Business entities in Saudi Arabia

Requirements to setup LLC in Saudi ArabiaThe Saudi company law recognizes four types of business entities: the limited liability company, the joint stock company (corporation), the partnership and the branch of a foreign company. To be shareholders, foreigners must however obtain a foreign capital investment license from the Saudi Arabian General Investment Authority (SAGIA), which in practice is seldom granted by this licensing authority. Consequently, we recommend our Clients to action the following alternatives: i) register a branch of a company incorporated in one of the countries members of the Gulf Cooperation Council, which are exempt from licensing requirements or ii) sign an agency agreement with a local partner.

  • The Saudi Arabia limited liability company - LLC (شركة ذات مسؤولية محدودة)

    • The Saudi Arabia limited liability company (LLC) is the most commonly used type of business entity by local investors;
    • A foreign LLC must appoint at least 1 director and 2 shareholders who can be of any nationality upon approval of a foreign capital investment license by SAGIA;
    • The minimum paid up share capital for a foreign owned entity is US$134,000. However, SAGIA often implements higher capital requirements, depending on the activities to be undertaken. In addition, there are different capital requirements for companies engaged in manufacturing, trading, real estate, agricultural or industrial projects;
    • All LLCs must appoint a statutory auditor and the annual accounts must be audited and submitted annually.
  • The Saudi Arabia agency agreement company - (اتفاقية وكالة)

    • We recommend our Clients who are not from the Gulf Cooperation Council countries to appoint commercial agent rather than form a company in KSA. Such strategy will allow them to legally avoid the need for an investment license. The commercial agent must be registered by the Ministry of Commerce and Industry and must sign a contract with our Client’s company. We will assist our Clients with all procedures involved;
    • The commercial agent appointed is then responsible for representation, promotion and selling of goods and services under terms and conditions required by the parent company. However, this strategy is not optimal for our Clients willing to relocate to Saudi Arabia, as the commercial agent will only be allowed to hire Saudi nationals.
  • The Saudi Arabia joint stock company - JSC (شركة)

    • The Saudi joint stock company must appoint a minimum of 2 shareholders and 3 directors, whom can be of any nationality (same conditions apply for investment by foreigners in JSCs and LLCs). The minimum share capital required is US$134,000 (SAR500,000). Subject to the approval of the Ministry of Commerce and Industry, the share capital subscribed for in cash may be paid up in stages, provided that the amount payable per cash share upon subscription is not less than one quarter of its par value;
    • The Saudi Arabia joint stock company must appoint an auditor and must submit audited financial reports annually.
  • The Saudi Arabia limited partnership (شراكة محدودة)

    A Saudi Arabia limited partnership requires only one director and two partners of any nationality and residency for the registration process. Amongst partners, there must be one general/managing partner and one limited partner. There is no minimum capital for the registration of a limited partnership.
  • The Saudi Arabia GCC branch company (فرع لشركة أجنبية)

    • A 100% foreign owned Saudi Arabia branch office can only be established by an existing GCC company. This entity requires the appointment of one shareholder and one director of GCC nationality;
    • The branch must appoint a legal representative resident in Saudi Arabia to carry out the branch’s management and administration.
  • Table of comparison between Saudi Arabia entities

    SummaryPublic limited companyLLPTechnical and Scientific OfficeTemporary Commercial RegistrationGCC owned Branch office
    Also known asشركةشراكة محدودةالمكتب الفني والعلميالسجل التجاري المؤقت أجنبية فرع لشركة
    Best use of company?To secure public fundingProfessional servicesTechnical support, marketing & researchAwarded government contractsSpecific projects
    How soon can you invoice Clients/sign sales contracts?9 months9 monthsCannot2 months2 months
    How soon can you hire staff?9 months9 months3 months3 months2 months
    How soon can you sign a lease agreement?2 months2 months2 months2 monthsYes
    How long to supply company registration / tax numbers?9 months9 months3 months3 months2 months
    How long to supply corporate bank account numbers?10 months10 months4 months4 months3 months
    Corporate tax rate on annual net profits?20%20%0%20%20%
    Limited liability entity?YesYesNoNoNo
    Government grants available?YesYesNoYesYes
    Government approval required for foreign owners?YesYesYesYesYes
    Resident director/partner/manager/ legal representative required?YesYesYesYesYes
    Minimum paid up share capital?US$134,000At SAGIA's discretionnonenoneUS$134,000
    Can bid for Government contracts?YesYesNoNoYes
    Corporate bank account location?Emirates NDBJ.P. MorganGulf international BankAlimna BankEmirates NDB
    Can secure trade finance?YesYesNoYesNo
    VAT payable on sales to local customers?NoneNoneNoneNoneNone
    Average total business set up engagement costs?US$54,380US$54,380US$52,180US$49,280US$54,380
    Average total engagement period?10 months10 months4 months4 months3 months

    See full table

    Accounting and tax considerationsPublic limited companyLLPRepresentative officeTemporary Commercial RegistrationGCC Branch office
    Statutory corporate tax payable?20%20%0%20%0%
    Annual Zakat rate payable by GCC residents only?2.5%2.5%2.5%2.5%0%
    Legally tax exempt if properly structured?NoNoNoNoNo
    Group HQ tax incentives?Yes, if KSA/GCC ownedYes, if KSA/GCC ownedNoNoYes
    Must file an annual tax return?YesYesYesYesYes
    Must file annual financial statements?YesYesYesYesYes
    Must appoint an auditor?YesYesNoNoNo
    Access to double taxation treaties?YesYesNoYesYes
    Withholding tax on payments to foreign shareholders?5%0%0%5%5%
    Company registrationPublic limited companyLLPRepresentative officeTemporary Commercial RegistrationGCC Branch office
    Resident director/partner/manager/ legal representative required?YesYesYesYesYes
    Minimum number of shareholders/partners?22Parent companyParent companyGCC Parent company
    Maximum shareholding for foreigners?At SAGIA's discretionAt SAGIA's discretion100%100%100%
    Can be wholly foreign owned?NoNoYesYesYes
    Sponsorship by a local citizen required?YesYesNoNoNo
    Minimum statutory paid up share capital?US$134,000At SAGIA's discretionnonenoneUS$134,000
    Security deposit to be kept with Government?NoNoNoNoNo
    Shelf companies available?YesNoNoNoNo
    Time to incorporate a new entity?9 months9 monthsCannot2 months2 months
    Can easily convert to a PLC?YesNoNoNoNo
    Public register of shareholders and directors?YesYesYesYesYes
    Can have preference shareholders?YesYesNoNoNo
    Business considerationsPublic limited companyLLPRepresentative officeTemporary Commercial RegistrationGCC Branch office
    Good entity for trademark registration?YesYesYesNoYes
    Can secure an import and export license?YesNoNoNoYes

    Our Client needs to travel to Saudi Arabia for business set up?No
    Temporary physical office solutions available?Yes
    You need a local resident as bank signatory?Yes
    The entity will likely be regulated by?SAGIA and Ministry of Commerce and Investment
    Minimum number of directors/managers?1
    Monthly VAT reporting to the Government?No
    Must sign an office lease agreement during incorporation?Yes
    Shareholders & directors documents to be attested/translated?Yes
    Each foreign director needs a personal income tax number?No
    Foreign director needs a residence visa?No
    Foreign bank signatories need a residence visa?Yes
    Maximum number of staff allowed?No maximum number for any entity
    Expatriate to local staff ratio?2 - 1
    Can secure residence visa for business owner?Yes
    Other useful information
    What will be included in my customer sales invoice?Click link
    This country has signed free trade agreements?Yes
    This country is a member of WIPO/TRIPS?Yes
    This country is a member of the ICSID?Yes
    Average custom duties suffered?5%
    Government foreign investment approval required?Yes
    Average monthly office rental? (US$ per sq m)35
    Minimum statutory monthly US$ salary?800
    Average monthly US$ salary for local skilled employees?1,580
    US$ deposit interest rate? (1 year average)2.89%
    Overseas remittance currency controls?None
    Banking considerations
    Multi-currency bank accounts available?Yes
    Corporate visa debit cards available?Yes
    Quality of e-banking platform?Satisfactory
    Crowd funding available in this country?Yes

Frequently asked questions

Contact us

For additional information on our business setup services in Saudi Arabia, please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi
riyadhchamber mof sama csc customs socpa mci