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

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

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 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 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

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

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 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 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 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

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

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

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

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 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 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 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

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 eservices portal.

Time: 1-3 days

Cost: No charge