{"id":130,"date":"2022-12-24T13:06:50","date_gmt":"2022-12-24T13:06:50","guid":{"rendered":"https:\/\/www.tamimilawfirm.com\/blog\/?p=130"},"modified":"2024-06-03T08:22:56","modified_gmt":"2024-06-03T08:22:56","slug":"llc-company-in-saudi","status":"publish","type":"post","link":"https:\/\/www.tamimilawfirm.com\/blog\/llc-company-in-saudi\/","title":{"rendered":"How to Form 100% Foreign Owned LLC Company in Saudi"},"content":{"rendered":"\n

How to Form 100% Foreign Owned\u00a0 LLC Company in Saudi:<\/strong> A limited liability company (LLC) is one of the most common forms of business entity preferred by foreign investors when they are looking towards the Kingdom of Saudi Arabia (KSA) for their business expansion. The Ministry of Investments of Saudi Arabia (MISA) offers to establish a 100% ownership company without a local partner and minimal government restriction. In this article we have discussed why 100% FDI is permitted, which sectors are open for, rules and conditions, licenses, documents, taxes, etc. requirements to form 100% foreign owned LLC company in Saudi.\u00a0<\/p>\n\n\n\n

Why 100% Foreign Ownership Allowed by MISA<\/strong><\/h2>\n\n\n\n
\"LLC<\/figure>\n\n\n\n

The Kingdom of Saudi Arabia (KSA) is the fastest growing and diversifying business market in the Gulf Cooperation Council (GCC). As per the latest world bank ranking on Ease of Doing Business, Saudi Arabia is placed at 62nd position compared to 92nd position in the year before. This is because of more favorable ease of doing business, opening up its market to more foreign direct investment (FDI), liberalizing business regulations, and providing online service portals for all ministries and departments.<\/p>\n\n\n\n

The Kingdom is also attracting a huge number of potential foreign investors to form a 100% foreign owned limited liability company (LLC) company in Saudi Arabia for achieving the objectives set in the Vision 2030. For this reason there has been a steep hike in the issue of foreign licenses during the past 3 years like 377 licenses in 2017, 736 in 2018, and 1131 in 2019 and the numbers are increasing year to year.<\/p>\n\n\n\n

Which Sectors are Permitted 100% Foreign Ownership by MISA<\/strong><\/h2>\n\n\n\n

Earlier the Kingdom of Saudi Arabia (KSA) required at least 25% of KSA national ownership in foreign businesses. But to achieve the goals of Vision 2030 by attracting more FDI the Saudi Arabian General Investment Authority (SAGIA)<\/strong>, presently the Ministry of Investments of Saudi Arabia (MISA), announced in a \u2018Decree\u2019 on 6 September 2015 that foreign nationals would be permitted to hold 100% ownership for retail and wholesale<\/strong> business operations in the KSA. It was kept up to 75%  for foreign ownership before this decree. <\/p>\n\n\n\n

The KSA Government has approved the rules and regulations in 2016 for issuing licenses to form 100% foreign owned LLC company in Saudi wholesale and retail <\/strong>businesses. The Saudi Government\u2019s approval was published in the Official Gazette on July 1, 2016. We provide legal support services in KSA<\/strong><\/a> related to all requirements for foreign investors to establish 100% foreign owned LLC company in Saudi.<\/p>\n\n\n\n

License Conditions to form 100% Foreign Owned LLC Company in  Saudi <\/strong><\/h2>\n\n\n\n

The Saudi Government\u2019s Council of Ministers ratified the decision made by SAGIA (now MISA)  in September 2015, and SAGIA announced conditions on 13 June 2016 for granting licenses to establish 100% owned LLC company in Saudi retail and wholesale business sectors by foreign nationals. These rules and conditions along with our review and remarks are given in the table below: <\/p>\n\n\n\n

License Conditions for 100% Ownership<\/strong><\/td>Our Review and Remarks<\/strong><\/td><\/tr>
The applicant company must have a minimum of SAR 3om (US$8m) cash capital.<\/td>In practice, this capital is not required to be frozen in the bank account and may be withdrawn after showing the proof of deposit to the authorities.<\/td><\/tr>
The foreign national must have operations at least in three regional or international markets.<\/td>The condition of \u2018operations\u2019 is not clear presently, it is expected to have direct trade and legal presence in more than three jurisdictions. <\/td><\/tr>
The foreign investors must invest at least SAR 200m (app. US$53.33m) including initial SAR 30m over the first five years of issuance of license by MISA (formerly SAGIA).<\/td>The earlier initial capital requirement was SAR 20m.<\/td><\/tr>
The company may be incorporated as aLLC or a branch of the foreign company.<\/td>Earlier, a branch of a foreign firm was not permitted to form 100% foreign owned LLC in Saudi.<\/td><\/tr>
The foreign investor must commit to achieve the Saudization (Nitaqat) percentage given by Ministry of Labour and Social Development (MLSD), provide a plan to enable Saudi nationals to hold key positions within the firstfive years of operation, and guaranteetheir continued employment. <\/td>The MLSD has prescribed Saudization percentages for various industries.The rules don\u2019t specify \u201ckey position\u201d but it seems the senior executive management positions.<\/td><\/tr>
The company must train at least 30% Saudi employees annually.<\/td>The earlier requirement was for a minimum of 15% of Saudi employees to be trained annually.<\/td><\/tr>
The foreign investor must fulfill one or more of the following conditions within the first five years: (a) Manufacturing:<\/strong> 30% of products to be distributed must be manufactured in the KSA,
(b) R&D:<\/strong> Invest at least 5% of gross sale revenue in research and development within KSA, and(c) <\/strong>Establish logistics centre<\/strong> and after sales services in the Kingdom of Saudi Arabia.<\/td>		It is not clear if satisfaction of any one condition will suffice.
(a) <\/strong>The percentage of manufacturing is unclear. As clarity is required on ensuring a certain percentage of raw materials is procured from KSA. (b) <\/strong>The research and development is also unclear, and remains to be seen how it will vary as per industry.(c) <\/strong>Logistics condition is not clear as to whether the investor must establish its own distribution channels, and if so, it is prevented from engaging other distributors in KSA. <\/td><\/tr>
Note:<\/strong> However, the above preceding conditions may not apply if the company invests SAR 300m (US$80m) within the first five years.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Capital Requirement to Start 100% Foreign Owned Company in KSA<\/strong><\/h2>\n\n\n\n

The Ministry of Investments of Saudi Arabia (MISA) formerly SAGIA requires foreign investors to have at least SAR 500,000 share capital to form 100% foreign owned LLC  company in Saudi. In most of the cases, this share capital needs not to be deposited in a local bank, but it should appear on the balance sheet of the company and can be used as working capital.<\/p>\n\n\n\n

However, for some types of businesses, MISA prescribes different minimum capital requirements as given below:<\/p>\n\n\n\n