Under Saudi Arabian Foreign Investment regulations, international companies may establish a foreign company branch in the Kingdom with 100 percent ownership. As appose to a commercial agent, a branch has a more direct presence. Branches are restricted to an administrative role and may not engage in trading activities. Despite this, a branch office can be especially useful for a foreign company as a liaison office. A branch office offers the benefits of a physical presence without the formal requirements of a joint-venture company.
There is no legal distinction between a branch and the foreign business itself. Therefore, the business activities of the branch will be limited to those of the foreign company, and liability for the debts and other liabilities of the branch will be transferred to the foreign company.
The incorporation process to register a branch in Saudi Arabia is alike to registering a limited liability company (LLC) in Saudi Arabia. Below we have listed the requirements for registering a branch in KSA, an overview of the documentation, eligible activities to incorporate a branch in Saudi, and the key differences / pre-requisites for branch registration compared to an LLC registration in Saudi.
WHAT ARE THE REQUIREMENTS FOR REGISTERING A BRANCH IN SAUDI ARABIA?
It is mandatory that the foreign company has existed for 3+ years and to provide proof.
The paid-up capital required must be the same as a subsidiary.
The paid-up capital must be deposited into a local Saudi corporate bank account for the branch.
The parent company adopts full liability for the Saudi branch.
WHAT DOCUMENTS ARE REQUIRED TO SET UP A BRANCH COMPANY IN KSA?
Copies of the commercial registration/license and the parent company Memorandums and Articles of Association are to be duly translated and attested by the Ministry of Foreign Affairs and the Saudi Embassy.
The shareholders need to draft a document with the decision/request to open the branch in Saudi. This document must be duly translated and attested by the Ministry of Foreign Affairs and the Saudi Embassy.
A drafted document detailing the decision to appoint the Saudi branch general manager. This document must be duly translated and attested by the Ministry of Foreign Affairs and the Saudi Embassy.
A copy of the residence proof of the newly appointed KSA branch manager along with a copy of their passport and details of all partners.
Company’s financial proof to display profit. This document is to be duly translated and attested by the Ministry of Foreign Affairs and the Saudi Embassy.
WHAT BUSINESS ACTIVITIES ARE ELIGIBLE TO REGISTER A BRANCH IN SAUDI ARABIA?
Services
Industrial
Trading1
1With a condition of contributing an initial capital contribution of SAR 30 million.
It is also worth mentioning that foreign companies wishing to practice “professional2” activities in KSA must keep a minimum of 25% Saudi partner. Therefore, in this instance, a branch of a foreign entity would not own 100 percent shares of a “professional” company.
KEY DIFFERENCES BETWEEN SETTING UP A BRANCH COMPANY IN SAUDI ARABIA VERSES SETTING UP AN LLC COMPANY IN SAUDI ARABIA
Branch Of Foreign Company
LLC
Minimum Capital Required
Determined by MISA
50,000 SAR
Minimum Shareholder
N/A
Min 1 shareholder max 50 shareholders)
Limited Liability
No
Yes
Corporate Tax on Annual profits
20%
20%
Ability to bid for government contracts
Yes
Yes
Ability to Trade
No
Yes
File Annual Tax return
Required
Required
File Annual final statements
Required
Required
Appoint Auditor
Required
Required
Losses Exceed
50% of Capital
(a) Should losses exceed 50% of capital.
(b) Shareholders are not personally liable for LLC debts.
(c) Shareholders to meet within 90 days & agree to dissolve or continue business & publish the decision.
(a) Foreign company’s liability is not restricted to the amount of the branch’s capital.
(b) Should losses exceed 50% of capital, the shareholders to meet within 90 days & agree to dissolve or continue the business.
TAKEAWAY
There are various procedures and requirements that you need to prepare and take into consideration to successfully operate a branch company in Saudi Arabia. From selecting the right structure for your company drafting the correct documentation to business license and office registration, visa services, banking support, accounting, bookkeeping, payroll, and tax services Creation Business Consultants will help you throughout the entire process. Our team of experts will leverage our experience to help simplify the process while simultaneously providing you with all the details needed to set up your company in Saudi Arabia and the GCC. Contact a member of our team for your free expert consultation, email [email protected] or call Saudi Arabia at +966 54 511 2494UAE +971 4 878 6240today.
Written by Creation Business Consultants Business Development Team
