Open a Branch in Saudi Arabia

Updated on Thursday 22nd July 2021

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The branch office in Saudi Arabia is incorporated following the regulations prescribed by the Foreign Investment Law. A foreign company applying to register a branch office in this country may receive the right to do so only for specific activities, as the branch office is prohibited for certain operations, such as trading activities. Investors interested in how to open a company in Saudi Arabia should know that the branch office is also known as a permanent branch and that the business establishment can be set up without having a Saudi partner.

Our team of consultants in company formation in Saudi Arabia can provide in-depth advice on the documents that are required in this case. 
 

Incorporation requirements for a branch office in Saudi Arabia in 2021
 

When opening a branch office in Saudi Arabia in 2021, the foreign company will have to satisfy specific requirements. For example, it is necessary to provide a minimum share capital of SAR 500,000. However, the capital requirements may increase depending on the business activities that will be performed by the foreign company in Saudi Arabia
 
The procedure for setting up a company in Saudi Arabia which will perform its business activities through a branch office stipulates that the foreign entity must obtain a license issued by the Saudi Arabian General Investment Authority (SAGIA).
 
Some of the most important documents that are to be provided by the parent company applying to open a branch office are the following: 
 
copy of the company’s certificate of incorporation;
copy of the parent company’s articles of association and memorandum;
the power of attorney, attested by the Saudi consulate
payment of specific fees. 

We can assist foreign companies interested in setting up branch offices in Saudi Arabia in 2021.
 

The main characteristics of branches in Saudi Arabia


Foreign companies interested in expanding their operations in Saudi Arabia have several types of entities they can operate under. Among these are the following:
 
  1. technical and scientifical office that can be employed to offer support to Saudi companies;
  2. liaison offices, also known as representative offices, that are not allowed to engage in commercial activities;
  3. joint ventures that can operate in partnerships with local companies;
  4. branch offices that can engage in commercial activities and fall under the total control of the parent company.

Out of all entities, the branch office can be the most appropriate business form for expanding operations in Saudi Arabia. As main characteristics, it should be noted that the branch office:
 
  • can only complete the same activities as the parent company;
  • the foreign enterprise is required to apply for the licenses related to the operations of the Saudi branch;
  • the parent company will be liable for the debts and other obligations of the branch office;
  • the foreign company can appoint a person from its headquarters to represent it in Saudi Arabia, however, the respective individual must obtain a work permit;
  • the minimum share capital to set up a branch in Saudi Arabia is 500,000 SAR.

In certain cases, foreign companies interested in expanding their operations through Saudi branch offices must also have a business established in another Gulf Cooperation Council (GCC) member state.

Our Saudi company formation advisors are at your service with detailed information on the requirements to meet in order to create branch offices in this country.
 

What to consider when opening a branch in Saudi Arabia


There are several aspects to take into account upon the establishment of a branch office in Saudi Arabia, among which is the fact that it must bear the same name as the parent company. Also, this type of entity is not considered a legal business form, but an extension of the main company, thus it has no decision-making power in respect to its activities.

Also, even if it operates as an extension, the branch office must have a legal address in a Saudi city. This will enable it to access certain financial benefits, such as double taxation avoidance.

The branch is limited in the activities it will undertake to those of the parent company, which is why it is mainly employed in the financial sector.

The branch office is suitable for both medium and large-sized companies and foreign companies can set up more than one entity in Saudi Arabia.

We provide tailored support to foreign single investors and companies interested in accessing the Saudi market by setting up a business here. Our company registration advisors in Saudi Arabia will answer all your questions related to starting an enterprise here.
 

Bank account opening and licensing requirements for a Saudi branch


Two of the important aspects to consider when operating a business in Saudi Arabia are the opening of a bank account that needs to be set up by the parent company and obtaining the necessary licenses with the local authorities.

In terms of bank account creation, the parent company can choose a national Saudi bank or an establishment of a foreign bank (in certain cases, banks from the foreign business’ home state operate here, which is a good option for these).  In it, the parent company will deposit the share capital and once the operations begin, all financial transactions will be completed through it.

When it comes to licensing, the parent company is required to prepare and file all the required documents with the Saudi agency in charge of representing and administering the industry to operate in. Specific authorizations must be obtained in the financial and insurance fields.

If you want to set up a branch in a specific sector and need guidance, we are at your service with information and assistance.
 

Incorporation advantages in Saudi Arabia  
 

Our team of specialists in company formation in Saudi Arabia can advise foreign businessmen on the main advantages of setting up a branch office in 2021. As a general rule, it is important to know that the branch office is incorporated in a similar manner prescribed for the limited liability company in Saudi Arabia. One of the main advantages is that, during the registration, the businessmen will not need to draw new articles of association. Also, the branch office may engage in various public and private activities, depending on the company’s main operations
 

Taxation of branch offices in Saudi Arabia


The taxation of companies in Saudi Arabia relies on residency. In the case of branches, however, the corporate tax imposed by the Tax and Customs Authority will target only the income it generates here.

As a permanent establishment, the branch office can benefit from the provisions of double tax treaties provided that it operates in Saudi Arabia for a specific period.

Here are the main taxes to be paid by a branch office in Saudi Arabia:
 
  • the corporate tax which is levied at a rate of 20% for most companies (exceptions apply to oil and gas businesses);
  • the value added tax which is levied at a standard rate of 5%;
  • the capital gains tax which is applied at a rate of 20%.
 
Investors can find out more details on the registration of a branch office from our representatives. Please contact our team of agents in company formation in Saudi Arabia for consultancy services and advice.