Limited liability One-Person Company

The New Company Law released in 2022 permitted the formation of a one person company in Saudi Arabia. This allows a single shareholder to form a business in Saudi Arabia and own 100% of the companies shares.

It is now possible to setup a Single Shareholder Limited Liability Company in Saudi Arabia (KSA) – meaning that a limited liability company (LLC) can be formed by a single shareholder who holds 100% of the shares, has the rights and powers of the General Manager, Board of Directors and Shareholders General Assembly. This also means that the liability of the company lies with the individual shareholder, limited to their contribution to the share capital – assuming their intentions and practices are appropriate.

This can be achieved either through Direct Establishing where a person intends to form a company as an individual or through Indirect Establishing where a single person collects all of a LLCs shares, transferring the company to be a Single Shareholder Company.

A single person cannot own more than one Limited Liability Single Shareholder Company. Such single-member LLC (natural or legal person) may not incorporate another single-member LLC.

The Ministry of Investment of Saudi Arabia (MISA) offers foreign ownership of a company in the KSA without a local partner and minimal government restriction. MISA registration/license is required for a business to establish with 100% foreign ownership in Saudi Arabia.

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What is the share capital requirement for a KSA one-person LLC?

MISA generally requires foreign LLCs to have a minimum of SAR 500,000 share capital.

In most cases, this does not need to be paid down, or deposited in a local bank, it appears on the balance sheet of the business and can we used as working capital.

For certain types of activity, MISA prescribes differing minimum capital:

Property investment projects – SAR30 million

Contracting – SAR500,000 (also have revenue/asset value requirements)

Commercial – SAR30 million and a commitment to invest a minimum of SAR200 million over the first 5 years (for 100% foreign ownership)

Certain activities require a Saudi partner/shareholder or are for Saudi nationals only – This list is issued by MISA and can be subject to amendments. Speak to your contact at PRO Partner Group for more information on specific activities, share capitals and local ownership requirements.

LLCs must set aside minimum 10% net profits until the statutory reserve reaches 30% of the LLCs original capital.

What are the documents required to set up a KSA Single Person LLC?

  1.  Ministry of Commerce and Industry (MOCI) registration.
  2.  MISA registration - LLCs must renew their foreign investment license with MISA, commercial registration certificate with MOCI and renew their chamber of commerce subscription annually.
  3.  Articles of Association (AoA) – approved by MOCI and signed in presence of a notary.
  4.  A local KSA bank account.
  5.  Wasel registration - mandatory provision of local address to the government. LLCs require a local physical office lease and address – a virtual office is not sufficient.
  6.  Commercial Registration or business license (CR) - CR certificate issued by MOCI to outline and enable the LLC to conduct business activities in the KSA, allowing the same rights given to a citizen.
  7.  Registration with Ministry of Labour and Social Development (MLSD) - The visa issuing authority to labour in-country.
  8.  General Organisation of Social Insurance (GOSI) registration - a mandatory social insurance for processing salaries monthly and maintains government record for Saudization quota system.
  9.  Additionally, certain types of activity require specific licensing from relevant government departments – e.g. pharmaceutical companies require a Saudi Food and Drug Association license.

What are the Tax requirements with a KSA Single Person LLC?

  1.  General Authority of ZAKAT and tax (GAZT) registration. The mandatory submission of audited financial statements for financial transparency.
  2.  20% corporate/capital gains tax.
  3.  Withholding taxes (WHT) rates are between 5% and 20%.
  4.  Zakat is charged on the company's Zakat base at 2.5%.
  5.  Standard 15% VAT of all goods and services.
  6.  The KSA LLC must file tax returns within 120 days from end of financial year. Tax year starts on 1st January and ends 31st December – delays can lead to 1% revenue penalties or 5-25% depending on lateness.

Other requirements and specifications to set up a KSA Single Person LLC

  1.  Establishing a LLC in KSA can take up to several months from application submission to MISA (SAGIA).
  2.  The LLC is required to hold at least 1 annual shareholders meeting (AGM), within 4 months of the end of the financial year. This AGM is the annual shareholders meeting where managers of the company prepare financial statements, operations reports, proposal for appropriation of net profits within 3 months from end of financial year and to be prepared to submit a report copy to MOCI within 1 month of preparation.
  3.  There’s no requirement to have a board of directors or specific nationality of the directors, this is at the discretion of the company - LLCs in KSA may be managed by a General Manager (GM) or Board of Directors.
  4.  If a board is formed, there’s no requirement for frequency of meetings, other than the AGM.
  5.  The GM needs to be a KSA resident, with an Iqama – other Directors do not need to hold residency or nationality requirements, depending on activity. PPG can provide Resident GM services if required to fulfil this requirement to have a GM with a KSA Iqama.
  6.  There is no requirement to publicly disclose the identity of directors and shareholders.
  7.  A minimum of 1 shareholder and maximum of 50 shareholders is required for a LLC – the is no minimum/maximum for directors.
  8.  A LLC may add shareholders if they wish to expand but shareholder numbers cannot exceed 50 or it will become at Joint Stock Company.
  9.  No requirement for a local corporate secretary. No requirement, beyond managers or directors, for a local legal or admin representative.
  10.  A LLC is permitted to be a holding company, provided none of the subsidiaries hold shares in the holding company.
  11.  LLCs should have “limited liability” at the end of its name, which should be derived from its purpose – to be approved by MOCI.
  12.  A LLC can sponsor its employees for residency.

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