Types of Companies in Saudi Arabia
Updated on Thursday 23rd September 2021
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Foreign investors interested in how to open a company in Saudi Arabia will first need to decide on one of the business forms provided under the local legislation. The manner in which companies are registered and operated in Saudi Arabia is established under the New Companies Regulations, a legal act that became applicable starting with the 2nd of May 2016. Each company type offers a set of advantages and obligations and investors should choose a legal entity depending on their business plans or capital and our team of consultants in company formation in Saudi Arabia can offer assistance in choosing the right structure.
Business forms available for investors in Saudi Arabia
The New Companies Regulations provides the following types of companies in Saudi Arabia, available for both local and foreign businessmen:
- joint liability company;
- establishment/sole proprietorship;
- limited partnership company;
- joint venture;
- joint stock company;
- limited liability company.
The legislation on Saudi Arabia company formation also stipulates special business forms available for foreign companies interested in operating on the local market, as follows:
• branch office;
• representative office.
Foreign businessmen may operate on the Saudi Arabia commercial market if they obtain a license issued by the Saudi Arabian General Investment Authority (SAGIA). The license – foreign capital investment license, is available for all foreigners wishing to become shareholders in a local business and our team of agents in company registration in Saudi Arabia can offer advice on the documents that must be submitted with the institution.
The legislation of commercial activities in Saudi Arabia also stipulates that companies set up by foreigners may have full foreign ownership, but this is available for specific business fields.
The establishment or sole trader in Saudi Arabia
One of the types of companies in Saudi Arabia that has no corporate form and is suited for small-scale operations is the establishment or sole proprietorship/trader. This business form can be set up by a single entrepreneur who will bear responsibility for the debts and obligations of the venture with his/her personal assets if it can no longer respect them. On the other hand, it is subject to simple creation requirements, while the settlor will be entitled to all the profits.
What should be noted about this business form is that it can be created by Saudi or Gulf Cooperation Council (GCC) citizens only, which is why it is not employed by foreign investors who come here.
If you want to open a company in Saudi Arabia, our specialists can help you select the appropriate legal entity in accordance with your purposes.
The limited partnership in Saudi Arabia
The limited partnership is a suitable Saudi entity for foreign entrepreneurs coming to this country and who are not familiar with the business market here. Because its structure requires at least two members and it is a great path to residency, it is suitable for single investors who want to establish themselves here.
If you want to create a limited partnership in Saudi Arabia, here are its main features:
- it must have at least one director;
- one of the partners must be a general member, while the other is a limited member in the business.
Should you want to create this type of enterprise in Saudi Arabia, our officers can offer more information about it. Our specialists can help you start a business in Saudi Arabia in the shortest time possible.
Limited liability company in Saudi Arabia
The most common legal entity preferred for incorporation in Saudi Arabia is the limited liability company, which can be registered by a single shareholder. The business form may have a maximum of 50 shareholders. There are no capital requirements when setting up this type of company, but depending on the specific business activities, the local authorities may impose a capital requirement.
Besides the limited liability company, foreign investors also prefer to register the following company types:
• joint stock companies;
Investors can benefit from further advice on the company types available in this country from our team of specialists in company registration in Saudi Arabia.
The joint stock company in Saudi Arabia
Just like in other countries, there are several types of companies in Saudi Arabia and foreign investors interested in setting up large operations can choose the joint stock company if they plan to enter this market.
The main features of this Saudi business form are:
- it must have at least two shareholders;
- it must have at least three directors;
- there are nationality requirements for the shareholders.
The joint stock company can be fully owned by one or more natural persons or companies who can be foreigners, and it is suitable for various activities. In order to create such a business, an approval from the Saudi Ministry of Commerce is required.
Because it can be used for large projects, the Saudi joint stock company is required to appoint an auditor and file audited financial statements every year.
Foreign companies expanding their operations in Saudi Arabia
Saudi Arabia is one of the most popular markets for foreign companies seeking to expand in the Middle East. These can use the branch and the representative or liaison office to set up their presences here, as these types of establishments can be fully controlled by the parent company. However, they can also create subsidiary companies that will be treated as domestic businesses. In this last case, the parent company will act as a sole shareholder in the subsidiary. However, it can only take the form of a limited liability company.
In the case of branch offices, there are two forms this type of Saudi company can take:
- that of a branch of a foreign company;
- that of a branch of a GCC company.
If you need information on these types of companies available for registration in Saudi Arabia, you can rely on our local advisors.
Share capital requirements when setting up a company in Saudi Arabia
The taxation system and the share capital requirements are two of the most important aspects to consider when setting up any type of company in Saudi Arabia.
When it comes to the share capital one must prepare for incorporating the main types of companies in Saudi Arabia, here are the most important aspects to consider:
- in the case of establishments and partnerships there are capital requirements;
- in the case of a limited liability company, the minimum amount necessary is nearly 27,000 USD or 100,000 SAR;
- in the case of a joint stock company, the minimum share capital is set at 134,000 USD or 500,000 SAR and must be deposited in stages.
When it comes to taxation, the company must register with the Saudi Tax and Zakat Authority.
Taxation of companies in Saudi Arabia
No matter the types of companies one can set up in Saudi Arabia, here are the main taxes that need to be paid here:
- the corporate tax has a standard rate of 20%;
- branches must pay the corporate tax to which a 5% remittance levy is added;
- the capital gains tax is also 20%.
Companies must file their tax returns within 120 days from the end of the financial year, while the tax year starts on January 1st and ends on December 31st. Any delay can lead to penalties of 1% of the revenue or 5% to 25% depending on how late the filings were made.
Please contact our representatives for consultancy services on the registration of a local company.