Establishing a Representative Office in Saudi Arabia

Establishing a representative office in Saudi Arabia can help foreign firms to conduct market research and liaison activities under MISA oversight. The model offers a cost-efficient route for market entry, but requires it to fulfil licensing and Saudization requirements, like other entry models.

Foreign companies entering Saudi Arabia often use a representative office as their first step toward market entry. It is regulated by the Ministry of Investment (MISA) and allows non-commercial operations, promotion, liaison, and market research at much lower capital requirements. It is a cost-effective way to build local relationships and test market without generating revenue or entering into contracts.

Legal framework and regulatory structure

MISA is the central authority for governing representative offices under the Foreign Investment Law. It acts as the single point of contact for licensing and renewal. Its main job is to ensure that non-commercial entities remain within permitted activity boundaries.

Definition and permitted scope

A representative office, also known as a liaison or technical services office, functions as an extension of a foreign parent company without separate legal personality.
It can do:

• Market research and feasibility assessments;
• Brand promotion and public relations;
• Liaison with Saudi clients, regulators, and business partners; and
• Coordinate administrative and technical work.

It cannot execute contracts, issue invoices, or engage in sales. Any commercial activity outside its scope is considered a violation of the rules and may result in penalties or revocation of its license.

Eligibility and documents

Foreign companies need to exhibit that the parent company is legally incorporated and operating in good standing in their home jurisdiction. They need to attach:

• Certificate of incorporation and articles of association;
• Audited financial statements for the past years; and
• Proof of active business operations and financial stability.

Supporting documents

Each application must include:

• A board resolution approving the establishment of the Saudi representative office;
• Power of attorney authorizing a local representative;
• Passports of authorized signatories; and
• Audited financial statements and other corporate records.

All foreign documents should be attested by the Saudi embassy or certified through Apostille for Hague Convention countries.

Set up process and licensing procedure

Foreign firms can submit their application through MISA’s electronic portal along with supporting documents and a description of business activities. The approval process typically requires 3-7 business days for standard applications, though there are expedited options available for investors meeting MISA’s qualifying criteria.

After getting the necessary approvals, the office then needs to:

• Obtain commercial registration (CR) from the Ministry of Commerce;
• Register with the Chamber of Commerce; and
• Complete municipal licensing if required.

Financial requirements and renewals

Representative offices usually run on minimal capital investment and have no fixed minimum share capital requirements due to their non-commercial nature. However, they have to pay initial and recurring expenses, initial MISA license fee of SAR 12,000 (US$3,199.4), legalization and translation costs of SAR 20,000-50,000 (US$5,332.3-US$13,330.8), and annual renewal fee of SAR 62,000 (US$16,530.2). So, the combined yearly costs, which have renewals and administrative expenses too, generally amount to SAR 75,000 (US$19,996.2).

Representative offices are usually exempt from corporate income tax since they cannot earn income within the Kingdom. But they still comply with the social insurance rules under the General Organization for Social Insurance (GOSI). They make employer contribution of 11.75 percent for Saudi employees and 2 percent for expat employees.

Scope of operations and restrictions

As seen above, representative offices may engage in promotional and liaison activities for researching market demand and competition, coordinating with local distributors or regulators, and organizing product and technical workshops.

But they are prohibited, by law, from engaging in direct sales or profit-making transactions, signing contracts, doing any commercial operations that generate profit, or invoicing and payment collection. Doing so means they are violating MISA rules, which can lead to fines, suspension, or cancellation of the license.

Human resources and staffing requirements

Representative offices are allowed to hire Saudi and foreign staff for administrative or liaison roles, but ensure that expatriates hold work visas (iqamas) sponsored by the office. They cannot engage in sales or business development functions within this structure.

Saudization obligations

The office’s hiring policy should be as per the Nitaqat program for employing Saudi nationals in proportion to total workforce size. In previous cases, non-compliance has resulted in restrictions on new visa issuance for the firms, delays in service or even suspensions, and penalties from SAR 2,000 (US$533.2) to SAR 250,000 (US$66,654) depending on violation type.

Also, please ensure office is submitting annual employee records and contract registrations regularly, on the Ministry of Human Resources platform.

Transition to commercial operations

Representative offices are precursors to companies pressing accelerators for going fully commercial. It prepares the stage for companies by testing the market and building local networks before they establish a branch or subsidiary. The transition process requires:

• Applying for a new MISA license for a commercial entity;
• Meeting capital requirements under the Companies Law; and
• Registering with the Zakat, Tax, and Customs Authority (ZATCA).

In this manner, companies can reap benefits of transition and retain continuity in relationships and local presence established through the representative office.

Takeaway

If we compare with other Gulf jurisdictions, Saudi Arabia’s representative office framework is restrictive but also more structured. The UAE allows much more free zone activities, but Saudi regulations target proper oversight, because the Kingdom intends to attract sustainable investment under Vision 2030, and give foreign companies the benefits of stable entry mechanisms at the same time.

(US$1 = SAR 3.75)

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