Saudi Arabia – Saudi Arabia is one of the fastest-growing business destinations in the Middle East. As the Kingdom works toward its Vision 2030 goals, many international companies are looking to establish a presence in the country. Whether you're planning to handle company formation in Saudi Arabia, expanding your business into the Gulf region, or tapping into a strong local market, opening a branch office or subsidiary can be a smart move.

Here, we explain the difference between a branch and a subsidiary, the legal process to set up each, and the steps you need to follow to start operating in Saudi Arabia successfully.
Branch Office vs. Subsidiary: What’s the Difference?

a) Branch Office: A branch is an extension of your parent company, as it is not a separate legal entity. It operates under the name of the foreign company and carries out specific business activities approved by the Saudi government. The parent company is fully responsible for the branch's liabilities.

b) Subsidiary: A subsidiary is a separate legal entity registered in Saudi Arabia, even though it is owned (partially or fully) by the foreign parent company. It operates independently and can carry out a wider range of activities.

The choice depends on your business goals, the company's law in Saudi Arabia, level of control, liability risk, and operational flexibility.
Step-by-Step Process to Open a Branch or Subsidiary in Saudi Arabia

Step 1: Obtain a MISA License

To operate legally in Saudi Arabia, foreign companies must obtain a license from the Ministry of Investment of Saudi Arabia (MISA). For a branch office, apply for a Foreign Company Branch License. For a subsidiary, apply for an investment license that allows the creation of a new local entity.

Documents Required:
Parent company’s commercial registration (attested by the Saudi embassy)
Board resolution approving expansion into Saudi Arabia
Audited financial statements (last fiscal year)
Articles of Association of the parent company
Power of attorney for the authorized signatory in Saudi Arabia
These documents must be translated into Arabic and notarized.

Step 2: Register with the Ministry of Commerce (MOC)

Once you receive your MISA license, you must register your business with the Ministry of Commerce. For a branch, you will register it as an extension of the parent company. For a subsidiary, you will register a new company (typically a Limited Liability Company or LLC).

You’ll need to reserve a trade name, draft Articles of Association, and submit incorporation documents. Once approved, you’ll receive your Commercial Registration (CR).

Step 3: Open a Bank Account and Deposit Capital

For subsidiaries, especially LLCs, you’ll need to deposit the minimum share capital into a local Saudi bank account. This amount can vary depending on the type of activity. Branches are not required to deposit share capital, but they must show financial strength through the parent company’s financial statements.

Step 4: Register with Other Government Authorities

You must also register with the following:

Chamber of Commerce and Industry
Zakat, Tax, and Customs Authority (ZATCA) for tax and VAT registration
General Organization for Social Insurance (GOSI) to register for employee benefits and insurance
Ministry of Human Resources and Social Development
Municipality (Baladiya) to obtain a municipal license (for office locations)
A civil defense license is also required
Saudi Post / national address

If you're hiring employees, you’ll also need to register on the Mudad and Qiwa platforms to manage labor contracts and compliance, with the assistance of experts specializing in business setup in Saudi Arabia.

Step 5: Set Up an Office and Address

You must have a physical office address in Saudi Arabia to complete your registration. Virtual offices are not accepted for legal registration. The address will be used for all official correspondence and must be active before completing municipality and labor registrations.

Step 6: Hire Staff and Begin Operations

Once your business is fully registered and licensed in compliance with commercial registration in Saudi Arabia, you can begin hiring staff. You’ll need to apply for:
Work visas for foreign employees
A certain percentage of your workforce must be Saudi nationals, based on your industry.
You can now officially begin operating in Saudi Arabia, signing contracts, opening offices, and conducting business activities.
Key Considerations for International Companies

a) Ownership Rules

Saudi Arabia allows 100% foreign ownership in most sectors, but some areas like oil, security, and insurance still require local participation. It’s important to check the latest guidelines from MISA for your industry.

b) Taxation

Branch offices are taxed at a flat rate of 20% on profits
Subsidiaries (LLCs) are also taxed at 20% on profits
VAT is applied at 15% on most goods and services
Zakat (a local religious tax) is applicable only if there is Saudi or GCC ownership
Make sure your accounting and tax systems are in place from day one of company incorporation to avoid penalties.

c) Saudization

Foreign companies must meet Saudization targets, which means hiring a minimum number of Saudi nationals. Targets vary by sector and company size. Subsidiaries usually have more flexibility in workforce planning than branches.

SB Saudi Lawyers specializes in helping international companies establish branch offices and subsidiaries in Saudi Arabia. Our lawyers in Saudi Arabia are experts who handle everything from MISA licensing and commercial registration to tax compliance and Saudization planning. With our deep local knowledge and experience, we simplify the process and help you avoid costly mistakes, so you can focus on growing your business in one of the most dynamic markets in the world.

About SB Saudi Lawyers:
SB Saudi Lawyers (AlSuwaiket and AlBusaiyes Law Firm) is a premier law firm in Saudi Arabia, trusted and renowned for its legal consultancy services in corporate, commercial, construction, mergers and acquisitions, real estate, employment law, and more. With a team of highly skilled and experienced lawyers, the firm provides comprehensive legal services, ensuring compliance with local laws and regulations. SB Saudi Lawyers is dedicated to providing exceptional legal solutions tailored to meet the unique needs of individuals, corporations, and enterprises. Their commitment to professionalism and excellence makes them a trusted partner for those seeking reliable and affordable legal support in Saudi Arabia.