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Business Setup in the Kingdom of Saudi Arabia (KSA)

Published on : 20 May 2021

Company setup in the Kingdom of Saudi Arabia


The Kingdom of Saudi Arabia (KSA) is the Middle East's largest economy, with a history of oil production as its primary source of revenue. And it is one of the Arab countries that is a member of the G20.  It is primarily an oil-based economy, with nearly 16% of global petroleum reserves and 5% of natural gas reserves, and is the world's largest petroleum exporter. The Saudi government has taken a number of business-friendly social and economic steps to draw foreign investment over the years, and many investors and business owners from around the world are considering company formation in Saudi Arabia.

The Saudi Arabian government, on the other hand, launched the Vision 2030 plan in April 2016, which included a range of new initiatives aimed at diversifying the Saudi economy. The aim of Vision 2030 is to reduce Saudi Arabia's reliance on oil and grow service sectors like health, education, infrastructure, leisure, and tourism. The broad reforms outlined in Vision 2030 and the National Transformation Plan impact a wide range of political, economic, and foreign investment sectors. As part of the government's attempts to diversify revenues away from oil and address wider social and economic goals, the reform's tax and legal policies will play a significant role.

To reduce its reliance on oil exports, the Saudi government has implemented a number of reforms aimed at attracting foreign investment, empowering women, growing jobs and social opportunities, and expanding the role of the private sector and MSMEs in the economy. Recent economic policy changes have made doing business in Saudi Arabia much easier and turned the country into a more diverse economy.

At STA, our lawyers in Saudi Arabia have extensive legal experience in all forms of corporate and commercial matters across Saudi Arabia. We provide a range of corporate and commercial law services and advice, including busines set-up in Kingdom of Saudi Arabia (KSA). Our lawyers in Saudi Arabia can assist investors throughout the entire process of establishing a company in Saudi Arabia. Our Lawyers are your perfect partner on the ground for this journey offering end to end service delivery from company conception to post-launch business support.

Types of business entities available for investors in Saudi Arabia

According to the New Saudi Company Law, the different type of business forms available for the local and foreign investors are as follows;

  1. General partnership
  2. Limited partnership
  3. Joint ventures
  4. Joint-stock company
  5. The limited liability company (LLC)

The legislation also specifies the business forms that are available to foreign companies in Saudi Arabia, and they are as follows.

  1. Branch office.
  2. Representative office.

General Partnership

Two or more partners are required to share responsibility for the company's duties and debts. Upon incorporation, the company must be registered with the commercial registry. There is no requirement for a certain amount of capital. However, the partners will be jointly and severally liable for the partnership company's obligations to third parties.




The company itself is not taxed, and all profits, deductions, and credits are passed on to the individual partners.

Individuals can form partnerships, but corporations cannot.

Filing tax returns is a reasonably simple procedure.

Each partner's liability is unlimited, and partners will be collectively and severally liable to third parties for the partnership company's obligations.

Limited Partnership

It is comprised of general partners who are responsible for the partnership's debts to the extent of their personal wealth and limited partners who are only responsible for the debts of the partnership to the extent of their investments. Further, general partnerships have the same registration requirements as general partnerships.

This partnership must avoid including their names in the firm liability, and at least one of the general partners' names should be incorporated in the name of the limited partner.



It aids in the better distribution of risk among various partners.

With no option to carry over profits to a future tax year, all earned profit is effectively allocated.

It is easier to attract passive investors.

A relationship company's partners cannot withdraw without a court order or, if the company has no set period, at a time that is convenient for the other partners.


Joint Ventures

Foreign investment joint ventures with Saudi partners has advantages. Whereas foreign partners in a joint venture may own 100% of the equity in some Gulf Cooperation Council (GCC) countries, having a local Saudi partner who owns 50% or more of the equity has advantages.

For example, if a Saudi owns 50% of a joint venture company, the company is eligible for a loan that is interest-free for up to 50% of the project's cost, repayable over ten years. In the allotment of government contracts for majority Saudi-owned joint ventures, it also has priority over wholly Saudi-owned firms.

Trading and marketing activities targeted at Saudi individuals or firms that are wholly owned by Saudis. According to Royal Decree M/11 of 1962, mixing Saudi-foreign joint ventures is prohibited.




Saudi Arabia does not impose any restrictions on foreign ownership in this form of business entities. A foreign natural or legal individual may own up to 100% of a Saudi Arabian company's stock.

Companies with 100% foreign ownership may be subject to additional conditions, such as higher share capital or additional approval.

When a joint venture is structured as a joint-stock company, there is no general obligation to report beneficial ownership of a joint venture firm.

Foreign investors are not allowed to invest in sectors that are on the negative list.

Joint-stock company

A minimum of five (5) shareholders is required for a joint-stock company. There is no upper limit. Shareholders may be both individuals and businesses. Share certificates are traditionally used to represent shares in a joint-stock company, but dematerialized shares are becoming more common. Shareholders are only responsible to the degree that their shares are worth.

The share capital subscribed for in cash can be paid up in stages, subject to the approval of the Ministry of Commerce and Industry, given that the sum payable per cash share upon subscription does not fall below one-quarter of its par value.

In Saudi Arabia, the joint-stock company (JSC) is probably the most regulated corporate body. The regulatory conditions for incorporation, as well as the degree of control and participation of the Ministry of Commerce and Industry, demonstrate this.




Foreign companies are permitted to bid on government contracts and operate in Saudi Arabia without the involvement of a Saudi agent or partner.

The Capital Market Authority, which oversees public JSCs, has a higher level of scrutiny.

Imports of machinery, equipment, materials and spare parts for industrial ventures are excluded from customs duties for foreign companies.

JSCs are subject to more scrutiny than LLCs, and the costs of enforcement are much higher.

In terms of goods and services, the Kingdom remains by far the largest Arab market and one of the world's most important trading nations.

A Saudi Arabian Joint Stock Company pays a 20% corporate tax.


Limited Liability Company

As a limited liability company, it is a privately held company that develops commercial, agricultural, contracting, or service ventures with Saudi and international partners. However, it is not permitted to engage in activities such as banking, insurance, or investments since these companies will not be able to offer public subscriptions to raise money, and without the agreement of both partners, both their interests cannot be transferred.

According to Regulations for companies, this must be registered in the foreign capital investment regulatory regime as well. The contribution terms and other necessary details must be registered with the Ministry of Commerce.

The limited liability company is the most popular form of business in Saudi Arabia. It should be noted that the most common corporate vehicle for foreign equity participation is a limited liability company.




A small business start-up often forms an LLC to escape double taxation and to fund multiple groups of stock if necessary.

Small businesses can use the Limited Liability Company (LLC) form. It is not the best business model for a company that wants to go public.

There's no need for a lot of continual maintenance once you've set it up.

When a member dies or files for bankruptcy, the LLC must be automatically dissolved. It will not be able to operate indefinitely like a corporation. If any of the members of the company resign, the company must be wound up. If the remaining members wish to proceed, they may form a new LLC.

Many start-ups form an LLC to secure their personal assets from litigation filed against the company.



Branch Office

To set up a branch in the Kingdom, a foreign company performing industrial or contracting works may apply for a license from the Foreign Capital Investment Committee, and the company may complete its registration process under the Regulation. Additionally, the concept of branches has been expanded to include companies that aren't engaged in contracting or industrial work, though such licenses are uncommon.




Since there are no Articles of Association to accept and no reserve conditions, the incorporation process is usually easier than that of a corporation.

Saudi-owned companies, or companies with a significant Saudi component, are likely to be favoured for government contracts.

The branch has the authority to encourage and solicit business all over Saudi Arabia.

Its activities are restricted to SAGIA-approved licensed objects.

It can work on both public and private sector initiatives (in accordance with approved objects)

It is unable to engage in advertising, marketing, or trading (for these activities, a minimum of 25% Saudi equity participation is needed, as well as significantly increased capitalization).


There are no new articles of association required.

The parent company's liability cannot be quarantined in Saudi Arabia, and it may be exposed in its region of incorporation.


Representative offices

Representative offices in the form of technical and scientific offices (TSSO), as well as temporary company registrations (TCA), are permitted under Saudi Arabian law. Technical and scientific offices are often formed in order to provide technical support to manufacturers through a distributor. Temporary company registration is a general business created for the purpose of obtaining a government contract.

The types of activities that these institutions can carry out are restricted. Technical and science offices are unable to complete commercial tasks or generate income. Instead, they can only provide technical knowledge and help distributors and consumers with goods, as well as business and technical analysis.

Only pharmaceutical firms are usually allowed to open these offices. Non-pharmaceutical companies may only be established with the SAGIA's and the Ministry of Commerce and Industry's permission. They must conclude that the company's goods are sufficiently complex to warrant the establishment of a technical and scientific office before they can authorize this form of office.


Advantages of TSSO

Disadvantages of TSSO

It can only be seen in the context of complex products. The process of forming a branch is similar to that of forming a corporation.

Not all goods are complex enough to include a TSSO.

A TSSO may conduct market studies for the company's business activities and submit reports to the parent entity as a result of those studies.

The parent cannot quarantine liability in KSA because there is no independent legal identification, and it may be revealed in its place of incorporation.


There are no capital requirements.

The number of employees in a TSSO is limited to the number set by Saudi authorities.


It must perform a market analysis for the company's business operation and submit reports to the headquarters on the findings. Also, it must send an annual report on its activities to SAGIA.



Advantages of TCR

Disadvantages of TCR

It can be obtained for consultancy projects


It can only be granted to a foreign investor after a government contract has been awarded to it.

Occasionally, a temporary commercial registration may be converted to permanent commercial registration.

It's possible that subcontractors on government contracts won't be able to use it.

At a later stage, the provisional status may be changed to permanent commercial registration.

The activities that can be undertaken are limited to the contract's scope and length (With the approval of the government party, extensions to commercial registration may be requested).

It is generally easy to liquidate this form of business entities.




The legal requirements of the different form of business entities


General Partnership


Limited Partnership


Joint Ventures


Joint Stock Company

Limited Liability Company

Branch Office

Representative Office

Minimum Capital Requirement

No statutory minimum capital requirement

No statutory minimum capital requirement

The Saudi company's minimum capital contribution is not specified in the Companies Regulations. However, Saudi Arabia may, in the future, join other Arab countries in requiring foreign investment in the Kingdom to be contingent on Saudi ownership of at least 51% of the business.

Except for some types of SAGIA approved firms, which must have the required minimum capital, the minimum capital requirement is SAR 500,000.

Except for those types of SAGIA approved businesses, which must have the required minimum capital, there is no minimum capital requirement.

A minimum capital of 500,000 SAR is required.

Does not have minimum capital requirements

Minimum Number of Shareholders

Two or more


A minimum of one director and two partners are required, regardless of nationality or residency.

Two or more entities

Two of more persons

Minimum of one and maximum of 50 shareholders




Managed by all the partners

Limited partners - responsibility is limited to their participation in the share capital but cannot be involved in the management of the business.

General partners - responsible for the day-to-day management of the partnership and are entirely liable for the partnership's debts and liabilities.

The company will be managed according to the KSA JV agreement, which must include provisions in regards to the management and decision-making process.

A JSC is governed by a board of directors, which must have at least three members and no more than eleven members.

The general managers are in charge of limited liability companies' management.

Branch offices are often managed by their parent company. It is 100% owned by Foreign investment. However, it must appoint a legal representative in KSA.

They are managed by the head office


Unlimited Liability

General partners – Fully liable for the debts

Limited partners – Limited to their share capital investment

The joint venture partners are liable to each other based on their percentage of the shareholding in the company 

The liability of shareholders is limited to the value of their shares.

Shareholders are only responsible for the company's debts to the degree that their respective interests are affected.



Transfer of Shares



The transfer of share arrangements is followed according to the JV agreement.

A JSC's shareholders do not have constitutional pre-emption protection when it comes to sharing transfers.

A constitutional pre-emption privilege applies to transfers to third parties. Transfers must be (1) registered in the LLC's share register, which must be filed with the Ministry of Commerce and Investment ("MOCI"), and (2) reflected in the LLC's articles of association, which must be signed by a Saudi notary public.

In the articles of association, shareholders may determine a valuation method for their LLC interests.



Scope of Work






It can be used for the full range of activities allowed by the branch's SAGIA license, and it can participate in both the private and public sector.

Its roles are limited to providing technical information and assistance about the foreign company's goods to its Saudi distributors and end-users, as well as market analysis and market reporting

Licensing requirements

Must obtain a license from SAGIA

Must obtain a license from SAGIA

- Must obtain approval from both SAGIA and the Ministry of Commerce and Investment must approve joint-stock companies.

-The license required to establish the joint-stock company can be granted by a Ministry of Commerce and Industry decision, but if the request for creating a joint-stock company established by or jointly created with the country or some other public individual requires an exception to any regulations of this law, the request must be submitted to the Cabinet for approval.

-Must obtain foreign capital investment license from SAGIA in case you are a foreigner.

- Must register your company with the Ministry of Commerce & Industry MOCI and obtain a business license

- Must be licensed SAGIA

- The branch must appoint a legal representative in Saudi Arabia.

-Must be licensed by SAGIA

-Must obtain Government Contract (TCR


Note: All investments in Saudi Arabia by foreign companies and individuals (those who are not nationals of the Gulf Cooperation Council (GCC)) are subject to approval and need an investment license from the Saudi Arabian General Investment Authority (SAGIA)).

Types of Tax on Company formation in Saudi Arabia

  • Local Saudi Companies Tax – 2%
  • Service Company Tax – 20%

There are three different types of taxes that apply to shareholder companies and their systems. They are as follows;

  1. Corporate Tax

On a non-share Saudi's in a resident company and income earned by a non-resident from a PE in Saudi Arabia, the regular corporate income tax rate is 20%.

  1. Withholding Tax

The rates range between 5%, 15%, and 20%, depending on the form of service and whether or not the recipient is a relative. This tax is imposed on businesses that earn money from non-residential activities such as rent, royalties, and management fees.

  1. Zakat Tax

Local Saudi investors and business shareholders are subject to a tax of up to 2%, while non-Saudis are subject to a corporate tax of 20%.

Incorporation process to form a Company in Saudi Arabia

Part I – Planning (Pre-incorporation process)

Primarily, the optimum business type, paid-up capital, and license requirement are investigated. The following is a list of things to think about during this process;

  • The business/company’s name
  • The business entity’s type
  • Preparing documents such as certificate of incorporation, Power of Attorney, business license, Board resolution etc.

Part ll – Incorporation

After the planning stage, the company registration in Saudi Arabia will begin, with various steps being worked on at the same time to reduce the time required. The procedures are as follows;

  1. Application for obtaining Investment License
  • an application must be sent to the Saudi Arabian General Investment Authority (SAGIA), a government body tasked with issuing licenses to 100% foreign-owned businesses operating in Saudi Arabia.
  • A comprehensive report will be submitted outlining important details such as the scope and scale of the investment activity, as well as key financial data regarding the company's operations. Filling out the SAGIA application forms and submitting them to SAGIA is also needed.
  • SAGIA would then grant a pre-approval certificate, indicating whether the company can be listed and whether it will have 100 % foreign ownership.

Note: This license is required for non-GCC foreign investors and only applies to commercial activities that are not on the "Negative List."

  1. Submission of Article of Association
  • The Article of the Association of the company must be submitted to the Ministry of Commerce and Investment.
  • Once it has been accepted, the application must be signed in front of a notary public for a CR certificate.
  • Following that, the name and articles of incorporation must be published in the newspaper.
  1. Registration of Company’s name

Before all other forms can be submitted, the company name must be reserved with the Unified Centre and then accepted. Incorporation types, articles of association, and deeds of creation are examples of such documents.

  1. Registering with MERAS
  • Companies may register with a municipality under MERAS, and registration would entail a physical office. The Saudi Arabia Ministry of Commerce and Industry must receive the full registration (MOCI).
  • It takes 6 weeks for the Certificate of Registration to be issued, and the company handles the tax registration for the time period.
  • Companies may use MERAS to notarize their articles of incorporation online, as well as register with the Ministry of Labor and Social Development (MLSD), the General Organization for Social Insurance (GOSI), and the General Authority of Zakat & Tax (GAZT), as well as Wasel.
  1. Obtaining SAGIA foreign business license

To obtain a SAGIA license, submit all necessary documents to SAGIA for examination and approval, including the CR, tax registration, municipality license, and bank share capital deposit letter. The foreign business investment license will be issued by SAGIA, allowing the company to sign contracts, issue invoices, and recruit employees.

  1. Creating Company Seal
  • The seal must include the company's CR number as well as the name of the company. To attest signatories at the Chamber of Commerce, register with the General Organization for Social Insurance, and for company invoices, the company seal is necessary.
  • Contractual arrangements, shareholder and management resolutions, government records, official letters and notices all require a company seal that includes the CR number and the company name.
  1. Registering with Chamber of Commerce

All business entities seeking company registration in Saudi Arabia must apply for a certificate of membership obtained from the Chamber of Commerce and Industries within 30 days of CR registration (CCI).

  1. Setting up a Bank Account

Within 90 days of receiving the Commercial Certificate, a local bank account must be established.

Part lll – Continued Compliance

Following the incorporation of the company, the following activities must be carried out in order to complete the entire phase of company creation in Saudi Arabia.

  • Converting the personal bank account to a corporate bank account.
  • A Saudi Employment visa (Iqama) is required if the company appoints foreign employees to be bank signatory to a Saudi Corporate bank. Notably, before a foreign national can apply for an Iqama, Saudi nationals must have already been on the company's payroll.

Our lawyers at STA Law firm are well equipped and competent in assisting with the company formation in the Kingdom of Saudi Arabia and shall be able to accommodate all your incorporation needs along with future compliance requirement.



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