HomeBranching Out: How to Successfully Open and Operate a Branch Office in Saudi Arabia

Benefits of Setting Up a Branch Office in Saudi Arabia

• 100% Foreign Ownership: Retain full control and ownership rights over your branch.

• Simplified Setup Process: Enjoy a hassle-free incorporation process compared to other business entities.

• No Local Sponsor Required: Establish your branch without the need for a local sponsor.

• Cost-Effective Growth: Expand your business efficiently and increase brand visibility.

• Market Expertise: Gain strategic insights into the Saudi market and build a local presence.

Understanding the Difference: Branch vs. Subsidiary

A branch office is an extension of the parent company, sharing the same legal identity. In contrast, a subsidiary is a separate legal entity, providing liability protection for the parent company. While both have their merits, a branch office offers a simpler and faster route to establishing a presence in Saudi Arabia.

Key Considerations for Opening a Branch in Saudi Arabia

Essential Points to Ponder

1. Legal Status: A branch office is an extension of your main company, not an independent entity.
2. Registered Address: Your branch must have a registered office in a Saudi city to benefit from local financial incentives.
3. Activity Alignment: The branch can only engage in activities identical to those of the parent company.
4. Multiple Branches: Foreign companies can establish more than one branch in Saudi Arabia.

Important Requirements

To establish a branch office in Saudi Arabia, several legal and procedural requirements must be met:

• Minimum Capital Investment: Deposit a minimum capital of SAR 500,000, adjustable based on business activity.
• Foreign License: Obtain a business license from the Ministry of Investment (MISA).
• Commercial Registration: Secure a Commercial Registration Certificate from the Ministry of Commerce and Industry (MOCI).
• Bank Account: Open a business bank account in Saudi Arabia to manage financial transactions and deposit share capital.
• Residency Permit: Ensure the branch office manager has a Saudi residency permit.
• Physical Office: Establish a registered office address in a Saudi city.

Documentation Required for Opening a Branch in Saudi Arabia

When setting up a branch, having the right documentation is crucial. Here are the necessary documents:

• Parent Company’s Business License: Valid license from the country of origin.
• Memorandum of Association: Official document outlining the company’s structure and operations.
• Audit Report: Recent audit report of the parent company.
• Shareholder Certificate: Proof of shareholders’ identities and shares.
• Passport Copies: Copies of shareholders’ passports.

Taxation for Foreign Branches in Saudi Arabia

A branch office in Saudi Arabia is subject to a 20% corporate income tax on its revenue generated within the kingdom. Understanding these tax obligations is vital for compliance and financial planning.

By considering these aspects and fulfilling the requirements, your company can successfully establish a branch office in Saudi Arabia, unlocking new growth opportunities in this dynamic market

Types of Branch Offices in Saudi Arabia

Saudi Arabia offers various options for foreign businesses looking to establish a presence. The primary types of branch offices available are Permanent Branches and Technical & Scientific Services Offices (TSSO). Both require a foreign investment license from the Saudi Arabian General Investment Authority (MISA) and possibly other regulatory approvals.

Permanent Branch

A Permanent Branch is a traditional extension of the parent company, requiring an initial capital investment of around SAR 500,000 to meet MISA’s requirements.

Advantages of a Permanent Branch:

• Quick Establishment: Often the fastest branch type to set up.
• Familiar Process: The formation process resembles that of a limited liability company.
• No New Articles Required: Operates under the parent company’s existing articles of association.
• Wide Activity Range: Can engage in various projects in both public and private sectors.
• Business Promotion: Can promote and solicit approved business activities throughout Saudi Arabia.
• Full Control: The parent company maintains complete control over branch operations.
• Comprehensive Engagement: Allows for involvement in diverse business activities, enhancing market presence.

Technical & Scientific Services Office (TSSO)

A TSSO is suitable for foreign manufacturers with a registered distribution agreement with a Saudi distributor, focusing on complex products.

Advantages of a TSSO:

• Simpler Formation: Easier to set up compared to other entities.
• No Capital Requirements: Does not need initial capitalization.
• Market Research Capabilities: Can conduct market studies and report findings to the parent company.
• Support Local Distributors: Assists registered distributors with marketing and customer relations, providing technical and scientific services.
• Streamlined Operations: Perfect for manufacturers needing a presence without direct sales, ensuring efficient market support.
• Annual Reporting: Provides structured annual activity reports to MISA, helping maintain compliance and strategic alignment.
• Focused Expertise: Specializes in technical support and complex product expertise, enhancing distributor relationships.

Temporary Commercial Registration (TCR)

TCR is a specific option for foreign entities awarded government contracts. It is not a conventional branch office but offers a quicker license issuance.

Advantages of a TCR:

• Quick Setup: Faster licensing process for government contracts.
• Conversion Potential: Can potentially be converted to a permanent commercial registration.
• Ease of Liquidation: Simplified dissolution process after project completion.
• Government Contract Alignment: Ideal for consulting projects tied to government contracts, providing a strategic entry into the Saudi market.
• Flexibility: Can sometimes be converted from temporary status to a regular commercial registration, offering growth opportunities.

By understanding these options, foreign businesses can choose the most suitable branch type for their needs and successfully navigate the regulatory landscape in Saudi Arabia. Establishing a branch office here enables companies to tap into a dynamic market with robust growth potential.