Solidarity professional company / Sole Establishment in KSA

A sole proprietorship company in Saudi Arabia is an entity where a single person can own and operate the business. A sole proprietorship in Saudi Arabia means that the owner takes full responsibility for the company including all its decisions, finances and liabilities.

A sole establishment/proprietorship in Saudi Arabia (KSA) is referred to as an establishment.

This company type is suitable for small businesses. An establishment has an individual/sole trader, who has unlimited personal liability for the business and the licence is issued in their name – a company or corporate body cannot own the business. The sole proprietorship is not a legal entity and refers to the business owner who is personally liable.

With Saudi Arabia’s fast-growing economy and altering business environment, an establishment has the benefit of being flexible and adaptable with only one decision-maker.

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What is the share capital requirement for a KSA sole establishment?

There are no other shareholders or minimum capital requirements for an establishment.

What are the documents required to set up a KSA sole establishment?

  1.  Ministry of Commerce and Industry (MOCI) registration.
  2.  MISA registration – Sole establishments must renew their foreign investment license with MISA (MISA License or SAGIA License), 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. Sole establishments 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 establishment 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.

Despite being required to register with MOCI, they are not subject to regulations (not subject to corporate law) but are subject to commercial registry law.

What are the Tax requirements with a KSA sole establishment?

  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 sole establishment 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 sole establishment

  1.  Establishing a sole establishment in KSA can take up to several months from application submission to MISA (SAGIA).
  2.  Only KSA nationals or residents can register an establishment in Saudi.
  3.  No requirement for a local corporate secretary. No requirement, beyond managers or directors, for a local legal or admin representative.
  4.  An establishment can sponsor its employees for residency.
  5.  Unlike a LLC or other corporations, a sole proprietor can comingle personal and business property.

It is common for businesses to begin as a sole establishment and, as they grow/develop, to become a more complex business form.

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