Foreign companies can use several legal forms to operate in Saudi Arabia, among which the branch and subsidiary. However, when first choosing to test the market or having a local contact point, the Saudi liaison or representative office is a better temporary option. This is also known as a technical and scientific services office.
Below, our Saudi company formation officers explain the main characteristics and the procedure to create a liaison office. We are also at your service if you are interested in immigration to Saudi Arabia.
How to open a liaison office in Saudi Arabia
A foreign enterprise must file various documents with the Companies Registrar in order to register a representative office in Saudi Arabia, such as:
- a copy of the foreign company’s Certificate of Incorporation;
- a copy of the parent company’s most recent annual financial statement and audited accounts;
- a commercial agreement must also be drafted and filed with the Saudi Ministry of Commerce and Industry;
- the parent company must also appoint a local agent to represent it.
If you need more information on how to establish a technical and scientific services office in Saudi Arabia, do not hesitate to get in touch with our specialists.
Requirements to establish a Saudi liaison office
A scientific and technical office is not required to have a certain amount of money as a share capital. Its formation is similar to that of a branch and is simpler than that of a corporation. The office is required to provide the Ministry of Commerce with an annual account of its operations in the Kingdom.
This is one of the main advantages of choosing this legal form to operate in Saudi Arabia temporarily.
Legal considerations when setting up a representative office in Saudi Arabia
The Saudi legislation authorizes the establishment of temporary company registrations as well as technical and scientific offices as representative offices. Such entities are usually employed to offer technical support for manufacturers through a distributor.
It is important to note that Saudi liaison offices can only carry out a certain set of activities. They usually can:
- offer technical advice;
- help distributors and clients with products;
- support market and technical analysis for these products.
Typically, these offices can only be established by pharmaceutical corporations. Only with permission from the SAGIA and the Ministry of Commerce and Industry can businesses that are not pharmaceutical in nature be founded. For this purpose, foreign entities must prove that their goods are sufficiently complex to warrant the establishment of a technical and scientific office before the two authorities approve its settlement.
Compared to other countries, where liaison offices are also available for creation, Saudi Arabia has more complex requirements, and our local professionals are at your disposal if you want to open one.
Taxation of companies in Saudi Arabia
There is no personal income tax in Saudi Arabia. However, levies are imposed on businesses according to their legal form. All registered enterprises, including companies or branches with foreign ownership, are subject to corporate tax.
The corporate tax rate for unlisted businesses is 20%. Income tax is levied on the portion of profits attributable to interests owned by non-Saudi or non-GCC nationals. There is also the tax called Zakat that must be paid on the share of revenues attributable to interests owned by Saudi or GCC nationals and it is levied at 2%.
As for a representative office in Saudi Arabia, the following withholding taxes can be considered:
- international telecommunications service payments are subject to a 5% tax;
- royalties are imposed with a rate of 15% of the withholding tax;
- 20% is the rate for management fees.
If you need assistance in setting up a liaison office in Saudi Arabia, contact us.