Company Formation in Saudi Arabia
Learn the best ways of starting a business in Saudi Arabia, different types of business structures in Saudi Arabia, and what is required to start a business in Saudi Arabia.
- We will help you register your company in Saudi Arabia
- We will help you look for and choose a suitable partner or sponsor from Saudi Arabia
- We will help you set-up your business and associated requirements
- We will help you register for tax and licenses
Find out how to register a company/business in Saudi Arabia in very easy steps. Our comprehensive list of services is here to help you.
If you are not having the proper guidance from a professional services firm, Saudi Arabia company formation will be challenging and complex due to strict regulations and legal formalities existing in the country. We will provide you with a detailed report about company formation in the Kingdom of Saudi Arabia. Saudi Arabia now invites investment from foreign countries. Company formation rules may change as per the prevailing economic situations in the country.
Foreign Investment Policy
Foreign capital is regulated by the Foreign Investment Regulations issued in April 2000 as part of the government’s foreign investment policy. These regulations control the Foreign Capital Investment Code issued in 1979. The Law requires any company in the Kingdom of Saudi Arabia with foreign shareholders to obtain a foreign capital investment license.
Licensed companies enjoy all privileges and incentives offered to wholly Saudi owned companies, like ownership of freehold property that is necessary to carry out the licensed activity, the privileges granted by the anti-double taxation treaties to which the Kingdom of Saudi Arabia is a party, a law prohibiting against expropriation or confiscation of investments, rights to repatriate profits, etc.
Branches of foreign companies in the Kingdom of Saudi Arabia are subject to the provisions of the Regulations for Companies and to the laws applicable to business formation. A foreign company that opens a branch in the Kingdom of Saudi Arabia is required to deposit a security deposit to a local bank and the amount is blocked until issuance of the certificate of registration for the specific branch by the Ministry of Commerce and Industry.
Registering a company in Saudi Arabia can be difficult without the assistance of a professional services firm. However, the Saudi Arabic regulators have enhanced techniques for organisational development to assist and motivate business owners to form their organisation in Saudi Arabic.
Advantages of Saudi Arabia Company Registration
- Saudi Arabia company formation is the best possible corporate structure for international business owners to work in Saudi Arabia.
- A Saudi company can bid for local agreements, rent office property, and obtain visas for staff.
- According to the World Bank’s Doing Business 2012 Survey, Saudi Arabic is favourably rated as the Twelfth best legislation with ease of performing.
- The World Economic Forum also ranks Saudi Arabia positively at 18th in its Global Competitiveness Report 2012-2013.
- The government-run Saudi Arabia General Investment Authority (SAGIA) provides incentives to encourage Saudi Arabia company formation.
- Saudi Arabia company formation permits 100% foreign investment in most sectors. All foreign investment projects require a government license
- The minimum capital investment for forming a Limited Liability Company (LLC) in Saudi Arabia varies according to the business sector of the company.
- A contracting company requires SR500,000 (approximately US$133,000), while a company in agriculture requires SR25,000,000 (approximately US$6.67million).
- As an aspect of its program to create non-oil sectors, the govt. provides various tax and other rewards for international traders.
- For government-approved projects with at least 25% Saudi participation, foreign investors in agricultural and industrial ventures are eligible for a 10-year exemption from tax.
- High oil prices are driving economic growth in the Kingdom, presenting opportunities for investors considering Saudi Arabia company formation.
- After incorporating a company, it is easy to start corporate bank accounts all over the world.
Legal Structures of the Company
The following business types are accepted in the Kingdom of Saudi Arabia as per the law. These may change as per the prevailing regulatory and legal conditions. Please contact Helpline Group for an up-to-date estimate and data sheet on company formation in the Kingdom of Saudi Arabia.
- General Partnership & Limited Partnership Company
- Partnership Limited by Shares
- Limited Liability Company & Cooperative Company
- Variable Capital Company
- Joint Stock Company
- Cooperative Company
This is known as a group of company. There will be more than two partners in the management team. A limited partnership consists of at least one general partner who is liable for the debts of the partnership to the full extent of his assets.
In a Partnership Limited by Shares company, there should be at least one general partner and four limited partners, the interests of the limited partners consist of negotiable shares of equal value.
A limited liability company is a private entity formed by two or more partners who are liable for company debts to the extent of their contributed capital. The company may not include in its objects the conduct of banking, insurance or savings. Requirements are placed on the company in respect of audits, annual general meetings and filing of accounts.
A limited liability company or a joint stock company may be incorporated as a cooperative for the purposes of achieving specific objectives such as reductions in the cost, the selling price of certain products and services, and/or achieving improvements in their quality.
Investment in Variable Capital Companies may be different according to the organisation’s Memorandum and Content of the Organisation. The investment may be improved either by further efforts from the current associates or by the entrance of new associates, and it may be decreased either by the withdrawal of associates or by a decrease in their investment.
A joint stock company or corporation includes five or more investors who are responsible for the financial obligations of the organisation to the level of their investment participation. A Joint Stock Company may only be integrated upon the acceptance of the Reverend of Industry or upon the issuance of a Royal Decree.
A limited liability company or a joint stock company may be integrated as a cooperative company for the requirements of accomplishing particular goals such as achieving cost reductions, or achieving low prices for certain goods and solutions or achieving improvements in the overall quality. Investments in such cooperative companies are variable and it must be separated into stocks of equivalent value with the par value of each share.
Other Factors You Should Consider for Bahrain Business Formation
The Government Tender and Procurement Law control Government tenders and procurement in the Kingdom of Saudi Arabia. The Kingdom of Saudi Arabia has also acceded to the Unified Rules of Granting Priority in Government Procurements to National Products and Products of National Origin in the GCC. The Capital Markets Law act as the regulator and supervisor of capital markets in the Kingdom of Saudi Arabia.
The CMA has already implemented ten major regulations, namely (1) Listing Rules, (2) Offers of Securities Regulations, (3) Authorised Persons Regulations, (4) Securities Business Regulations, (5) Market Conduct Regulations, (6) Corporate Governance Regulations, (7) Investment Funds Regulations, (8) Real Estate Investment Funds Regulations, (9) Merger and Acquisition Regulations and (10) Anti-Money Laundering and Counter-Terrorist Financing Rules.
There are Import and Export regulations as well. Similarly, the Anti Cover-Up Law and competition Law come under the title of business setup.
Saudi Arabia’s tax system is promulgated by the central government through royal decrees, ministerial decisions and circulars of the Department of Zakat and Income Tax (DZIT) of the Ministry of Finance and National Economy.
The Income Tax
The income tax rate is 20% for all taxpayers. The NGIT rate for any taxable year is determined based on the internal rate of return on the cumulative annual cash flows of the taxpayer from the natural gas investment activities. Based on the NGIT rates table, the NGIT rate can range from a minimum of 30% for an internal rate of return of 8% to a maximum of 85% for internal rates of return of 20% and above. A tax rate of 85% is applicable to the taxable income from oil or other hydrocarbon production activity in the Kingdom.
Zakat is known as the Islamic tax. Zakat levied on Saudi Arabian and GCC natural persons, wholly Saudi Arabian or GCC-owned entities, and Saudi Arabian or GCC shareholders of companies. The rate of zakat is 2.5%.
Payments made to non-residents by a resident or a permanent establishment of a nonresident, that are from a source in the Kingdom, are subject to withholding tax. Withholding tax rate as follows: (1) Five per cent of rents (2) 15 percent of royalties (3) 20 percent of management fees(4) Five percent for payments for air tickets, airfreight and maritime freight (5) Five percent for payment of international telecommunications services and (6) 15 percent for any other services
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P.O Box:30606, Nearby Gulf Times,
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C-Ring Road, Doha, Qatar