Registration of a mainland company in Saudi Arabia. Service offer

In accordance with the KSA Companies Law, a legal entity in the Kingdom can be registered in the following legal forms:

• General partnership;
• Limited partnership;
• Joint-stock company;
• Simplified joint-stock company;
• Limited liability company.

The most common legal form is a limited liability company.

In Saudi Arabia, most types of activities have special requirements that must be met when registering a company. For example, companies engaged in construction or tourism are required to provide financial statements for the last year certified by the Embassy of Saudi Arabia. Companies providing communication services must have a Saudi partner with at least 40% participation share. However, if a person wishing to register a Saudi company has Premium Residency*, such person is exempt from these requirements.
*Premium Residency is a document in Saudi Arabia similar to a residence permit, which gives foreign citizens the right to live, work, and do business in the Kingdom of Saudi Arabia.

All types of activities can be divided into two groups:

1. activities available to companies with 100% foreign ownership;
2. activities available to foreigners with the mandatory participation of a Saudi partner.

• Activities related to heavy and light industries;
• Activities related to the performance of government and semi-government contracts (provided there is no foreign investment licence for the performance of government/semi-government contracts);
• Research and development activities (provided the company has a Saudi agent distributing the company’s products in the Kingdom);
• Activities related to real estate investment (provided the value of a single project is at least SAR 30 000 000 (~USD 8 000 000);
• Commercial activities: wholesale and retail trade, e-commerce;
• Engineering consultation activities;
• Activities related to the employment of domestic staff;
• Activities related to audio and video recording;
• Activities in the printing and publishing field, etc.;
• Activities related to transportation (private/public taxis, school and tourist transfers, transfers of pilgrims and visitors to the Kingdom, carriage of passengers by buses outside the Kingdom, directing taxis; car, bus, and truck rental).

It should be noted that if a company is 100% foreign-owned, there are additional requirements* for almost all types of activities (minimum share capital, minimum value of investment projects, presence in international markets, etc.). Premium Residency does not exempt a person wishing to register a Saudi company from these requirements.

* See details below.

• Construction activities;
• Activities related to technology development;
• Tourism;
• Activities in the field of training;
• Activities in the field of healthcare;
• Insurance and reinsurance;
• Activities in the field of education;
• Activities related to the provision of logistics services;
• Activities related to the provision of financial services;
• Organization of exhibitions;
• Activities in the field of public catering;
• Activities in the field of aviation and handling, etc.;
• Commercial activities: retail and wholesale trade, e-commerce (provided the company has a Saudi partner with a share of at least 25%);
• Professional services (accounting and auditing, architecture, etc.);
• Agricultural activities;
• Mining activities;
• Activities related to the provision of legal services in the Kingdom through the involvement of a licensed Saudi lawyer;
• Activities in the field of transportation by bus within cities, transportation by metro within cities;
• Activities in the field of communication services.

Generally, Saudi Arabia has no minimum capital requirement. However, there are special requirements for the size of share capital for companies conducting certain business activities, for example:

1. 100% foreign-owned companies engaged in wholesale and retail trade and e-commerce are required to have a minimum capital of SAR 30 000 000 (~USD 8 000 000);
2. Companies that are engaged in wholesale and retail trade and e-commerce and have a Saudi partner are required to have a minimum capital of SAR 20 000 000 (~USD 5 332 000).

The number of shareholders must be at least one; shareholders can be individuals and legal entities.

A foreign citizen can own up to 100% of shares (participation) in a company, depending on the company’s type of activity.

However, although Saudi law* sets out minimum requirements for company shareholders, the main regulator for companies with foreign investment is the Ministry of Investment of Saudi Arabia (MISA), which imposes higher requirements for company formation by foreign investors.

Foreign citizens have two options to enter the Saudi domestic market:

1. Obtain Premium Residency – a premium residence permit that provides exemption from the mandatory participation of Saudi nationals in foreign-owned companies and offers other reliefs depending on the type of activity.
2. Comply with the requirement to pay the minimum share capital of the company**. A potential shareholder must provide proof of having funds to contribute to the capital and demonstrate compliance with additional requirements for the chosen type of activity.

* Saudi Companies Law.
** See details below.

A limited liability company is managed by one or more managers. Managers can be appointed from among partners or other persons.

Steps involved in the registration of a company in Saudi Arabia:

1) It is necessary to determine:

• company name;

• type of company;
• company structure (shareholders, manager);
• type of activity.

2) It is necessary to provide information and documents regarding:

• names and passport details of the partners,
• company’s headquarters,
• company’s purpose,
• company’s capital and its distribution between the partners,

and draft the Articles of Association containing:

• company management procedure,
• how decisions are made in the company,
• how profits and losses are distributed between the partners,
• company’s financial year start and end dates,

and any other provisions, conditions, or information that the partners plan to include in the company’s memorandum of association.

3) Submitting an application for company registration to the Ministry of Investment of Saudi Arabia (MISA).

The application must contain the details of the company’s shareholders, managers, and proposed business activities. The applicant must confirm compliance with the requirements for the proposed activity and provide proof of having funds to pay the share capital. If the shareholder is a foreign legal entity, it is necessary to submit audited financial statements and provide a financial development plan for the next 3 years. Following the review, MISA will issue a pre-approval certificate confirming that the company can be registered and whether the company can be 100% foreign-owned or not.

4) Reservation of the company name and drafting of the Articles of Association.

The Articles of Association must be submitted to the Ministry of Commerce and Investment (MOCI). Once approved, the document must be signed before a notary in order to get the Commercial Registration certificate. The certificate will be issued approximately 6 weeks after the filing of the Articles of Association. After that, the company’s name and Articles of Association must be published. At this stage, the company can also register for tax.

5) All registered companies must submit a Certificate of Membership obtained from the Chamber of Commerce and Industry.

This must be done within 30 days of receipt of Commercial Registration.

6) It is then necessary to open an account at a local bank within 90 days of the date of Commercial Registration.

A corporate bank account must be opened after the company registration numbers are issued, and all foreign employees must obtain an Iqama* in advance.

7) To obtain a MISA licence for a certain type of activity, it is necessary to provide MISA with all documents, such as: tax registration, bank letter confirming the payment of share capital, etc.

MISA will subsequently issue a foreign investment licence that will allow the company to sign contracts, issue invoices, and hire employees.

8) The next and final step is to register the company with the General Authority of Zakat** and Tax (GAZT) for tax purposes.

* Iqama is a special residence permit in Saudi Arabia that allows a foreigner to work and live in the KSA.

** Zakat is an Islamic annual wealth tax for the benefit of the poor levied on Muslims.

As a result, the company is assigned a taxpayer identification number (TIN).

A company is required to annually renew its Commercial Registration and MISA licence by paying relevant fees, and to renew its office lease agreement.

A mandatory condition for company renewal is to provide financial statements for the last 3 years. The financial statements should be uploaded to the government portal.

Saudi accounting regulations require every business enterprise with a capital exceeding SAR 100 000 to maintain proper accounting records. Records must be kept in Arabic and stored within the territory of the Kingdom. Financial statements are prepared by a local certified accountant in accordance with the international financial reporting standards.

Financial statements of companies with an annual revenue exceeding SAR 10 000 000 (~USD 2 670 000) must be audited.

Article 16 of the Saudi Companies Law states that the financial statements of a company must be prepared by the end of each financial year in accordance with the accounting standards approved in the Kingdom, and must also be deposited within 6 months of the financial year end date.

The company’s financial year is 12 months. The first financial year may cover a period of not less than 6 months and not more than 18 months, starting from the date of registration of the company.

Corporate income tax

Payment of corporate income tax depends on the citizenship of the company’s members. If a Saudi company only has foreign investors as members, then its profit is taxed at the rate of 20%. However, some activities are subject to a higher rate of corporate income tax. If a company is engaged in extraction of natural resources, the tax rate can range from 50% to 85%.

Dividend income received by a mainland company is subject to corporate income tax at the standard rate of 20%. However, dividends may be exempt from tax if the following conditions are met:

• the share in the underlying company is at least 10%;
• the holding period for the share is at least one year.

Interest income is subject to corporate income tax at the standard rate of 20%. Interest paid to a non-resident attracts 5% withholding tax.

Royalty income is subject to corporate income tax at the standard rate of 20%. Royalties paid to a non-resident attract 15% withholding tax.

VAT

The standard VAT rate has been 15% from 1 July 2020.

Social security contributions

Contributions are paid every month based on the monthly salary and housing allowance capped at SAR 45 000 (~USD 12 000). These contributions are charged at a rate of 2% for non-Saudi employees and are payable by the employer. For Saudi employees, the rate is 21.5% and is split between the employee and the employer.

*The cost of services is effective as of the July 2024.

**The fees for preparing financial statements and conducting an audit are charged based on the time spent at hourly rates ranging from USD 100 to USD 400 (depending on the type of work and qualification of a specialist involved).