Foreign company branch

With the rapid pace of development in the Kingdom of Saudi Arabia and its significant openness to international investments, establishing a foreign company branch in Saudi Arabia has become a strategic option for many entrepreneurs and investors worldwide. The Kingdom offers an attractive legal and regulatory environment that supports the expansion of global companies within the local market. However, before embarking on this path, it is crucial to understand the conditions and requirements imposed by Saudi laws when opening a foreign company branch to ensure compliance and avoid any future legal obstacles.

1. Obtaining a License from the Ministry of Investment

The first legal step to establish a foreign company branch in Saudi Arabia is to obtain an official license from the Ministry of Investment, formerly known as the Saudi Arabian General Investment Authority (SAGIA). This license forms the legal foundation that allows the foreign company to operate within the Kingdom in a legitimate manner.


Submitting the application requires preparing a number of documents such as a copy of the parent company’s commercial registration, the articles of incorporation, a recent financial report, in addition to certified translations of all documents from official authorities. The requirements vary depending on the nature and size of the activity, as authorities carefully review the compatibility of the branch’s activity with local regulations.
Failure to obtain the license or attempting to operate without it may result in rejection of the application or suspension of operations later on. Therefore, obtaining the license is considered the cornerstone for any foreign company branchseeking to enter the Saudi market legally. Investors must give this step great importance to ensure a smooth and stable start.

2. The Parent Company Must Be Legally Established and Registered in Its Country

One of the fundamental legal conditions for establishing a foreign company branch in Saudi Arabia is that the parent company must be legally established and officially registered in its country of origin. This means that the foreign company should have a valid legal entity, be actively conducting business, and possess a valid commercial registration issued by the competent authorities in the country where it was established.


When applying for the license from the Ministry of Investment, the company must provide a certified copy of its commercial registration and articles of incorporation, along with an accredited Arabic translation of the documents, certified by the Saudi embassy in the company’s country or by the Saudi Ministry of Foreign Affairs.


This condition is crucial as it confirms that the parent company is not merely a paper entity but a legitimate and active company, which strengthens the credibility of the application to establish a foreign company branch in the Kingdom. Missing or flawed documentation may lead to immediate rejection of the application.

3. The Branch Activity Must Match the Parent Company’s Activity

Saudi foreign investment regulations require that the activity practiced by the foreign company branch in the Kingdom exactly match the activity conducted by the parent company in its home country. Adding new or different activities not registered under the parent company is not permitted. This condition ensures the consistency of the commercial identity and its credibility.


For example, if the parent company operates in the food industry, its foreign company branch in Saudi Arabia cannot apply to engage in information technology or construction activities. The application must include a precise description of the company’s activity, preferably supported by documents such as previous contracts or financial reports that demonstrate this activity.


The purpose of this condition is to verify that the foreign company branch represents a genuine extension of the parent company’s business and is not simply a façade for a new activity. Therefore, every company wishing to establish a foreign company branch should carefully review its commercial registration before applying to ensure full alignment

4. Appointment of a Legal Manager Authorized for the Branch

A fundamental condition for establishing a foreign company branch in Saudi Arabia is appointing a legal manager who is officially authorized to manage the branch and represent it before governmental bodies. This manager must be empowered to make legal and commercial decisions on behalf of the foreign company branch, ensuring smooth operations compliant with Saudi laws.


The license application to the Ministry of Investment requires submitting the manager’s personal data, including identification, CV, and an official power of attorney from the parent company granting management authority. Having an accredited legal manager enhances government trust and facilitates communication with official entities, and it is a necessary condition for the continuous operation of the foreign company branch within the Kingdom.


Any flaws in appointing the manager or ambiguity in their authority may cause legal complications and delay the issuance of licenses. Therefore, the parent company must ensure the selection of a qualified and legally authorized manager before applying.

Capital Requirements According to Activity Type

An important condition for establishing a foreign company branch in Saudi Arabia is compliance with the capital requirements specified by the Ministry of Investment based on the activity the branch will undertake. Certain activities require a minimum capital threshold to guarantee seriousness and financial capability to successfully execute projects.
The parent company must provide proof of the required capital amount and submit it as part of the incorporation documents

. This facilitates the approval process for the foreign company branch application. Failure to meet the required capital may result in rejection or postponement of the license until financial requirements are fulfilled.


Proper capital determination also reflects the company’s seriousness and readiness to enter the Saudi market and is a key element in ensuring the continued operation of the foreign company branch according to legal and financial standards.

Compliance with Applicable Saudi Laws and Regulations

One of the most important legal conditions for establishing a foreign company branch in Saudi Arabia is full compliance with all applicable local laws and regulations. This includes company law, labor law, zakat and tax regulations, as well as adherence to the commercial registration and regulatory frameworks issued by various government bodies.
Every foreign company branch is expected to comply with these laws to ensure smooth and lawful business operations within the Kingdom.

Non-compliance may lead to fines or even license cancellation, damaging the reputation of both the parent company and its foreign company branch in the Saudi market.
Therefore, it is essential for the parent company and the branch manager to be familiar with all relevant legislation and regularly update their knowledge, as Saudi laws are continuously evolving to improve the business environment and attract more foreign investments.

conclusion

Establishing a foreign company branch in Saudi Arabia is a strategic step that opens vast horizons for growth and expansion in one of the largest economic markets in the region. However, success in this endeavor requires strict adherence to legal conditions and full compliance with the Kingdom’s regulations. At [hfa firm ], we take pride in our extensive experience supporting foreign companies to establish their branches in Saudi Arabia with ease and confidence. We have assisted numerous clients in successfully navigating legal procedures and achieving their investment goals.


Our specialized team provides comprehensive legal and administrative consultations, ensuring you expedite obtaining the necessary licenses while fully complying with Saudi regulations. If you are considering establishing a foreign company branch or want to learn more about Saudi market requirements, do not hesitate to contact us today. We will guide you step by step to achieve your project professionally and confidently.

Foreign company branch

BY Belkis HUSSEIN

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