Open a Subsidiary in Saudi Arabia

Updated on Saturday 17th April 2021

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When a business buys another one, the second business generally becomes a subsidiary. Therefore, a subsidiary is a business which is owned and controlled by another company. The owning company is named a parent or a holding company. In this article, our company formation agents in Saudi Arabia explain different aspects related to opening a subsidiary in Saudi Arabia.

How to open a subsidiary in Saudi Arabia in 2021

Numerous foreign investors are considering opening a subsidiary in Saudi Arabia in 2021 because, as the largest economy in the Arab area, the country is a major hub for business development and investment into the region.

The incorporation procedure has been simplified for companies which want to open a subsidiary here, even though there still are certain minimum capital requirements.

There is no limit on the foreign ownership of a subsidiary company in Saudi Arabia in 2021, as long as the registration and capital criteria have been respected.

Holding company liability in Saudi Arabia

According to the Companies Law, outside statutory insolvency requirements, the liability of the holding company in Saudi Arabia is limited to the amount of its investment in the subsidiary.

In case, though, the subsidiary losses are bigger than 50% of its paid-in capital, the shareholders have to effectuate the procedure in the Companies Law, or incur the loss of limited liability. Our company registration consultants in Saudi Arabia can further explain this matter.

Tax matters for subsidiaries in Saudi Arabia in 2021

For 2021, parent companies and their entirely owned subsidiaries in Saudi Arabia have to submit their consolidated financial statements, as well as the profits of the subsidiaries, if the subsidiaries are registered in or out of Saudi Arabia.

Investment in businesses outside of the country will be deducted from the zakat (a religious obligation or tax) base if the tax payer files the financial statements audited by a certified public accountant.

In case the tax payer does not comply with these requirements, the investment will not be deductible. Our Saudi Arabia company formation advisors can offer further details related to this issue.
If you would like to know more about setting up a foreign subsidiary in Saudi Arabia, or for advice on how to open a company in Saudi Arabia, please feel free to speak to our friendly staff.