Opening a Branch vs. New Company in Saudi Arabia: Which is Better for Foreign Investors in 2025?

Introduction: Why Saudi Arabia is Attracting Global Businesses

Saudi Arabia’s Vision 2030 and pro-business reforms have made it one of the top destinations for foreign investment in the Middle East. Whether you’re expanding a global brand or launching a new venture, understanding the right entry structure, Branch vs Company Saudi Arabia is critical for success.

Branch Office in Saudi Arabia: Fast Market Entry & Full Control

Key Features of a Branch Office

• Extension of Parent Company: Not a separate legal entity, parent company is fully liable for all branch obligations.
  
• 100% Foreign Ownership: Direct control and full ownership, no Saudi sponsor required for most sectors.
  
• Activity Restrictions: Can only perform business activities aligned with those of the parent company; cannot independently engage in trading.
  
• Minimum Capital Requirement: Minimum capital is only required in few sectors. For servicing and manufacturing no need to have minimum capital, but to be on safer side, keep it as 50K SAR-100K SAR.
  
• Quick Setup: Faster and simpler registration compared to a new company.
  
• Required Licenses: Ministry of Investment (MISA) license, Commercial Registration, and a manager with a Saudi residency permit (Iqama).
  

Advantages of Opening a Branch

• Direct Market Entry: Use the parent company’s brand reputation to quickly build trust in Saudi Arabia.
  
• Full Operational Control: The parent company retains complete decision-making authority.
  
• No Local Partner Needed: 100% foreign ownership is standard.
  
• Multiple Branches Allowed: Expansion flexibility across the Kingdom.
  
• Faster Setup: Less bureaucratic complexity than forming a new company.
  

Challenges & Compliance Requirements

• Parent Company Liability: All liabilities and obligations extend directly to the parent entity.
  
• Limited Business Scope: Activities restricted to those of the parent; trading not permitted.
  
• Saudization Compliance: Must follow local employment quotas and business practices.
  
• Regulatory Updates: Stay current with ongoing changes in Saudi business regulations.
  

New Company (Subsidiary) in Saudi Arabia: Full Presence & Limited Liability

Key Features of a Subsidiary (LLC)

• Separate Legal Entity: Operates independently from the parent company; liabilities do not extend to the parent.
  
• Ownership Structure: Typically allows 100% foreign ownership; in some sectors, a local partner may be required.
  
• Wider Business Activities: Can engage in a broader range of business operations, including trading.
  
• Capital Requirement: Similar to branches, but can vary by business type and scale.
  
• Formal Incorporation: Requires Articles of Association (AoA) and a detailed setup process.
  
• Comprehensive Registration: Involves the Ministry of Commerce, Chamber of Commerce, Ministry of Labor, GOSI, and tax authorities.
  

Advantages of Setting Up a New Company

• Limited Liability: Parent company is protected from Saudi legal and financial risks.
  
• Operational Independence: Local management and flexibility to shape business direction.
  
• Broader Business Scope: More sectors and activities accessible, including trading and local partnerships.
  
• Long-Term Presence: Ideal for companies committed to building a robust, sustainable business in Saudi Arabia.
  

Challenges & Regulatory Complexity

• Longer Setup Process: More steps and paperwork than opening a branch.
  
• Potential Local Partner Requirement: In some regulated industries.
  
• Full Saudization and Compliance: Must meet all local business and labor law requirements.
  
• Ongoing Regulatory Monitoring: Stay informed about new reforms and compliance standards.
  

Direct Comparison: Branch Office vs. New Company (2025)

Aspect	Branch Office	New Company (Subsidiary)
Legal Status	Extension of parent (not separate entity)	Separate legal entity (LLC)
Liability	Parent company fully liable	Liability limited to subsidiary
Ownership	100% foreign-owned	100% foreign-owned (some sectors may differ)
Business Scope	Restricted to parent’s activities	Broader, can include trading
Setup Time	Faster, simpler	Longer, more complex
Capital	No minimum capital is required	No Minimum capital is required
Local Partner	Not required	May be required in some sectors
Liability Protection	No	Yes

Which Structure Is Right for Your Business Goals?

• Choose a Branch If:
  
  • You want a fast, cost-effective market entry.
    
  • Full control from the parent company is a priority.
    
  • You don’t plan to trade or need only limited operations.
    
• Choose a New Company (Subsidiary) If:
  
  • You want limited liability protection.
    
  • A broader scope of activities or trading is essential.
    
  • Long-term, independent operations and local partnerships are goals.
    

Actionable Steps for Setting Up in Saudi Arabia (2025)

For Branch Office:

1. Obtain a license from MISA.
   
2. Register with the Ministry of Commerce.
   
3. Secure a Commercial Registration Certificate.
   
4. Appoint a branch manager with a valid Iqama.
   

For New Company (Subsidiary):

1. Draft and notarize the Articles of Association.
   
2. Register with the Ministry of Commerce.
   
3. Obtain a Commercial Registration (CR).
   
4. Register with the Chamber of Commerce.
   
5. Complete labor, insurance, and tax authority registrations.
   

Conclusion:

The best entry route, branch office vs. new company, depends on your business objectives, risk tolerance, and future plans in Saudi Arabia. Both options offer 100% foreign ownership and access to Saudi’s booming economy, but only a subsidiary provides full liability protection and operational flexibility.

Ready to expand into Saudi Arabia?
Contact our team for tailored business setup solutions and up-to-date regulatory advice. 

Frequently Asked Questions (FAQ)

Q: Can a branch office trade independently in Saudi Arabia?
A: No, a branch office cannot conduct trading activities independently; it’s limited to the parent company’s business scope.

Q: Do both structures require compliance with Saudization?
A: Yes, both branch offices and subsidiaries must meet Saudization requirements and local employment quotas.

Q: Is 100% foreign ownership allowed?
A: Yes, in most sectors, but some industries may require a local sponsor or partner for a subsidiary.