A foreign company wins a contract with a Saudi client and sends its team to start work immediately, planning to "sort out the paperwork later". That delay can make the company, and everyone who worked in its name, jointly liable for everything done before registration.
The direct answer: a foreign company can work in Saudi Arabia through a branch, a representative office or another form (Article 236 of the Companies Law). But it must first register with the Ministry of Investment before making any investment (Article 7 of the Investment Law) and be entered in the Commercial Register. If it is in the Kingdom to carry out a specific project for a specific period, it is given a temporary registration that ends when the work ends (Article 241).
How can a foreign company operate in Saudi Arabia?
A foreign company carries on its activity in the Kingdom through a branch, a representative office or any other form, in line with investment laws and the related legal rules (Article 236 of the Companies Law). The Companies Law applies to foreign companies working in the Kingdom, except for the provisions on incorporation (Article 235).
| Form | What it is |
|---|---|
| Branch | An extension of the foreign company itself. It carries on the licensed activity and is treated as the company's domicile in the Kingdom (Article 239). |
| Representative office | Also treated as the company's domicile. It is exempt from filing financial statements (Article 238), and the scope of its activity is set by its licence. |
| Subsidiary | An independent Saudi company incorporated under the Companies Law, owned wholly or partly by the foreign investor. |
Do you need to register with the Ministry of Investment before opening a branch?
Yes. A foreign investor must register with the Ministry of Investment before making any investment, as set out in the regulations (Article 7 of the Investment Law). If the activity is on the list of excluded activities, prior approval is required (Article 8). The current Investment Law, issued in 1446H, replaced the Foreign Investment Law that Article 236 of the Companies Law still refers to.
What are a branch's obligations after registration?
- Show its address in the Kingdom and the company's full name, address and head office on all its papers and printed materials (Article 237).
- State the start and end dates of the branch's financial year in the registration request, prepare financial statements for its activity in the Kingdom under the approved standards, and file them with the auditor's report within six months of the end of its financial year. Representative offices are exempt (Article 238). The branch manager may appoint the auditor if authorised by the company.
- The branch or representative office is treated as the company's domicile for its activity in the Kingdom, and all Saudi laws apply to it (Article 239).
What if the foreign company starts work before registration?
If a foreign company carries on its activity before completing the licensing procedures and registration in the Commercial Register, or goes beyond what it is licensed to do, the company and the persons who carried on the activity are jointly liable (Article 240). This liability extends to the individuals who did the work, such as a project manager who signed and contracted.
A German engineering company has a contract to design a plant in Dammam over 18 months.
The suitable route is often a temporary registration in the Commercial Register that ends when the work ends. It is deleted after the company's rights and obligations are settled, and the company may continue afterwards if it meets the requirements (Article 241).
If its team had started work before registration, the company and the project manager would be jointly liable for that work (Article 240).
This is general information based on the official Arabic texts of Saudi laws, which prevail over any translation. It is not legal advice for your specific case.
Practical solutions for the foreign company and the Saudi client
If you are a foreign company entering the Saudi market:
- Choose the right form: a branch for commercial work, a representative office, or a subsidiary, depending on the activity and how long you will stay.
- Register with the Ministry of Investment before any work, and check the list of excluded activities.
- Do not let your team start work before registration, because liability is joint.
- If the contract is for a project with a fixed term, consider temporary registration.
- Set up a separate financial year for the branch and an auditor from the start.
If you are a Saudi client contracting with a foreign company:
- Ask for proof of its registration and of its branch's registration before signing.
- Contract with the registered branch. The branch is the company's domicile in the Kingdom and Saudi laws apply to it.
- Include a clause requiring it to hold the legal licences and to bear the consequences of any work done before registration.
Entering the Saudi market the right way protects the company and its staff. Send us your company's activity and the length of the project on WhatsApp, and we will explain the most suitable form and the steps.
Need advice on your own case?
Every case turns on its own facts and documents. Send us a short summary and we'll arrange a session with a licensed Saudi lawyer who will tell you clearly where you stand.
Frequently asked questions
Can a representative office sell in Saudi Arabia?
A representative office is different from a branch, and the scope of its activity is set by its licence and the related laws. Do not assume it can sell and issue invoices.
What if the company starts work before registration?
The company and the persons who carried on the activity are jointly liable (Article 240 of the Companies Law).
Is a branch a separate company?
No. It is an extension of the foreign company and is treated as its domicile in the Kingdom (Article 239).
Must a branch file financial statements?
Yes, within six months of the end of its financial year, with the auditor's report. A representative office is exempt (Article 238).
General information, not legal advice. The official Arabic texts of Saudi laws prevail over any translation. Disclaimer