Expanding the branch setup in Saudi Arabia into a new market requires thoughtful planning, especially when deciding between a branch setup in Saudi Arabia and a subsidiary. This guide explores the key differences and local requirements for each.
What is a branch office?
A branch office serves as an extension of the parent company, offering a quick and cost-efficient way for foreign businesses to establish a branch setup in Saudi Arabia. While it can perform the same functions as the parent company, it is not permitted to engage in trading activities.
Read also: Set Up Your Foreign Branch in Saudi Arabia Today: 2025 Guide.
Advantages of Establishing a Branch Setup in Saudi Arabia
Establishing a branch setup in Saudi Arabia offers several key advantages, helping your company tap into the kingdom’s dynamic market:
- 100% Foreign Ownership: Foreign companies retain full ownership and control of their Saudi branch.
- Simplified Setup: The registration process is more straight forward compared to other business structures.
- No Local Sponsor Required: Opening a branch office in KSA does not require partnering with a local sponsor.
- Cost-Effective Expansion: Branch setup in Saudi Arabia provides a budget-friendly and structured path for business growth and brand exposure in the region.
- Market Insight & Presence:Operating a branch setup in Saudi Arabia enables you to build a local presence while gaining valuable knowledge of the Saudi market.
Reach out to Motaded today for a free consultation, and let our team guide you through the process with ease and efficiency. Your success in Saudi Arabia starts here!
Key Considerations for Opening a Branch Setup in Saudi Arabia
Foreign companies planning to open a branch setup in Saudi Arabia should keep the following points in mind:
- A branch is not an independent legal entity; it functions as an extension of the parent company.
- It must have a registered address within a Saudi city to access financial incentives.
- The branch can only engage in activities that align with those of the parent company.
- Foreign businesses are allowed to establish multiple branches across Saudi Arabia.
Requirements for Establishing a Branch Setup in Saudi Arabia
To establish a branch of a foreign company in Saudi Arabia, you must meet various legal and administrative requirements, including those related to capital, licensing, and residency.
- Minimum Capital Investment: A minimum capital of SAR 500,000 must be deposited, with potential increases based on the nature of the business activity.
- Foreign Business License: A license must be obtained from the Ministry of Investment (MISA) to legally operate in the Kingdom.
- Commercial Registration: The branch must be registered with the Ministry of Commerce and Industry (MOCI) to receive a Commercial Registration Certificate.
- Business Bank Account: The parent company is required to open a Saudi business bank account to deposit capital and manage transactions.
- Residency Permit for Manager: The appointed branch manager must hold a valid Saudi residency permit (Iqama).
- Registered Office Address: The branch must have a physical office address located in a Saudi city.
Read also: Branch License Company in Saudi Arabia: Key Insights.
Documents Needed to Open a branch setup in saudi arabia
Our company is here to guide you through the documentation process, tailored to your company’s specific business activities.
Essential Documents for Setting Up a Branch in Saudi Arabia:
- Parent company’s business license
- Memorandum of Association (MoA)
- Audited financial report of the parent company
- Shareholder certificate
- Passport copies of the shareholders
Key Steps to establishing a branch setup in saudi arabia
1. Obtain a MISA License
The first and most crucial step is securing a license from the Ministry of Investment of Saudi Arabia (MISA), formerly known as SAGIA. This license grants foreign service companies the authority to establish and operate within the kingdom.
- Eligibility: Companies in sectors like IT, healthcare, engineering, and finance are typically eligible. The license type depends on your sector and services.
- Ownership: MISA licenses permit 100% foreign ownership, giving you full operational control.
- Documentation: You’ll need to submit documents such as your Articles of Association, financial statements, and a description of your services.
2. Register with the Ministry of Commerce (MOC)
Once you have your MISA license, the next step is to register your branch with the Ministry of Commerce to obtain a Commercial Registration (CR).
Commercial Registration (CR): This is essential for conducting business, signing contracts, opening bank accounts, and hiring staff. It legally recognizes your branch in Saudi Arabia.
3. Open a Local Business Bank Account
To handle financial operations, you'll need to open a corporate bank account in Saudi Arabia.
Requirements: Most banks require your MISA license, CR, and Articles of Association to open an account.
4. Join the Chamber of Commerce
Membership in the local Chamber of Commerce is important for industry networking and government interaction.
Purpose: It's necessary for participating in tenders, industry events, and government contracts.
5. Comply with Saudi Labor Laws
Your branch must comply with local labor laws, including the Saudization program (Nitaqat
- Work Visas (Iqama): Foreign employees need valid residency and work permits sponsored by the employer.
- Saudization (Nitaqat): This national initiative mandates a minimum percentage of Saudi nationals in your workforce, depending on your industry and business size.
6. Ensure Tax and Financial Compliance
Foreign branches in Saudi Arabia must meet the following tax obligations:
- Corporate Income Tax: Branches are taxed at 20% on profits earned in Saudi Arabia. Certain sectors may benefit from tax incentives or reduced rates.
- Value-Added Tax (VAT): Service companies must register for 15% VAT and comply with reporting requirements under the General Authority of Zakat and Tax (GAZT).
Essential Tips for Successfully Establishing a branch setup in Saudi Arabia
Setting up a branch in Saudi Arabia requires careful planning and a clear understanding of legal and operational requirements.
Since a branch office is an extension of the parent company, it must operate under the same name and cannot independently decide on its business activities.
It can only engage in operations within the scope of the licensed services.
Additionally, having a physical office address is mandatory.
It's recommended to rent a suitable location in Saudi Arabia that aligns with your business needs and provides a professional base for your operations.
To ensure a smooth and successful branch setup in Saudi Arabia, consider the following tips:
- Understand the Market: Conduct thorough research on the Saudi market to gain insights into its dynamics and how your branch might perform.
- Explore New Investment Opportunities: Stay informed about the latest investment trends and sectors of growth in Saudi Arabia.
- Prepare Your Documents Early: Collect all necessary documents well in advance. Translate and legalize them as required to avoid registration delays.
- Study Local Regulations: Familiarize yourself with Saudi business laws and compliance requirements to avoid future penalties.
- Choose a Reliable Bank: Select a reputable Saudi bank to handle your branch’s financial operations efficiently.
- Verify Licensing Needs: Depending on your industry, determine whether any special approvals or authorizations are needed before operating.
By following these tips, you'll be better positioned for a seamless and compliant branch setup in Saudi Arabia.
A branch setup in Saudi Arabia offers international companies a strategic gateway into one of the fastest-growing economies in the region.
With the kingdom's ongoing transformation under Vision 2030, establishing a branch allows you to tap into expanding opportunities across various sectors while maintaining full control of your operations.
Ready to grow your business? Contact Motaded today to learn how we can support you with a smooth and compliant branch setup in Saudi Arabia.
FAQs about branch setup in Saudi Arabia
What are the tax requirements for a foreign company branch in Saudi Arabia?
A foreign company’s branch in Saudi Arabia is subject to a 20% corporate income tax on its revenue generated within the Kingdom.
How can I open a branch of a foreign company in Saudi Arabia?
Partnering with a local expert like Analytix can help you successfully complete all the official procedures required to establish a branch office in Saudi Arabia.
What is the difference between a branch and a subsidiary in Saudi Arabia?
A branch operates as a direct extension of the parent company, meaning the parent company is legally responsible for the branch’s obligations. In contrast, a subsidiary is a separate legal entity, and the parent company is not legally liable for the subsidiary’s debts or legal issues.