Company Formation Services
Registration through the Ministry of Investment Saudi Arabia (MISA) is the first step insetting up a foreign-owned business in Saudi Arabia. MISA is the gateway to permission to operate in the Kingdom with the primary goal to facilitate and encouraging foreign investment. Local and fully owned GCC national companies are set up directly through theMinistry of Commerce. The principal business entities in the Kingdom include Limited Liability Company (LLC), Branch of a foreign entity and a Regional Head Quarters (RHQ). However, the most common is the Limited Liability Company (LLC) for which100% Foreign Ownership is permissible throughMISA and is applicable from day one. This makes it appealing to foreign investors and applies to many business activities. However, there are some activities which require a Saudi National Shareholder to be active in the business and become a true 25% Shareholder, e.g.Engineering & Consultancy.
It is essential to obtain independent tax and legal advice, specific to your companies operations in Saudi Arabia before setting up in the Kingdom.
Before Setting Up in Saudi Arabia
MISA typically will only consider a foreign business if it has: Profitable accounts- The company has an established track-record (minimum one year) and can demonstrate profitable, audited accounts in the last financial year.
Parent Company Trade License – MISA requires submission of the parent company trade license which should be legalised and attested in the home country, as well as submitting other documents such as Articles of Association (AoA). Appoint a General Manager- The business must also be willing and able to appoint an individual as General Manager who will obtain residency in Saudi to open/operate a Bank account, amongst other mandatory formalities.
1st Hire – The first hire after the GM must be a SaudiNational. Saudization is measured on a scale through the Nitaqat(Quota) rating system and business should be willing to embrace “Saudization”initiatives as bad Saudization scores have operational implications.
LLC & Foreign Ownership
A LLC is one of the most common forms of legal entity opted for by foreign investors when making market entry to the Kingdom and is well regarded and widely used. The Ministry ofInvestment of Saudi Arabia (MISA) offers foreign ownership of a company in theKSA without a local partner and minimal government restriction. MISA registration/license is required for a business to establish with 100% foreign ownership in Saudi Arabia.
Share Capital Requirement
MISA generally requires foreign LLCs to have a minimum of SAR 500,000 share capital. Once the corporate bank account is open, the share capital will need to be deposited, it appears on the balance sheet of the business and can be used as working capital. For certain type sof activity, MISA prescribes differing minimum capital: Property investment projects – SAR30 million Contracting – SAR500,000 (other revenue/asset value requirements) Trading – SAR30 million LLCs must set aside minimum 10% net profits until the statutory reserve reaches 30% of the LLCs original capital. GOFICO can advise you further on permissible LLC activities as some activities still remain withSaudi Nationals only or require a Saudi partner/shareholder.
FreeZones or Economic Zones are still in the very early stages of development inKSA, but will be sector targeted when launched.
Key steps in the company formation process:
Regional Head RHQ
Previously, an RHQ was a non-operational company separate to the operating entity in Saudi. Now, the company must establish the LLC and then apply for the RHQ, making it an operational RHQ.