia?
A branch of a foreign company is mandated to deposit a minimum share capital of SR 500,000. Depending on the business activity, the share capital requirement may vary.
4. Technical and Scientific Services Office (TSO)
A Technical and Scientific Services Office (TSO) provides specific technical or scientific services, such as engineering or IT consulting. Sales activities are not permitted under this license. Also, it requires local sponsorship to establish a TSO in Saudi Arabia and has no minimum capital requirement.
Conclusion
The Saudi Arabian market presents a wealth of opportunities for foreign companies, and the potential rewards are significant. The above guide provides the essential information and considerations needed to make a firm decision based on your business needs. For a smooth and efficient experience, consider hiring a company formation expert who specialise in the Saudi Arabia market, like Gatestone Group. For expert advice and a free consultation, contact us today via email at [email protected]. Alternatively, schedule a brief call at +971 52 410 0849 or +971 4 450 1023.
