Saudi Arabia Employer of Record Overview

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The Ultimate Guide To
Employment in Saudi Arabia

Employing in Saudi Arabia
Using Shield Geo Employer of Record Services in Saudi Arabia
Payroll and Tax in Saudi Arabia
Immigration and Work Permits in Saudi Arabia
Setting up a Company in Saudi Arabia

Saudi Arabia Facts

Population size: 32,157,974
Currency: SAR - Saudi Arabian RiyalIt is fixed to the USD at the rate of USD 1 = SAR 3.75
Capital city: Riyadh
Languages spoken: Arabic
Ease of Doing Business: 94

Employing in Saudi Arabia: What You Need to Know

Saudi Arabian employment law might appear complex and confusing for an individual unfamiliar with the country. There are, however, many similarities to other countries. As the following only aim to act as a guide in the broadest sense, it is still recommended that professional legal advice be sought when employing in Saudi Arabia.

Key Factors to Consider When Employing in Saudi Arabia

There are several key areas to be aware of within Saudi Arabia’s employment regulatory framework, specifically for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

Contracts

Saudi Arabia requires that workers have employment contracts that meet local labor law standards. Companies must have a professional who can draft local employment contracts in Arabic and English.

Employee Entitlements

Information	Explanation
Paid Public Holidays ?	There is a variety of religious-related leave entitlements in Saudi Arabia, as reported on Pinoy-Ofw. Hajj Holidays Hajj is the annual Islamic pilgrimage among Muslim faithful held at the holy city of Mecca. If an employee joins they are allowed 10 days of paid vacation. However, they must have completed two years with the company first and can only take this leave once every five years. Eid ul Fitr Workers are allowed 4 days of paid vacations from 30th Ramadan for the Eid ul Fitr. Eid ul Adha Workers are allowed to have 4 days of paid vacations from 9th Zil Hajja for the Eid ul Adha.
Time Off Work ?	In the case of the death of a spouse or immediate biological family, workers are entitled 3 days paid leave. Female workers are entitled 15 days paid leave, according to Pinoy-Ofw.
Annual Leave Accrual Entitlement ?	Saudi Arabia guide Pinoy-Ofw states that Saudi Labor Law grants workers 21 days paid annual vacation. It will become 30 days once a worker completes five consecutive years of service. In general employees should use vacation leave during the year it is due. Marriage Leave Pinoy-Ofw reports employees are given 3 days of paid marriage leave. Marriage leave is separate to annual leave, e.g. if an employee takes two weeks of holiday leave to get married, 3 of those days will be deducted from Marriage Leave and the remaining from Annual Leave.
Paid Sick Leave Entitlement ?	Pinoy-Ofw reports that if an employee’s sickness has been proven (e.g. medical certificate), they are allowed up to four months sick leave from employer. Under these conditions the employer cannot terminate the employee during this time. It is possible to connect sick leave with annual holiday benefit. The following lists down the quota which is implemented on yearly basis. First 30 days- Fully paid Next 60 days – 3/4 of total wages Next 30 days – Unpaid
Maternity Leave in Saudi Arabia ?	Pinoy-Ofw reports that female workers are entitled to 10 weeks of leave to deliver a child, starting from 4 weeks before the delivery date and 6 weeks after. This leave can also be connected with Annual Leave if the worker chooses to. During the period of Maternity Leave, the company cannot terminate the worker. Maternity Leaves pay is determined as such: Less than 1 year – Unpaid 1 year – Half paid 3 years or more – Fully paid Male workers are entitled to one day of paid paternity leave to attend the birth of their newborn.
Employment Termination in Saudi Arabia ?	The employer must have a valid reason for terminating the employee. According to labor laws listed by the Saudi Arabia embassy, examples of valid reasons include employees still under probation, gross misconduct, prolonged absence without valid reasons, violence, refusal to perform critical work duties, or failing to heed clear performance warnings. The dismissal could be regarded as having no valid reason if the employee was fired for reasonably refusing to accept a transfer. If an employee takes legal action and the dismissal was found to be without valid reason, the court may order compensation or reinstatement of the employee. According to Lexology, Saudi Arabia law does not yet provide for the concept of redundancies (although the article is undated, it is circa 2011).

Employment Termination

Information	Explanation
Severance / Redundancy Pay ?	According to SAP’s Saudi Arabia page, Saudi labor law stipulates End of Service (EOS) payments are to be calculated based on the average wages (plus housing allowance) and service years an employee has worked, unless the employee was terminated due to gross misconduct. If terminated by employer the severance is equal to the wages for a half-month for each year for the first five years of service, and a whole month for each subsequent year. However, if the employee quits, the award is modified based on the following: Less than 2 years – no award 2-5 years – one-third of the award 5-10 years – two-thirds of the award The employee may be entitled to the full award if they leave for reasons outside of their control (force majeure), or if it is a female worker who ends her contract within six months from the date of her marriage or three months from the date of giving birth.
Termination of Employment ?	For employees employed at a monthly rate, the employer must give thirty-days notice, or fifteen-days notice for other workmen. Alternatively, the employer can give payment in lieu of notice. Payment is generally based on the average wages of the last three months.

Information

Explanation

Severance / Redundancy Pay ?

According to SAP’s Saudi Arabia page, Saudi labor law stipulates End of Service (EOS) payments are to be calculated based on the average wages (plus housing allowance) and service years an employee has worked, unless the employee was terminated due to gross misconduct.

If terminated by employer the severance is equal to the wages for a half-month for each year for the first five years of service, and a whole month for each subsequent year.

However, if the employee quits, the award is modified based on the following:

Less than 2 years – no award
2-5 years – one-third of the award
5-10 years – two-thirds of the award

The employee may be entitled to the full award if they leave for reasons outside of their control (force majeure), or if it is a female worker who ends her contract within six months from the date of her marriage or three months from the date of giving birth.

Termination of Employment ?

For employees employed at a monthly rate, the employer must give thirty-days notice, or fifteen-days notice for other workmen. Alternatively, the employer can give payment in lieu of notice. Payment is generally based on the average wages of the last three months.

Probation

Information	Explanation
Probation Period ?	Saudi law explicitly states that probation periods may not last longer than 30 days, as stated by the Saudi Arabia embassy.

GEO Solutions or DIY Employment in Saudi Arabia?

Companies entering Saudi Arabia must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Saudi Arabia Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Saudi Arabian entity established that can run payroll.

A DIY approach will typically be delayed until there is a properly incorporated entity ready to run payroll and will require registered capital (minimum SAR 500,000) for a subsidiary LLC. If foreign nationals are to be employed the process can take 5 months or longer for employers applying for the first time.

Shield GEO can deploy foreign staff in 6-8 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Outsourcing Employment Through a GEO Employer of Record Service

Using Shield GEO Employer of Record Services in Saudi Arabia

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Saudi Arabia. For companies which intend to employ their staff directly through their incorporated Saudi Arabia entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Saudi Arabia.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Saudi Arabia.

The Shield GEO solution is an attractive alternative where:

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Saudi Arabia

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Saudi Arabia

– the company needs help with tax, employment, immigration and payroll compliance in Saudi Arabia

Shield GEO can contract directly with the company to employ and payroll their staff in Saudi Arabia. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits. Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO

Payroll

Payroll	Saudi Arabia
Management Fee for Employer of Record Services / Monthly Payroll Costs	Please contact us for a quote
Notes	Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. There is no income tax, but employers social security called General Organisation for Social Insurance (GOSI) is deducted at source and paid to the local tax authorities. Where foreign workers are employed there is a Saudisation liability. Additionally End of Service Benefit (EOSB) is accrued each month.
Currency ?	SAR - Saudi Arabian Riyal It is fixed to the USD at the rate of USD 1 = SAR 3.75

Saudi Arabia

Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. There is no income tax, but employers social security called General Organisation for Social Insurance (GOSI) is deducted at source and paid to the local tax authorities. Where foreign workers are employed there is a Saudisation liability. Additionally End of Service Benefit (EOSB) is accrued each month.

Currency ?

SAR - Saudi Arabian Riyal

It is fixed to the USD at the rate of USD 1 = SAR 3.75

Grossed income	Tax Rate (%)
0-∞	0%
* Employment income and allowances, including education allowances, received by expatriates is not subject to tax in Saudi Arabia.

Tax Returns Supplied

Yes

Corporate Tax Requirements

Tax filings are based on the fiscal year of the company and the tax return is due within 120 days of the fiscal year end. Tax returns are submitted to the Department of Zakat and Income Tax (DZIT). If a Saudi citizen has any ownership stake the company must also file audited financial statements with the tax return.

Corporate tax is paid quarterly based on previous years estimates (assuming total annual tax payment is greater than SAR 500,000) and the final tax installment is due within 120 days of the companies fiscal year end.

GOSI – employers social security is calculated on a monthly basis. The rate is 2% for expats and 12% for Saudi nationals.

It is assessed based on the total monthly remuneration in the following categories (subject to an upper limit of SAR 45,000 per month).

1. Basic wage

2. Housing allowance

3. Commission payments

Saudisation requirements may apply for employers where less than 50% of employees are Saudi nationals

GOSI of 10% applies to Saudi nationals

There is no GOSI or employees social security for foreign nationals

Work Permits

Work Permits
Can Sponsor Work Permit	Yes

Business Visas

Business Visas
Can do Business Visa	Yes

Payroll and Tax in Saudi Arabia

There are specific rules for payroll and taxation in Saudi Arabia, depending upon the type of company structure chosen. The primary concerns for a foreign company that needs to comply with tax laws in Saudi Arabia are: individual income tax, social security costs, payroll tax, sales tax, withholding tax, business (Zakat) wealth tax and permanent establishment concerns.

Information	Explanation
Remote Payroll ?	A remote payroll in Saudi Arabia is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Saudi Arabia. One option for a non-resident company to payroll its employees (local and foreign) in Saudi Arabia is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf.
Local Payroll Administration ?	In some cases, a company will register their business in Saudi Arabia under one of the forms available, but might prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. The payroll calculations, payments and filings can however, all be outsourced to the payroll provider.
Internal Payroll ?	Larger companies with a commitment to Saudi Arabia may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who possess the relevant background necessary to manage a Saudi Arabian payroll, and can also fulfill all tax, withholding, and payroll requirements. This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Saudi Arabian employment laws.
Fully Outsourced Payroll & Employment ?	Companies can outsource the employment and payroll of their staff in Saudi Arabia to a GEO, like Shield GEO. This is possible for both foreign workers and Saudi Arabian nationals. This is the easiest, fastest and safest way to payroll staff in Saudi Arabia. Shield GEO manages all aspects of payroll for workers in Saudi Arabia including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client. Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips. Read more about outsourced payroll and employment through Shield GEO.

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Tax Figures

Tax Figures

Information

Explanation

Corporate Income Tax ?

20% of net adjusted profits.

Income Tax Rate ?

Grossed income	Tax Rate (%)
0-∞	0%
* Employment income and allowances, including education allowances, received by expatriates is not subject to tax in Saudi Arabia.

Payroll Tax ?

N/A

Sales Tax ?

N/A

Withholding Tax ?

Withholding Tax is applied to payments to a non-resident party.

Dividend WHT 5%

Interest WHT 5%

Royalty WHT 15%

These figures can be reduced by treaty agreements. Withholding Tax is payable within 10 days of the month following the initial payment.

Other Tax ?

N/A

Time to prepare and Pay Taxes ?

67 hours

Time required to start a Business ?

15 days

Immigration and Work Permits in Saudi Arabia

Foreign workers are required to have the proper visas and work permits in Saudi Arabia, as established by immigration laws. Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the Saudi Arabian market. If you have yet to complete the incorporation process you can use an outsourced management company or GEO Employer of Record to sponsor the employee for the necessary permits.

Have your own Company?

A work visa is sponsored by an employer. This can be a Saudi company, a Saudi citizen or a foriegn entity appropriately licensed to do business in Saudi Arabia.

Processing Steps

The employer must first register with the Ministry of Interior who will open an “immigration file”. This will contain details of all expatriate employees with that employer. The sponsoring employer must be registered in Saudi Arabia and hold a valid commercial license. The employer may be asked to submit a variety of documents listed below. The employer will likely be asked to show a commitment to “Saudization” which is to prove that there are no Saudi citizens available to fill the position, and that the employer is taking steps to employ Saudi citizens where possible.
The employer then lodges a work visa application with the Ministry of Labor. This can take 1-3 months.
The Ministry of Labor will advise the Ministry of Foreign Affairs when the application is approved. The Ministry of Foreign affairs will issue a Visa Authorisation Number. This takes 1-2 weeks.
The actual Work Visa is issued by the relevant Saudi embassy under the instruction of the Minisry of Foreign Affairs. At this point the employee will have to apply at the revelant Saudi Arabian embassy. The employee must submit an application form and the documents outlined below to the embassy. Processing times vary by embassy but generally 1-3 weeks. After the embassy issues the Work / Employment visa, the individual can travel to Saudi Arabia. The Work / Employment visa will allow a stay of between 14-90 days.
On arrival an application must be filed with the Ministry of Labor for the Iqama or residency permit. Once approved by Ministry of Labour it will be forwarded to Ministry of Interior to issue the Iqama or residency permit. The Directorate General for Passports, within the Ministry of Interior, will issue the Iqama. The employer will need to obtain the work permit from the Ministry of Labor gor the employee to show at the passport office when applying for the Iqama. The Iqama normally takes 1-3 weeks to be issued. The employee should carry the Iqama with them at all times as it proves they have the legal right to live and work in Saudi Arabia. The employee can be fined if the Iqama is lost and not reported lost, or if it expires before renewal.
Lastly after the Iqama is issued then an application is lodged with the Ministry of Interior for an Exit/Re-Entry Permit which allows the employee to travel in and out of Saudi Arabia whilst they have a valid Work Permit and Iqama. The length of permit and type will depend on a number of factors including the nationality and profession of the employee. It takes approximately 1 week to issue.

Requirements for the Employee to present at the relevant Saudi Arabian embassy:

– Original valid signed employment contract in Arabic

– Original passport valid for at least the duration of the employment contract and it must have at least two full blank adjacent visa pages. (note if an Israeli visa stamp is found in your passport, the Saudi embassy will likely refuse to grant a visa application)
– Medical certificate stating the applicant is free of contagious diseases. This should be issued by a clinic approved by the Saudi Embassy and be issued within 3 months of the application being lodged.

– Completed application form (BLOCK LETTERS and black ink)

– In order to transfer from one employer to another, a No-Objection Certificate (NOC) from the previous employer is required.

– If previously worked in Saudi Arabia a copy of the relevant exit visa and a reference from the previous employer may be required
– Copy of relevant academic qualifications (notarised by the educational institution and the Saudi embassy)

– Color passport photos. The number required varies by embassy. (it is advised to dress conservatively and avoid wearing religious symbols)

– Original support letter from the sponsoring employer, certified by the Saudi Arabian Chamber of Commerce and the Ministry of Foreign Affairs

– Copy of the invitation letter issued by Saudi Ministry of Foreign Affairs (this will reference the employer name, and the number of the employment visa)

– Police clearance dated within 6 months of the application

Requirements of the Employer to submit to Ministry of Interior:

– Company Registration (CR)

– Company Stamp

– Zakat Certificate

– GOSI Certificate

– Chamber of Commerce Certificate

– KROKI Certificate

– NITAQAT statement

NB: This is not an exhaustive list and the Ministry may request further documentation

Cost: Varies according to embassy
Processing time: Varies by embassy and nationality. Total process takes 3-5 months for a new employer.

Use the Shield GEO Employer of Record Solution?

Once you get in touch with us, one of our consultants will take all the work off your hand, co-ordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. Contact us to know more.

Types of visas in Saudi Arabia

Category	Description of Visa
Business Visit Visa	Business visa is to conduct limited business transactions with a sponsor (Saudi person or company). Theoretically this is restricted to activities like conducting negotiations or holding business meetings. The business visa is commonly used by individuals providing short term or intermittent services like technical services or management consulting and the Saudi authorities have tolerated that. With the advent of the temporary visa work visa this may change. Requirements: An original signed Letter of Invitation (LOI) is renerally required from the Saudi sponsor (company or individual). It may also be necessary to supply additional documents such as a support letter from the persons current employer or a copy of the companys business registration. Processing time: 3-7 business days Cost: Varies by embassy e.g. in USA it is approx USD $270 for US passport holders and $54 (single entry) $134 (multiple entry) for other nationalities. In UK it is GBP £49 (single entry) £106 (multiple entry).
Work Visa	Work Visas are issued through the Ministry of Labour A Residence permit is also required and issued by the Ministry of the Interior’s Directorate General for Passports. The actual Work Visa is issued by the relevant Saudi embassy under the instruction of the Minisry of Foreign Affairs. Requirements: Must be sponsored by a Saudi employer. In order to transfer from one employer to another, a No-Objection Certificate (NOC) from the previous employer is required. – valid employment contract in Arabic – medical reports – degree or educational qualifications Cost: varies by embassy Processing time: 2-3 months Penalties for non-compliance: If a company is found to be employing foreigners without the proper work permits and visas it can be fined up to SAR 100,000 and have its license to trade revoked. Individuals who are working in Saudi Arabia without an Iqama can be fined up to SAR 10,000 and immediately arrested and deported.
Temporary Work Visa	This is a recent addition which allows employees of a foreign entity to do temporary work in Saudi Arabia. The foreign entity cannot have a presence in Saudi Arabia. Duration : 30 or 90 days Application process : It is understood to be similar to the process for issuing a Work / Employment Visa

Setting up a company in Saudi Arabia

When setting up a company you may want to consider these factors:

Business factors

Some examples would be:
- The industry and type of business
- Nationality of the headquarters or individual(s) and
- Presence of existing trade agreements or relationships
Commercial Agents

According to information on Startup Overseas, while you can make direct sales to the private sector from outside Saudi Arabia, it is recommended to employ a Saudi agent or distributor. Saudi law does not allow an alien business to operate as a commission agent. Wholesale, retail trading and distribution is subject to a minimum foreign investment of 20 million SR with a 25% local partner.

Generally the nation seems open to foreign investment, and according to the CIA World Factbook, the previous king worked to modernize the nation through social and economic initiatives. These include attracting foreign investment, expanding employment and social opportunities for women, and increasing the role of the private sector in the economy. It is worthy to note that there was also a proposed movement towards “Saudization” to secure more jobs for future youth by discouraging businesses from hiring foreign workers, though to date, this has not been very effective.

The Kingdom of Saudi Arabia is the largest Arab state and the world’s second largest oil producer and exporter. It is also the birthplace of Islam and home to Islam’s two holiest shrines in Mecca and Medina. Modern-day Saudi Arabia formerly consists of four distinct regions: Hejaz, Najd, and parts of Eastern Arabia (Al-Ahsa) and Southern Arabia (‘Asir).

Population 30,000,000

Capital Riyadh

Official language Arabic

Currency Saudi Riyal (SR) (International code: SAR)

USD$1 = approx. 3.75SAR

Time zone UTC+3

Calling code +966

Nominal GDP $648.971 billion ($20,677 per capita)

Internet domain .sa

A regional economic power, Saudi Arabia is one of the only Arab countries to be a member of the G20. It is heavily dependent on its oil industry which comprises almost half of its GDP. It is also dependent on foreign workers, with about 80% of private sector employees being non-Saudi.

There are three types of business forms available to foreign companies in Saudi Arabia. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most situations, these requirements are dependent on the degree of commitment a company has to Saudi Arabia, and the proposed business activity.

Subsidiary Company

A. Requirements/Restrictions

The limited liability company (LLC) is the most common type of company and form of investment for foreign businesses entering Saudi Arabia.

The minimum capital investment required to establish an LLC is SR 500,000 and must have between 2 and 50 shareholders and be managed and represented by one or more managers. There is no Board of Directors, although shareholders often provide for a Board and other management arrangements in the Memorandum of Association. However, if there are more than twenty partners, the company must establish a “Board of Controllers”. A Saudi partner is not required since there are no legal limitations on the percentage of foreign ownership.

The LLC must also have an auditor.

Both natural persons and corporate entities may be shareholders. Shareholders are, generally, liable for the debts of the company only to the extent of their respective interests in the company’s shares.

B. Advantages/Disadvantages

A limited liability company (LLC) is the most common form, and a particularly popular vehicle for entering into joint ventures with Saudi partners.

In particular, a limited liability company may engage in the full range of activities which fall under the approved objects of the company, and undertake projects in both the public and private sector. It is more likely to qualify for financing from the Saudi Industrial Development Fund at favorable rates for any industrial projects. A limited liability company can also sponsor its employees for residency purposes.

SEE STEPS INVOLVED

On the other hand, initial capitalization may be quite large and the approval of objects of the company are also a source of restriction. These objects are limited to the approval of SAGIA. As such while the objects must be broad enough to allow the company to engage in the activities, if they are too broad SAGIA is unlikely to approve them.

In addition the dissolution process can be fairly involved and, if any partner chooses not to cooperate, costly.

C. Registration steps

1. Reserve a Company Name

An approved name must be reserved before registering a company. A name can be reserved at the Ministry of Commerce and Industry. The name reservation is valid for 2 months and can also be done completely online through the website of the Ministry of Commerce and Industry.

Time: Instant (online procedure)

Cost: No charge

2. Apply for Investment License at General Investment Authority

Obtaining an investment license is the first requirement for the establishment of a Saudi company with foreign shareholders. This can be done by submitting an application to the Saudi Arabian General Investment Authority (SAGIA) to obtain an investment license.

The following documents must be submitted:

A completed standard license application form signed by each applicant, which must include an authenticated declaration that the applicants have reviewed the Foreign Investment Regulation and its Implementing Rules.
An authenticated resolution of the applicant’s board of directors to incorporate a limited liability company (LLC) in Saudi Arabia.
An authenticated copy of the applicant’s certificate of incorporation and articles of association.
An authenticated copy of the applicant’s balance sheet for a period of two years preceding the year of application.
A complete copy of the company’s proposed manager’s passport, including the empty pages, as well as four passport-size photographs.
Complete copies of the passport, including the empty pages, as well as four passport-size photographs of each person listed in the applicant’s articles of association.

Time: 3 to 4 weeks

Cost: 2000 SR

3. Approval of Company Documents from Companies Department

After obtaining the investment license, the company must prepare draft documents (articles of association) which can then be submitted at the Unified Center (UC) for approval:

Confirmation of the reservation of the company name
Cover letter/Summary of the AOA
Articles of Association (AOA), in line with a standard template provided by the UC. The AOA must also be submitted in a soft copy on a CD (in practice)
Identification cards (e.g. passports)
SAGIA investment license
Application form

The registration fee is apparently paid separately at a bank window, however this should also be located in the same Unified Center and can be done at the same time.

Time: 5 days

Cost: No charge

4. Legalize/Notarize Documents

Once the draft articles of association have been approved, the company or authorized representative must execute and legalise the articles of association before a notary public. The following documents are usually required:

The original articles of association as approved by the Ministry of Commerce and Industry
Directorate of Companies signed by the shareholders or their representatives
A copy of the certificate of incorporation and articles of association of each shareholder
An authenticated power of attorney authorizing the representative of each shareholder to sign the articles of association.
A copy of the SAGIA investment license.
A copy of each of the identification cards of the two witnesses present

A notary public office should be located in the same building of the Unified Center (UC). The notary public reviews all the documents to make sure they are complete. The notary public is estimated to review up to 15 companies per day, so there may be waiting times. However, the offices are moving towards computerization and electronic notarization, increasing the chances of a faster notarization process.

Time: 1-2 weeks

Cost: No charge

5. Publication in Official Gazette

After having the company documents approved and legalized, the company must publish the company name and a summary of the Articles of Association in the official gazette.

Reports on the fees vary wildly, the Doing Business project reports as little as 650 SR while Startup Overseas reports as much as 5500 SR for the same step.

Time: 2 days

Cost: approximately 650-5500SR.

6. Open a Bank Account

After completing the above-mentioned steps, a bank account can be opened. Shareholders can now transfer the share capital, and obtain certification stating that the capital has been deposited. It is required to obtain the certificate before the final procedure at the Unified Center.

Time: 2 weeks.

Cost: No charge (aside from the capital deposit)

7. Establish an Office

It is likely that there are no requirements to have an office address ‘registered’ or ‘approved’, although this is required before completing registration in the Commercial Registry. Therefore, there are no formal procedures for establishing an office aside from arranging lease agreements.

Time: n/a

Cost: n/a

8. Register in Commercial Registry

The final step of the registration process is to obtain a commercial registration certificate. Once all the above-mentioned paperwork is sorted and the office and bank account is established, the final registration can be submitted to the Commercial Registry at the Ministry of Commerce and Industry. Similar to the steps above, this can be done at the Unified Center by submitting the approved documents. Generally the following documents must be submitted at the Unified Center:

An authenticated board resolution from the shareholders appointing their respective board members.
Two notarized copies of the articles of association.
Two copies of the receipt of fees for publication of the summary of the articles of association in the Official Gazette, or the commercial newspaper, where appropriate.
The bank certificate confirming payment of the capital.
A copy of the SAGIA investment license.
A copy of the office lease.

Time: 2 days

Cost: 0-8100 SR.

9. Register Membership at Chamber of Commerce

The Doing Business project states that a company must register at the Chamber of Commerce, and this can be paid at the same building the Unified Center is located in.

Time: 1 day

Cost: 2000 SR

10. Register for Taxes

The company must register to obtain a file number and certificate of business commencement by registering with the Department of Zakat and Income Tax (DZIT). The Zakat aspect is a religious wealth tax, and is assessed based on taxable income and certain assets. The calculation of Zakat is complex, but the effective rate is 2.5% of the companies’ total capital resources.

The required documents to register and obtain a financial number are as follows:

A filled out official registration form (obtained from DZIT’s offices or website)
A copy of commercial registration certificate of main office and subsidiaries if available.
Articles of association
A copy of the Investment permit.
Copies of any other required permits.
A certificate of capital deposit at a bank for Saudi companies.
A copy of the identity card for Saudis or of the passport and resident permit for non-Saudis.
Notarized authorization to deal on behalf of the taxpayer with DZIT (if applicable).

The DZIT has a registration service that can be done directly online via its website.

Time:1-3 days (can be done simultaneously with social insurance registration, below)

Cost: No charge

11. Register for Social Insurance

To register for social security insurance, the employer must open a file with the General Organization for Social Insurance (GOSI). This action will register the employer and the employee with the organization’s two branches: the Pension Fund and the Industrial and Illness Fund (Occupational Hazards Fund).

Registration can be done at the GOSI office online through its e-services portal.

Time: 1-3 days

Cost: No charge

Branch Office

A. Requirements/Restrictions

Foreign companies may register a wholly foreign-owned Saudi branch office, provided that they obtain the requisite license. The branch office may engage in commercial activity within the scope of its license. Like in most countries, the parent company will assume full liability for all activity undertaken by the branch office.

Although not a locally incorporated entity, a foreign company branch in Saudi Arabia is required to deposit an amount equivalent to the capital required for subsidiaries with a local bank. The amount is then blocked until issuance of the certificate of registration for the branch by the Ministry of Commerce and Industry. A minimum capital of 500,000 SAR is required.

Branch office registration follows the same general procedure as the registration of a subsidiary, except that there are no Articles of Association to be approved.

B. Advantages/Disadvantages

A branch may engage in the full range of activities which fall within its approved objects and undertake projects in both the public and private sector. In addition, the branch may promote and solicit business throughout Saudi Arabia. The formation process is generally simpler than for a company, since no Articles of Association have to be approved and there are no reserve requirements.

SEE STEPS INVOLVED

It can take longer to form a company if the manager is not a Saudi national or resident. A foreign manager needs to obtain a residence permit as part of the formation process while in the case of a company it may not be necessary to obtain a residence permit during the formation process. However, this is dependent on the company’s ownership and management structure.

Despite not being a locally incorporated entity, the branch office requires both a capital deposit and a similar registration procedure to a subsidiary. Like a limited liability company (LLC), a branch’s activities are also limited to the objects which have been approved by SAGIA. Branches can find it difficult to function in Saudi Arabia without a Saudi partner to handle local authorities and procedures. The partnership can take the form of an agency or consulting relationship.

Given that a branch office is not a separate legal entity and the parent office maintains liability, it suggests that a branch office could prove to be an undesirable option in most cases.

C. Registration Steps

1. Reserve a company name

Time: Instant (online procedure)

Cost: No charge

2. Apply at General Investment Authority

The following documents must be submitted :

A completed standard license application form signed by each applicant, which must include an authenticated declaration that the applicants have reviewed the Foreign Investment Regulation and its Implementing Rules
An authenticated resolution of the applicant’s board of directors to incorporate a limited liability company (LLC) in Saudi Arabia
An authenticated copy of the applicant’s certificate of incorporation and articles of association
An authenticated copy of the applicant’s balance sheet for a period of two years preceding the year of application
A complete copy of the company’s proposed manager’s passport, including the empty pages, as well as four passport-size photographs
Complete copies of the passport, including the empty pages, as well as four passport-size photographs of each natural person who is listed in the applicant’s articles of association

Time: 3 to 4 weeks

Cost: 2000 SR

3. Legalize/Notarize documents

Although a branch does not need to draft local incorporation documents, it is common that its parent company’s documents need to be legalized to prove the legal existence of the company. The company or authorized representative must execute and legalize the articles of association before the appropriate notary public.

The following documents are usually required to be legalized:

The original articles of association
Directorate of Companies signed by the shareholders or their representatives
A copy of the certificate of incorporation and articles of association of each shareholder
An authenticated power of attorney authorizing the representative of each shareholder to sign the articles of association
A copy of each of the identification cards of the two witnesses present

A notary public office should be located in the same building of the Unified Center (UC). The notary public reviews all the documents to make sure they are complete. Currently, the notary public is said to review up to 15 companies per day, so there may be waiting times. However, the offices are moving towards computerization and electronic notarization, so it is likely the notarization process would take a shorter time.

Time: 1-2 weeks

Cost: No charge

4. Publication in Official Gazette

Publication of the company name and a summary of the Articles of Association in the official gazette is required.

Reports on the fees vary wildly, the Doing Business project reports as little as 650 SR while Startup Overseas reports as much as 5500 SR for the same step.

Time: 2 days

Cost: approximately 650-5500SR.

5. Open a bank account

After the previous steps a bank account can be opened where shareholders can transfer the share capital, and obtain a certificate stating that the capital has been deposited. It is required to obtain the certificate before the final procedure at the Unified Center.

Time: 2 weeks.

Cost: No charge (aside from the capital deposit)

6. Establish an Office

Time: n/a

Cost: n/a

7. Register in Commercial Registry

The final step of the registration process is to obtain a commercial registration certificate.

Once all the above mentioned paperwork is sorted and the office and bank account is established, the final registration can be submitted to the Commercial Registry at the Ministry of Commerce and Industry. Similar to the steps above, this can be done at the Unified Center by submitting the approved documents. Generally the following documents must be submitted at the Unified Center:

An authenticated board resolution from the shareholders appointing their respective board members
Two notarized copies of the articles of association
Two copies of the receipt of fees for publication of the summary of the articles of association in the Official Gazette, or the commercial newspaper, where appropriate
The bank certificate confirming payment of the capital
A copy of the SAGIA investment license
A copy of the office lease

Time: 2 days

Cost: 0-8100 SR.

8. Register membership at Chamber of Commerce

The Doing Business project states that a company must register at the Chamber of Commerce, and this can be paid at the same building the Unified Center is located in.

Time: 1 day

Cost: 2000 SR

9. Register for Taxes

The required documents to register and obtain a financial number are as follows:

A filled out official registration form (obtained from DZIT’s offices or website)
A copy of commercial registration certificate of main office and subsidiaries if available
Articles of association
A copy of the Investment permit
Copies of any other required permits
A certificate of capital deposit at a bank for Saudi companies
A copy of identity card for Saudis or a copy of passport and resident permit for non-Saudis
Notarized authorization to deal on behalf of the taxpayer with DZIT (if applicable)

The DZIT has a registration service that can be done directly online via its website.

Time: 1-3 days (can be done simultaneously with social insurance registration, below)

Cost: No charge

10. Register for Social Insurance

Registration can be done at the GOSI office online through its e-services portal.

Time: 1-3 days

Cost: No charge

Representative Office

Saudi law allows rep offices in the form of Technical and Scientific Offices (TSOs) and Temporary Company Registrations (TCRs). TSOs are primarily liaison offices for a manufacturer to provide technical support to the local market via a distributor, while a TCR is a short-term general business established for the purpose of a specific government contract. Like a typical ‘representative office’ these forms are limited in their activities, especially from promotion and solicitation of business. In particular, a TSO serves only as a liaison between a foreign company and the local market (and a Saudi distributor), while a TCR may perform the contracted work operations but may not engage in any other or further general promotion or solicitation of its business(es).

A. Requirements/Restrictions

A TSO cannot engage in commercial activities or earn revenue. Instead its activities are limited to providing technical information and assistance to the distributor and to users regarding products and market and technical research in connection with the products. Generally, however only foreign pharmaceutical companies can establish a TSO. Non-pharmaceutical companies can do so at the discretion of SAGIA and the Ministry of Commerce and Industry if they can be convinced the products of the company are sufficiently complex enough to justify establishing the TSO. This means that TSOs can generally only be used in relation to complex products.

SEE STEPS INVOLVED

The process of forming a TSO or TCR is similar to that of forming a branch. However, a TSO would also require the foreign company to enter into a distributorship agreement with a Saudi distributor. While the TSO is still fully owned by the parent company (manufacturer), the distributor must write a letter supporting the establishment of the TSO before licensing and registration can be completed. For the TCR, after a government contract is established, the company must then obtain a Temporary License from Saudi Arabian General Investment Authority (SAGIA), before formally filing for a TCR with the Ministry of Commerce and Industry. In general the rest of the formation process is similar to that of a branch for both TSOs and TCRs. TSOs and TCRs do not require a minimum capital.

B. Advantages/Disadvantages

For both types there are no capital requirements, and the formation process is said to be simpler than a company. The TSO may also bring its employees into Saudi Arabia on visas.

The TCR can be obtained for consulting projects, and the actual TCR itself need not be applied for until a contract has been obtained. On the other hand, the TSO is only available for certain types of companies and cannot be involved in any commercial work. A TSO also does not have a separate legal identity, making the foreign parent company operating, liable to local legal obligations.

For the TCR, a major disadvantage is that the license is strictly limited to the scope and duration of the contract only. It is not allowed to promote business, or even monitor market conditions and business opportunities.

While the TSO can employ people, it is generally limited to five to ten persons (the exact number is subject to approval by Saudi authorities).

C. Registration Steps

1. Enter Distributorship Agreement (TSO)

If establishing a TSO, the foreign company is required to enter into a distributorship agreement with a Saudi distributor.

The specifics of establishing a distributor arrangement depend upon the management and legal process, and costs will be based on consulting and legal fees, etc. As such specifics cannot be advised in further detail.

However, the key requirement is that once an agreement has been reached the distributor must write a letter supporting the establishment of the TSO before licensing can occur.

Time: n/a

Cost: n/a

2. Obtain Government Contract (TCR)

If establishing a TCR, the company does not need to begin any registration steps until after a government contract has been obtained. In fact, there is no way to begin applying for a license and TCR before this point.

Since the specifics of obtaining a government contract depend upon the management and legal contract negotiation and drafting process, etc this step is mainly listed here as a reference point.

Time: n/a

Cost: n/a

3. Obtain Approval/License from SAGIA

Once the initial distributor/contract is obtained, the TSO/TCR can then apply for approval from Saudi Arabian General Investment Authority (SAGIA).

There is limited information on this process. However, it appears that the appropriate application can be submitted to SAGIA offices, or online via its e-services portal.

In addition to company information documents, a TSO will need to prove that it is the manufacturer of the product and that its product is complex enough to constitute a TSO (such as pharmaceutical products), and require a letter from its distributor supporting the establishment of the TSO.

A TCR will need to provide evidence of the government contract.

Time: 3 days

Cost: 2000 SAR

4. Open a Bank Account

Although it may not be required for a non-permanent establishment to open a bank account, it is listed as a general requirement for registering in the commercial registry. Regardless it may also ease operating in Saudi Arabia. After the previous steps a bank account can be opened where the shareholders can transfer the share capital, and obtain a certificate stating that the capital has been deposited. It is required to obtain the certificate before the final procedure at the Unified Center.

Time: 2 weeks.

Cost: No charge (aside from the capital deposit)

5. Establish an Office

Time: n/a

Cost: n/a

6. Register in Commercial Registry

The final step of the registration process once the preliminary requirements are arranged is to obtain a commercial registration certificate (TSO or TCR depending).

Once all the above mentioned paperwork is sorted and the office and bank account is established, the final registration can be submitted to the Commercial Registry at the Ministry of Commerce and Industry for the appropriate license. This can be done at the Unified Center. The following documents must be submitted at the Unified Center:

The bank certificate confirming payment of the capital
A copy of the appropriate SAGIA approval/license
A copy of the office lease

Time: 2 days

Cost: 0-8100 SR.

7. Register for Taxes

It is not known whether TSOs and TCRs are required to register for taxes. Even if Zakat does not apply, a TSO may still need to register if it is employing people. As a TCR is operating for profit it is likely to require to register especially if it employs individuals.

The required documents to register and obtain a financial number are as follows:

A filled out official registration form (obtained from DZIT’s offices or website)
A copy of commercial registration certificate of main office and subsidiaries if available
Articles of association
A copy of the Investment permit
Copies of any other required permits
A certificate of capital deposit at a bank for Saudi companies
A copy of identity card for Saudis or of passport and resident permit for non-Saudis
Notarized authorization to deal on behalf of the taxpayer with DZIT (if applicable)

The DZIT has a registration service that can be done directly via its website.

Time:1-3 days (can be done simultaneously with social insurance registration, below)

Cost: No charge

8. Register for Social Insurance

Registration can be done at the GOSI office online through its eservices portal.

Time: 1-3 days

Cost: No charge

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Saudi Arabia, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Saudi Arabia they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where

the company is looking to set up an office quickly
the company wants to work within a defined budget
the company wants to limit its initial commitment in Saudi Arabia
the company needs help with tax, employment, immigration and payroll compliance in Saudi Arabia

The complexity of employment regulations in Saudi Arabia makes the use of a GEO advisable. Coupled with local legal counsel, it ensures full compliance with employment laws.

Shield GEO provides a comprehensive service in Saudi Arabia allowing companies to deploy their staff quickly with reasonable, clearly stated costs and time frames. The company contracts directly with Shield to employ and pay their staff on their behalf in Saudi Arabia.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Saudi Arabia. Read more about outsourced employment through Shield GEO.

Summary of Setup Steps

	Company	Branch	TSO/TCR	Time	Cost (SAR)
Obtain Preliminary Distributor/Government Contract	–	–	Yes	n/a	n/a
Check and Reserve Company Name	Yes	Yes	–	instant	0
Apply for License at SAGIA	Yes	Yes	Yes	3-4 weeks	2000
Approve Company Documents	Yes	–	–	5 days	0
Legalize Company Documents	Yes	–	–	1-2 days	0
Publish Documents in Gazette	Yes	–	–	2 days	650-5500
Open Company Bank Account	Yes	Yes	Yes	2 weeks	0
Establish Office Address	Yes	Yes	Yes	n/a	n/a
Register in Commercial Registry	Yes	Yes	Yes	2 days	0-8100
Chamber of Commerce Membership	Yes	Yes	–	1 day	2000
Register for Taxes	Yes	Yes	Yes	1-3 days	0
Register for Social Insurances	Yes	Yes	Yes	1-3 days	0
TOTALS: *applications and processing times, not including internal document preparation, lawyer fees, etc	Comp. 48-60 days – 4650-17,600 SAR	Branch 40-44 days – 4000-12,100 SAR	Rep. Office 40-44 days – 2000-10,100 SAR

Conclusion

A branch may be a preferred option for a foreign investor keen to invest, without having to commit to the complicated requirements in establishing a limited liability company (LLC).

A Technical Services Office (TSO) however may be preferred if the investing company is only interested in providing technical support to facilitate distribution to the Saudi market, while a Temporary Company Registration (TCR) may be preferred if the investor is a contractor engaged in a single project with the Saudi governmental authority.