Steps to Establish a Foreign Company in Saudi Arabia

1. Definition of a Foreign Company

Under the Saudi legal system, a foreign company means a commercial entity that is wholly or partially owned by non-Saudi shareholders or partners. This includes branches of foreign companies coming from outside the Kingdom, or companies registered locally with foreign capital.
The regulations require obtaining an investment license from the Saudi Ministry of Investment before starting any formal incorporation procedures.

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2. Forms of Foreign Investment in Saudi Arabia

A foreign investor may establish several types of legal entities, most notably:

• Limited Liability Company (LLC).
• Joint Stock Company.
• Branch of a foreign company.
• Partnership with a Saudi investor (joint venture).
  The choice of legal form depends on the size of the project, its nature, and the investor’s objectives.

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3. Main Advantages for the Foreign Investor

The Saudi system grants foreign investors several advantages, including:
1. The possibility of owning up to 100% of the company in most permitted sectors.
2. Ease of procedures through government electronic platforms.
3. Legal protection of investors’ rights.
4. The ability to transfer profits and capital خارج المملكة in accordance with regulations.
5. No personal income tax on individuals.
6. Corporate profits of foreign companies are subject to income tax at a rate of 20%.

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4. Main Conditions for Establishment

To establish a foreign company, the following is required:
1. The activity must be among those permitted for foreign investment.
2. Submission of authenticated documents of the parent company from its home country.
3. No serious commercial criminal records against the investor.
4. Compliance with Saudi regulations and approved technical standards.
5. Submission of a written undertaking to comply with all regulatory requirements.

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5. Required Documents

The basic documents usually include:
1. A certified copy of the commercial registration of the parent company.
2. The articles of incorporation of the parent company officially notarized.
3. A board resolution approving investment in Saudi Arabia.
4. Reservation of a trade name from the Ministry of Commerce.
5. Passport of the general manager.
6. Draft articles of incorporation of the new company.
7. Economic feasibility study.
8. Approved financial statements of the parent company.

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6. Obtaining the Investment License

The license application is submitted to the Saudi Ministry of Investment along with the required documents.
This license is considered a basic requirement for the foreign investor to own the company and legally conduct business.

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7. Issuance of the Commercial Registration

After obtaining the investment license, the company is registered with the Ministry of Commerce and a commercial registration is issued.
The annual commercial registration fee usually ranges between SAR 1,200 and SAR 2,000 depending on the type of entity.

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8. Registration with Government Authorities

The company must then register with the following entities:
1. Zakat, Tax and Customs Authority.
2. General Organization for Social Insurance.
3. Ministry of Human Resources and Social Development.

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9. Additional Licenses Depending on the Activity

Some activities require special licenses from competent authorities such as:

• Ministry of Industry.
• Food and Drug Authority.
• Communications Authority.
  This depends on the nature of the commercial activity.

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10. Issuance of Visas

After completing registration, work visas for foreign managers and employees may be applied for through government platforms.

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11. Approximate Establishment Costs

They vary depending on the activity and location, but generally include:
1. Trade name reservation: from SAR 50 to SAR 200.
2. Annual commercial registration: from SAR 1,200 to SAR 2,000.
3. Investment license: from SAR 2,000 and may increase depending on the activity.
4. Chamber of Commerce fees: vary by category.
5. Municipality and office fees.

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12. Taxes

Foreign companies are subject to:
1. Income tax at a rate of 20% on net profits.
2. Value Added Tax (VAT) at a rate of 15% on taxable activities.

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13. Minimum Capital

There is no unified minimum for all activities, but generally:
1. Agricultural activities: may reach SAR 25 million.
2. Industrial activities: حوالي SAR 5 million.
3. Some other activities: from SAR 100,000 to SAR 1 million depending on the sector.

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14. Post-Establishment Obligations

The foreign investor is required to:
1. Renew the commercial registration and licenses.
2. Submit tax returns.
3. Comply with labor and localization regulations.
4. Maintain financial records.
5. Cooperate with regulatory authorities.

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Final Note

The information contained in this document is of a general guiding nature and is subject to the laws, regulations, and instructions issued by the competent authorities in the Kingdom of Saudi Arabia. Requirements may vary depending on the nature of the activity or regulatory updates.

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Legal and Regulatory Sources

Investment Law of the Kingdom of Saudi Arabia
Saudi Companies Law
Saudi Ministry of Investment
Ministry of Commerce
Zakat, Tax and Customs Authority
Ministry of Human Resources and Social Development
Regulatory guides issued by competent authorities