Accountants and company formation in Saudi Arabia

Setting up a company in Saudi Arabia

To set up a company in Saudi Arabia from abroad, you first register as a foreign investor with the Ministry of Investment (MISA), then incorporate the company with the Ministry of Commerce through the Saudi Business Center, and finally open the government, tax and bank files that let it trade. Foreign investors may invest in any activity open to investment, but some activities carry capital or Saudi partner rules, so the activity you choose shapes everything that follows.

The steps, in order:

1. Check your activity against MISA’s rules for foreign investors.
2. Choose the legal form, usually a limited liability company or a branch.
3. Authenticate the parent company documents at a Saudi mission abroad.
4. Register the investment with MISA.
5. Reserve the trade name and incorporate through the Saudi Business Center.
6. Complete the government registrations: labour, social insurance, national address and chamber of commerce.
7. Register for zakat, income tax and VAT, and set up compliant e-invoicing.

How foreign ownership works when you set up a company in Saudi Arabia

Saudi Arabia replaced its old Foreign Investment Law with an updated Investment Law, approved by Council of Ministers Resolution No. 40 of 16 July 2024. The main change for founders from abroad is that the investment licence has given way to a registration: MISA describes it as replacing “the licensing procedures with registration to provide more flexibility for investors”.

The principle is freedom of investment. An investor may invest in any sector or activity that is open to investment, and local and foreign investors are to be treated equally in similar circumstances. Two limits remain. First, a foreign investor must register with MISA before investing. Second, activities on the published list of excluded activities need MISA’s approval in advance, and some are closed to foreign investors.

Whether you need a Saudi partner depends on the activity. MISA’s frequently asked questions put it plainly: some activities require a local partner and others can be carried out without one. Investors from GCC countries are treated as local investors, unless the GCC company has foreign investors in its own ownership chain.

Activities with special rules

MISA’s Investor Guide lists the categories with extra conditions. Trading is the category to check first. A commercial company that is 100% foreign-owned needs a minimum capital of SR 30,000,000 and a presence in at least three regional or global markets. A commercial company with a Saudi partner needs SR 26,666,667 and at least 25% Saudi participation. The fully foreign-owned trading company also takes on obligations over five years, including Saudi training targets and an investment plan.

Professional activities with a Saudi partner need at least 25% Saudi participation. Activities outside these special categories follow the general registration route, so check your exact activity code before you plan the budget.

Step 1: Define the activity precisely

MISA registers activities by their ISIC4 code, in the category “available” or “restricted”. The code decides which conditions apply, which other authorities must approve you and what the commercial registration allows. A software company, a trading company and an engineering office follow three different paths, even when all three are foreign-owned.

Step 2: Choose the legal form

The Companies Law, issued by Royal Decree No. M/132 of 30 June 2022, allows five forms: general partnership, limited partnership, joint-stock company, simplified joint-stock company and limited liability company. It came into force on 19 January 2023. A company formed under it has Saudi nationality and its head office in the Kingdom.

• Limited liability company (LLC): the usual choice for a foreign-owned trading or service business. It can have one or more owners, natural or legal persons, and their liability is limited to their share of the capital. A single-owner LLC is allowed and has articles of association instead of articles of incorporation. The partners set the capital in the company’s constitution, subject to any minimum MISA sets for the activity.
• Simplified joint-stock company: a flexible share company. The minimum capital rule for joint-stock companies does not apply to it.
• Branch of a foreign company: the Companies Law lets a foreign company operate through a branch or representative office. A branch keeps local financial statements under the accounting standards approved in the Kingdom and files them with an auditor’s report within six months of its year end.

For a regional headquarters, see the section on the RHQ programme below.

Step 3: Authenticate the parent company documents

Before MISA registers you, the foreign shareholder’s documents must be authenticated. The Investor Guide asks for a copy of the foreign partner’s commercial registration certified by the Saudi Embassy and its financial statements for the last fiscal year, also authenticated by the embassy, plus the documents linked to the activity. If the partners come from two countries, each partner uses the authentication service at the Saudi mission in its own country.

Start this step early. Authentication runs on your home country’s procedures and the Saudi mission’s schedule, and the documents must match the registration application exactly.

Step 4: Register the investment with MISA

You apply online through the Invest Saudi portal. The Investor Guide gives an estimated processing time of 10 working days for a regular registration. MISA notifies the fee when it approves the application, and the fee must be paid within the deadline in the notice or the registration is void. The registration certificate is issued in Arabic only.

Registration is not a one-off. MISA requires an annual update of the registered company’s data, and the foreign parent’s own commercial registration must stay valid in its home country. Breaches of the registration rules can lead to a warning, cancellation or a fine of up to SAR 300,000 under Article 11 of the Investment Law.

Step 5: Reserve the trade name and incorporate

With the MISA registration in hand, you incorporate through the Saudi Business Center. The Ministry of Commerce says the process for incorporating companies is done electronically on that platform. For a foreign company formed from abroad, MISA explains that the articles of association are authenticated and the commercial registration issued electronically once the company has a file on the Ministry of Commerce website.

Under the Law of Trade Names, a trade name can be reserved before it is recorded, and a name may not be similar to another establishment’s name even if the activity differs. Have two or three names ready. The company’s form must appear in its name.

The Ministry’s LLC incorporation service records the commercial registration and the articles of association in one step, and lists its government fees as 1,200 for the commercial registration and 500 for publication, plus 15% VAT.

Under the Commercial Register Law, one commercial registration covers the whole Kingdom. It no longer expires; instead, the company confirms its data electronically every 12 months, and a register three months late on confirmation is suspended. The same law requires each establishment to hold a bank account in its own name.

Step 6: Complete the government registrations

The same Saudi Business Center service connects the company to the other authorities. According to the Ministry of Commerce, a new business:

• opens an entity file with the Ministry of Human Resources and Social Development,
• registers with the Zakat, Tax and Customs Authority (ZATCA),
• registers with the General Organization for Social Insurance (GOSI),
• registers its national address through Saudi Post (SPL),
• and joins the chamber of commerce for its location.

MISA adds that, after the commercial registration, the investor obtains the necessary licences from the other competent authorities, such as a sector regulator. A commercial registration on its own does not cover them.

Bank account and residence

The Commercial Register Law requires the company to hold a bank account in its own name. Expect the bank to run its own checks on the owners, the managers and the source of funds.

Owners and managers who move to Saudi Arabia need residence permits. For a general manager, the Investor Guide requires the manager’s name on the commercial registration and an electronic work permit from the Ministry of Human Resources and Social Development before the residence permit is issued. Some investors also look at premium residency: the Premium Residency Permit Law creates permanent and fixed-term permits that let the holder live in the Kingdom with family and engage in commercial activity. MISA exempts premium residency holders from submitting the parent registration and financial statements when they register.

Step 7: Register for zakat, income tax and VAT

Zakat and income tax

Saudi Arabia taxes a company according to who owns it. ZATCA applies the Income Tax Law to resident companies for the shares held by non-Saudi partners, and zakat to the shares held by Saudi partners and those treated as GCC citizens. A fully foreign-owned company therefore pays income tax, and a company with mixed ownership pays both in proportion.

The income tax rate is 20% of the tax base, except for oil and hydrocarbon production, as ZATCA’s guideline for regional headquarters restates. Zakat is generally 2.5% of the zakat base for the Hijri year. The income tax return is due within 120 days of the end of the tax year, and a company subject to income tax must register with ZATCA before the end of its first fiscal year.

Withholding tax

Payments from the Saudi company to non-residents are subject to withholding tax. ZATCA’s withholding tax guideline lists 5% on dividends, rent, loan charges and technical and consulting services, 15% on royalties and on other payments, and 20% on management fees. A tax treaty can change the rate, so check the treaty with your home country before you price intra-group services.

VAT and e-invoicing

VAT has been charged at 15% since 1 July 2020. A business must register once its taxable supplies exceed SAR 375,000 over twelve months, and may register voluntarily above SAR 187,500, according to ZATCA’s tax invoicing guideline. A non-resident that must account for VAT in the Kingdom registers whatever the value of its supplies.

Invoices must follow ZATCA’s e-invoicing rules (FATOORAH). Phase one has applied since 4 December 2021 to all resident taxpayers. Phase two, which requires the invoicing system to be integrated with ZATCA, has been rolled out in waves since 1 January 2023. A scanned paper invoice does not count as an electronic invoice, so choose accounting software that is compliant before you issue the first one.

The Regional Headquarters programme

A multinational group that wants to run its Middle East and North Africa operations from Saudi Arabia can apply for a Regional Headquarters (RHQ) licence. MISA requires two valid commercial registrations of two different group entities and the latest audited financial statements. The RHQ may not earn revenue from commercial operations outside its licensed activities, must start its mandatory activities within six months, and must employ at least 15 full-time staff within one year, including at least three at executive director or vice-president level.

In return, ZATCA grants a qualifying RHQ 0% income tax on eligible income and 0% withholding tax on certain payments to non-residents, for 30 years, subject to renewal and to the economic substance conditions.

Keep the company compliant after set-up

Incorporation starts a yearly calendar:

• Financial statements: prepared each year under the accounting standards approved in the Kingdom and filed within six months of the year end. SOCPA endorses IFRS for use in Saudi Arabia and approved the updated IFRS for SMEs standard in December 2025.
• Audit: the Companies Law requires a licensed auditor. Micro and small companies are exempt, but not when the company is a subsidiary of another company that is not itself micro or small, which covers many foreign-owned subsidiaries.
• Annual confirmations: the commercial registration data every 12 months, and the MISA registration update.
• Tax filings: the zakat or income tax return within 120 days of the year end, VAT returns once registered, and withholding tax on payments abroad.

Common mistakes foreign founders make

• Budgeting before checking the activity code. Trading, professional and some other activities carry capital or Saudi partner rules that change the plan.
• Leaving document certification to the end. Authentication happens abroad, and MISA registration cannot start without it.
• Assuming the commercial registration is enough. Sector and municipal licences, GOSI and the national address still have to be in place.
• Ignoring withholding tax on group charges. Management fees paid abroad carry 20% withholding unless a treaty reduces it.
• Forgetting the yearly confirmations. A commercial registration not confirmed on time is suspended.

Finding an adviser in Saudi Arabia

Many foreign founders hire a local adviser for the MISA registration, the Saudi Business Center filings and the first tax registrations. Our company formation page explains what a provider does and how to compare quotes. You can also browse firms by city: Riyadh, Jeddah and Dammam. If you are weighing a Gulf base elsewhere, our guide to the United Arab Emirates sets out the free zone route, which works differently.

Once your activity and ownership are clear, you are ready to set up a company in Saudi Arabia. Describe your plan once through a free quote request, and Accountanty passes it to firms that fit.