The Companies Act regulating commercial entities’ activities in Saudi Arabia, provides for the establishing in the Kingdom of companies of such legal and organisational forms as:

• Public company limited by shares
• Private limited liability company
• Partnership
• Foreign Company branch

Public company limited by shares

Public company limited by shares is established by at least five physical or legal persons (maximum number is not limited) and characterised as follows:

• if the company does not intend to offer its shares in an open subscription, the minimum charter capital is SR2’000’000 (US$1 is approximately SR4);
• if the company intends to offer its shares in an open subscription, the minimum charter capital is SR10’000’000;
• at least 50% of the capital is paid up at the time of registration;
• up to 50% of shares may be issued by the company in the form of non-voting preference shares;
• the company is managed by the Board of Directors to be composed of at least three members;
• directors are required to hold at least 200 shares of the company;
• the company may carry out any activities, however, mining operations, public utilities management, banking and insurance services need to be authorised by the royal decree.

Private company limited by shares

Private company limited by shares is established by at least five physical or legal persons (maximum number of shareholders is 50) and characterised as follows:

• minimum charter capital is SR500’000;
• at least 50% of the capital is paid up at the time of registration;
• the company may issue only registered shares which may not be transferred to third parties without the unanimous approval by the shareholders' meeting;
• the company may be managed by one director who is not required to be the company’s shareholder but the company with more than 20 shareholders has to establish the Supervisory Board to supervise the directors’ activities;
• the company may not carry out mining operations, public utilities management or banking and insurance services.

Partnerships

Although both limited liability partnerships and unlimited liability partnerships may be established in Saudi Arabia by foreign persons holding 100% of a partnership’s capital, in practice, there are more advantages if a partner - Saudi Arabia resident holds 50% or more in the partnership’s capital. This enables receiving interest-free loans and using the right to receive government orders in Saudi Arabia. Foreign lawyers, engineers and medical specialists may establish professional partnerships in Saudi Arabia and obtain the local practice license. The establishing of such a partnership needs to be authorised by the Ministry of Commerce of Saudi Arabia, which registers the Memorandum of Association and, in particular, determines the Saudi Arabia residents’ minimum participation interest (ordinarily, 25%). No minimum capital is required to be paid for establishing a partnership. The business name should include a name of at least one general partner. The business is managed by general unlimited partners.

Foreign Company Branch

Foreign Company Branch may be established in Saudi Arabia only by a foreign company engaged in operations significant for Saudi Arabia’s economic development.
Each company in Saudi Arabia has to be registered in the Trade Register, and potential partners in Saudi Arabia have to obtain the approval of the Committee on Foreign Investment in Saudi Arabia before a mixed capital company is registered.

Company foreign shareholders’ profit and foreign company branches’ net profit are subject to corporate tax in Saudi Arabia. Capital gains are deemed to be an ordinary income.

Tax rates applicable to partnerships and limited liability companies range from 25% to 45% depending on the profit.

Agricultural producers in Saudi Arabia may be exempted from taxes for a period of up to 10 years.

Zakat is a 2.5% tax on profits from any commercial activity imposed for religious needs of Saudi Arabia (and members of the Gulf Cooperation Council) on their citizens and fully owned companies.

All payments to non-residents for operations carried out in the Kingdom are subject to withholding tax at a rate of 15% of the payment.

There is no individual income tax scheme in Saudi Arabia.    

Saudi Arabia is not a tax heaven or offshore jurisdiction, and a concept of Saudi Arabia tax exempt company (and/or Saudi Arabia offshore company, International Business Company, trust, foundation etc. registration) does not exist in Saudi Arabia as such. A company formation in Saudi Arabia could be arranged with a professional registered agent providing incorporation, virtual office and other corporate services in Saudi Arabia. To set up a company in Saudi Arabia is possible by correspondence, but to open a bank account in Saudi Arabia will, most probably, require a personal visit.

Saudi Arabia does not have signed Double Taxation Agreements.

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