Shelf Company in Saudi Arabia: A Comprehensive Guide for Foreign Investors

Understanding the Shelf Company Concept in Saudi Arabia

Establishing a company in Saudi Arabia requires strict adherence to the country’s laws and regulations, especially for foreign investors. One of the fastest ways to commence operations is by acquiring a pre-registered company, known as a "shelf company." These entities are legally established but have had no prior commercial activities, making them ready for immediate use.

While shelf companies are a common business practice globally, they can also be acquired in Saudi Arabia. This guide explores the advantages, procedures, and legal considerations of purchasing a shelf company in the Kingdom.

Characteristics of a Shelf Company in Saudi Arabia

A shelf company in Saudi Arabia comes with several essential features, enabling swift business operations:

1. Trading Name: The company already has a legally registered name, an essential requirement for conducting business.
2. Registered Address: Every company in Saudi Arabia must have an official business address, which the shelf company provides.
3. Constitutive Documents: Including the Memorandum and Articles of Association, which define the company’s structure and rules.
4. Shareholders and Directors: Pre-existing company stakeholders, as required by Saudi law.
5. Bank Account and Tax Identification Number (TIN): The company comes with a corporate bank account and a TIN, both mandatory for conducting business activities.

In addition to these, some shelf companies may already possess a Value Added Tax (VAT) number, following the recent introduction of VAT in Saudi Arabia. This number, however, must be registered with the General Authority of Zakat and Tax (GAZT).

Advantages of Acquiring a Shelf Company in Saudi Arabia

Purchasing a shelf company provides several strategic advantages, including:

• Immediate Business Operations: The company is already registered, allowing you to start operations swiftly.
• Established History: The ability to choose companies of different ages can enhance your business's credibility with Saudi banks, clients, and partners.
• Flexibility in Entity Selection: Shelf companies are available in various forms, such as limited liability companies (LLCs) or public limited companies (PLCs).

However, it’s worth noting that the process is not always straightforward for foreign investors. Acquiring a Saudi Arabian General Investment Authority (SAGIA) license, which involves substantial capital requirements, is essential but time-consuming.

Steps to Acquiring a Shelf Company in Saudi Arabia

Although the procedure to purchase a shelf company is relatively simple, it may take more time compared to registering a new company. The main steps include:

1. Identifying Providers: Find a trusted service provider that offers shelf companies for sale.
2. Selecting the Entity: Choose the legal structure that best suits your business needs and verify the company’s availability.
3. Signing the Purchase Agreement: Arrange a meeting with the seller to sign the necessary documentation.
4. Updating Records: Make the required changes, such as the new shareholder, director, and company name, and record these updates with the Saudi Trade Register.

Our local specialists are available to assist you through every step of the acquisition process, ensuring compliance with Saudi laws and regulations.

Post-Acquisition Amendments

After purchasing a shelf company, certain legal and structural changes must be made. The most important modifications include updating the shareholders and directors and potentially altering the company’s name and legal address. When renaming the business, a new corporate bank account must be opened, and statutory documents must be updated and filed with the Saudi Companies House.

Taxation Considerations for Shelf Companies in Saudi Arabia

As a business owner in Saudi Arabia, it’s essential to understand the tax obligations that come with your newly acquired company. The key taxes include:

• Corporate Tax: Foreign investors are subject to a 20% corporate tax rate.
• Capital Gains Tax: This is also set at 20%.
• Value Added Tax (VAT): As of 2020, the VAT rate is 15%.

These tax obligations must be factored into your business plan. Our tax advisors can help ensure that your company is compliant with all local regulations.

Legal Entities Available for Shelf Companies

In Saudi Arabia, shelf companies are typically available as:

• Private Limited Liability Companies (LLCs)
• Public Limited Liability Companies (PLCs)

Each entity offers different benefits, and choosing the right one depends on your business goals.

Ready to Acquire a Shelf Company?

Acquiring a shelf company in Saudi Arabia is a fast and efficient way to enter the market. However, the process involves several legal and procedural steps that require professional assistance. Whether you’re looking to start operations immediately or need advice on the best legal structure, our team of Saudi company formation experts is here to guide you.

For further assistance on acquiring a shelf company, or if you're considering setting up a new entity, reach out to our specialists today.