Business entities in Saudi Arabia in 2023

The Saudi company law recognizes five types of business entities: i) the establishment; ii) the limited liability company; iii) the joint stock company (corporation); iv) the partnership and; v) the branch of a foreign company.

To be shareholders, foreigners must obtain a foreign capital investment license from the Ministry of Investment (MISA). It is expensive and time consuming to secure MISA license.

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 MISA licensing requirements or ii) sign an agency agreement with a local partner.

• The Establishment

  • The Saudi Arabia establishment is the equivalent of a sole proprietorship;
  • This business form only requires one owner and can only be registered by Saudi and GCC nationals. The owner of an establishment is personally responsible for its debts;
  • Although not mandatory as per the law, Healy Consultants Group recommends to include at least SAR10,000 (US$2,670).

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

  • Together with the Establishment, the Saudi Arabia limited liability company (LLC) is the most commonly used type of business entity by local and GCC investors as it only requires one director and one shareholder and can be set up within 2 months. The paid up share capital requirement is SAR100,000 (US$26,670);
  • This type of entity is also a common choice by foreign investors looking to serve the Saudi Arabia market. That said, registering an LLC for non-Saudi/GCC nationals in KSA is challenging and time consuming as it requires the approval of MISA. Refer to the MISA license webpage for more information regarding the same.

• The Saudi Arabia agency agreement - (اتفاقية وكالة)

  • The commercial agency agreement is not a legal entity but the quickest and cheapest way to penetrate the Saudi market;
  • The commercial agency agreement allows foreign investors to conduct business in Saudi Arabia through a local agent (also called commercial agent). And therefore without the need to secure a MISA foreign investment license;
  • The commercial agency agreement must be registered with the Ministry of Commerce and Industry. The commercial agent appointed is then responsible for representing, promoting and selling of goods and services on behalf of our Client and under terms and conditions listed in the agency agreement;
  • Healy Consultants Group advises our Clients to i) fully understand the risks associated with this strategy and ii) proceed with a Commercial Agency agreement as a temporary solution to “test the waters” in KSA. Refer to the agency agreement webpage for more information regarding the same;

• 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;
  • The GCC company must be 100% owned by GCC nationals. No foreigners allowed;
  • The branch must appoint a legal representative resident in Saudi Arabia to carry out the branch’s management and administration.

• Table of comparison between the most common business entities in Saudi Arabia

  Table of comparison between the most common Saudi Arabia business entities

• Table of comparison of other types of entities in Saudi Arabia

  Summary	Public limited company	LLP	Technical and Scientific Office	Temporary Commercial Registration	GCC owned Branch office
  Also known as	شركة	شراكة محدودة	المكتب الفني والعلمي	السجل التجاري المؤقت	أجنبية فرع لشركة
  Best use of company?	To secure public funding	Professional services	Technical support, marketing & research	Awarded government contracts	Specific projects
  How soon can you invoice Clients/sign sales contracts?	9 months	9 months	Cannot	5 months	2 months
  How soon can you hire staff?	9 months	9 months	5 months	5 months	3 months
  How soon can you sign a lease agreement?	5 months	5 months	5 months	3 months	1 month
  How long to supply company registration / tax numbers?	9 months	9 months	5 months	5 months	2 months
  How long to supply corporate bank account numbers?	10 months	10 months	6 months	6 months	3 months
  Corporate tax rate on annual net profits?	20%	20%	0%	20%	20%
  Limited liability entity?	Yes	Yes	No	No	No
  Government grants available?	Yes	Yes	No	Yes	Yes
  Government approval required for foreign owners?	Yes	Yes	Yes	Yes	Yes
  Resident director/partner/manager/ legal representative required?	Yes	Yes	Yes	Yes	Yes
  Minimum paid up share capital?	US$134,000	At MISA's discretion	none	none	US$134,000
  Can bid for Government contracts?	Yes	Yes	No	No	Yes
  Corporate bank account location?	Emirates NDB	J.P. Morgan	Gulf international Bank	Alinma Bank	Emirates NDB
  Can secure trade finance?	Yes	Yes	No	Yes	No
  VAT payable on sales to local customers?	None	None	None	None	None
  Average total business set up engagement costs?	US$76,390	US$76,390	US$67,040	US$49,280	US$76,390
  Average total engagement period?	10 months	10 months	6 months	4 months	3 months

  See full table

  Accounting and tax considerations	Public limited company	LLP	Representative office	Temporary Commercial Registration	GCC 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%	2.5%
  Legally tax exempt if properly structured?	No	No	No	No	No
  Group HQ tax incentives?	Yes, if KSA/GCC owned	Yes, if KSA/GCC owned	No	No	Yes
  Must file an annual tax return?	Yes	Yes	Yes	Yes	Yes
  Must file annual financial statements?	Yes	Yes	Yes	Yes	Yes
  Must appoint an auditor?	Yes	Yes	No	No	No
  Access to double taxation treaties?	Yes	Yes	No	Yes	Yes
  Withholding tax on payments to foreign shareholders?	5%-20%	5%-20%	5%-20%	5%-20%	5%-20%
  Company registration	Public limited company	LLP	Representative office	Temporary Commercial Registration	GCC Branch office
  Resident director/partner/manager/ legal representative required?	Yes	Yes	Yes	Yes	Yes
  Minimum number of shareholders/partners?	2	2	Parent company	Parent company	GCC Parent company
  Maximum shareholding for foreigners?	100%	At MISA's discretion	100%	100%	100%
  Can be wholly foreign owned?	Yes	No	Yes	Yes	Yes
  Sponsorship by a local citizen required?	No	At MISA's discretion	No	No	No
  Minimum statutory paid up share capital?	US$134,000	At MISA's discretion	none	none	US$26,670
  Security deposit to be kept with Government?	No	No	No	No	No
  Shelf companies available?	Yes	No	No	No	No
  Time to incorporate a new entity?	9 months	9 months	5 months	5 months	2 months
  Can easily convert to a PLC?	Yes	No	No	No	No
  Public register of shareholders and directors?	Yes	Yes	Yes	Yes	Yes
  Can have preference shareholders?	Yes	Yes	No	No	No
  Business considerations	Public limited company	LLP	Representative office	Temporary Commercial Registration	GCC Branch office
  Good entity for trademark registration?	Yes	Yes	No	No	Yes
  Can secure an import and export license?	Yes	No	No	No	Yes

  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?	MISA 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