Your global partner in establishing a Company in Saudi Arabia
Company Formation in Saudi Arabia requires an in-depth understanding of the options and Saudi Arabian laws that may impact you.
We discuss each option with you and describe the benefits and limitations of the various options so that you can make an informed decision about the type of legal entity you wish to establish in the Kingdom of Saudi Arabia.
Company Formation in Saudi Arabia
1. Branch Office
You can conveniently open a branch office of your company in Saudi Arabia with 100% ownership of the business. The branch office is an extension of your parent company. The Ministry of Commerce and Industry issues the certificate of registration to the business. Your branch office can conduct the commercial activity according to the parent company’s license scope.
The branch must appoint a legal representative in Saudi Arabia. Your legal representative is responsible for managing your business in the Kingdom. Foreign branches cannot get involved in promotion, marketing, or trading activities. Only those activities are allowed, which are mentioned in the MISA (SAGIA) license of the branch. Your branch office is eligible for both public and private sector projects.
Requirements for the Formation of a Branch Office
Opening a branch office is similar to a limited liability company with the exact capital requirement. The difference is that you are not required to submit Articles of Association (AoA). The branch of a foreign company is required to deposit a minimum capital of SAR 500,000. This capital must be deposited with a local bank. No local sponsor or participant is required to open a branch office in Saudi Arabia. The branch office will obtain its Commercial Registration Certificate. Setting up a branch office might take some time if the manager is not a Saudi national, GCC national, or a Saudi resident because a foreigner must have a residence permit as part of the incorporation process.
2. Representative Office
Saudi Arabia’s law permits the establishment of representative offices in the form of technical and scientific offices and temporary company registrations. Technical and scientific offices are often established to provide technical support to manufacturers through a distributor. A temporary company registration is a general business that is developed for a specific government contract.
These establishments are limited in the type of activities that they complete. Technical and scientific offices cannot complete commercial activities or earn revenue. Instead, they can only provide technical information and assist distributors and customers with products and market and technical research related to these products. Representative offices can also conduct product research and market surveys for the parent company. Based on the market research, the office can prepare a report for its head office. ROs can conduct liaison activities to provide technical assistance but are not allowed to engage in commercial activities. Typically, only pharmaceutical companies can establish these offices.
Companies that are not pharmaceutical can only be formed with permission from the SAGIA and the Ministry of Commerce and Industry. Before they approve this type of office, they must believe that the company’s products are sufficiently complex to justify the establishment of a technical and scientific office.
Requirements for the Formation of a Representative Office
There are no minimum capital requirements for a Representative Office. Its formation process is more straightforward than that of a company and quite like that of a branch. Furthermore, the office must submit an annual summary of its activity in the Kingdom to the Ministry of Investment (MISA).
3. Commercial Registration
Temporary Commercial Registration is a temporary license for specific government contracts. With Temporary Commercial Registration, you can not conduct activities in the private sector other than the specific government project.
4. Agency Agreement
While this option does not technically create a separate legal entity, it is usually the most affordable and fastest way to enter the Saudi market. Commercial agency agreements let foreign investors conduct business in Saudi Arabia through a local agent without the need to obtain a SAGIA foreign investment license.
Moreover, this agreement must be registered with the Ministry of Commerce and Industry. A commercial agent must be appointed. The Commercial Agent must be a Saudi national, or the Commercial Agency must be owned by a Saudi national. This agent is responsible for representing, promoting, and selling goods and services on behalf of the business under the terms and conditions of the commercial agency agreement.
Foreign investment prohibited activities
Company formation in Saudi Arabia is allowed for foreigners. However, trading and retail activities are permitted only for Saudi nationals or Saudi Arabian-owned entities.