Setting up a Special Purpose Vehicle or SPV in Saudi Arabia implies registering a business with the intention of separating the assets held by company from the liability it bears in connection to them. A SPV company in Saudi Arabia is usually used for financial operations and resembles a holding enterprise.
If you want to open a SPV in Saudi Arabia, our local agents will explain the special requirements that apply to this type of company. We are at your disposal with tailored company formation solutions in Saudi Arabia.
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Registration of an SPV company in Saudi Arabia
In order to incorporate a Saudi SPV, you can use the same legal forms as for any other types of activities. From this point of view, the private limited liability company is the most suitable, as it aligns with the purposes of such a vehicle.
This type of company can also be used by foreign investors who can immigrate to Saudi Arabia and set up SPVs that operate in the Gulf Cooperation Council (GCC) countries. Our local agents can be your guide in this endeavour should you decide to establish your business in Saudi Arabia.
The main characteristics of a Saudi SPV
In order to open a SPV in Saudi Arabia, you should first understand what its benefits are. A Special Purpose Vehicle is a firm formed by its stockholders with a defined objective.
The SPV can be used to hold a variety of assets, among which:
- real estate;
- intellectual property rights (such as trademarks);
- shares in publicly traded corporations;
- private company shares.
A SPV company in Saudi Arabia is not permitted to engage in commercial activities; it can only take part in passive operations. In other words, an SPV cannot carry out undertakings on its own, even though it may own shares in businesses that operate in various sectors. For this reason, one of the important traits to consider is that such an entity cannot have employees, therefore it cannot act as a sponsor for Saudi residency purposes.
Such a company may also pose various financial challenges, which is why you can rely on our accountants in Saudi Arabia for complying with accounting requirements.
What are the advantages of a SPV in Saudi Arabia?
While it may have certain limitations, such as the employment-related one mentioned above, without a doubt that opening a SPV in Saudi Arabia also comes with numerous benefits. Among these:
- real estate investors, both individual and corporate, who possess or intend to acquire property, may utilize the SPV to hold their assets;
- the SPV can also be created by setting up a trust, which is a great tool for estate planning;
- a single property or a portfolio of properties can be owned through an SPV;
- the Saudi special purpose vehicle can also be created in order to hold or generate intellectual property by natural persons, such as inventors, but also by corporations, start-ups.
In this latter case, the shareholders will then have a vehicle into which they can pool any royalties or licensing money. This way, the SPV can enter into licensing and intellectual property agreements as needed.
Our Saudi company formation advisors can assist with the creation of a SPV company.
How many companies operate in Saudi Arabia?
What should be noted about the SPV companies is that they are a rather new type of entity in the Arab world, which is why their number is still small. However, the number of entities in Saudi Arabia is flourishing, especially in the SME (small and medium-sized) enterprises sector. According to the Small and Medium Enterprises General Authority (Monsha’at):
- the number of SMEs grew by 4.8% in the first quarter of 2023, compared to the last quarter of 2022;
- 88,858 new SMEs were registered in the first quarter of this year;
- they employed 6.5 million people.
If you need support in opening a SPV in Saudi Arabia, please contact us.