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Our information on joint venture company registration Saudi Arabia might be obliging as follows: Foreign investors normally conduct to setup a business in Saudi Arabia with the local partners or investors for commercial, legal or practical reasons. The partners of joint venture will need to establish some form of legal entity in Saudi Arabia licensed duly to conduct the business which is seen in most of the cases. The legal entity will usually need a standardized form of constitutional documents for adoption such as Articles of Association (AOA) or By laws. These standardized documents are very friendly for the foreign investors that will not hamper them when entering into a joint venture in Saudi Arabia. Therefore, direct agreements are dealt with between the two parties (foreign investors and local individual or company)effectively which indicates a co-operative relationship. The relationship between foreign investors and local investors is documented and governed by some form of agreement that supplements the Articles of Association which is recommended. This document is usually referred to the agreement between two parties (foreign investors and local individual or company) as joint venture. The foreign investors get the opportunity up to 100% foreign ownership on a legal entity in Saudi Arabia according to the permission of the Foreign Investment Law. The proposed activities which appear the foreign investors on a negative list can restrict them from their ant kind of ownership in Saudi Arabia. It is important to examine thoroughly on the certain proposed activities if the foreign investors do not appear on the negative list may still fall into a sector which is the restriction in amounts of ranging from 25% to 75%. In the sector of manufacturing, technical services and trading activities, the foreign investment is permitted in general sense in Saudi Arabia.
Related authority for registration
The ground rules for the foreign investors have been provided in the Foreign Investment Act and the Executive Rules which is collectively under the Foreign Investment Law. Those foreign investors who have an intention to establish a legal entity, or acquire an interest in a legal entity in Saudi Arabia, they should strictly follow the ground rules. The license to the foreign investors is granted by the Saudi Arabian General Investment Authority (SAGIA).
Joint Venture agreement
There are different kinds of agencies in Saudi Arabia that license a KSA Entity will have a great deal to make the Articles of Association or to be made the standard documents. The areas that are included commonly in the joint venture agreement stated in the following:
- Provisions which is related to the management and decision-making process
- Strategic plans for the first few years of the company
- Plans for restructuring the legal entity in the future
- Plans for capital increases
- Review from shareholders for the annual budget of the joint venture company
- Distribution between the founding shareholders of the responsibilities and expenses which are involved in the incorporation and operation of the joint venture company in Saudi Arabia
- Dispute resolution and governing law provisions
- Non- competition provisions from owning a competing business by all the shareholders
- Confidentiality provisions which require the shareholders to keep confidential the information of the joint venture
- Provisions dealing with exit and dead lock
Conflict between the terms and conditions of Articles of Association (AOA) and Joint Venture company registration process Saudi Arabia or agreement are faced by two parties and the parties to the Joint Venture agreement can specify that the document will prevail in the event of such a conflict.
Applied tax on the joint venture company
Income tax is imposed on business profits and Zakat which is based on Shariah law principles mentioned as wealth tax are levied by the Saudi Arabian Department of Zakat and Income Tax. The key requirements of tax are
- Any person that is not a national of one of the GCC countries or a corporate entity which is directly or indirectly by nationals of one of the GCC countries must pay tax at the rate of 20% of the taxable income such as a UK national who owns 50% of a KSA company that makes USD 1 million profit should pay at the rate of 20% of USD 500,000.
- The tax laws provide for withholding tax which is varied from 5% to 20%
- Nationals of GCC countries must pay Zakat on ownership interests which is at the rate of 2.5% in Saudi Arabia
The law for dispute resolution and enforcement in Saudi Arabia will be generally applied to contracts entered in the KSA with KSA parties except from a country covered by the relevant GC Cor Arab League treaties. The foreign investors should bear in mind that Saudi Arabia will not enforce any foreign arbitrarily award or court judgment. If there is a claim arising in the difficulties associated with enforcing awards, regardless of the dispute resolution forum, consideration should be given to other forms of security. Do you need more information of 100% foreign company registration process in KSA?