- Foreign investors now register with MISA under the 2025 Investment Law instead of obtaining sector licences; restricted activities still need approval.
- Most Korean companies use a Saudi LLC; project contractors often use a branch; groups bidding for government contracts need a regional headquarters.
- Saudi tax: 20% corporate income tax on the foreign share of profits, 2.5% zakat on the Saudi share, 15% VAT; withholding on payments abroad from 5% to 20%.
- The Korea–Saudi treaty caps Saudi withholding at 5% on dividends to a 25%+ Korean parent, 5% on interest and 5–10% on royalties.
- In Korea, 95% of dividends from a 10%+ foreign subsidiary are excluded from corporate tax; the investment must be reported to a Korean bank before money leaves.
- The Korea–GCC free trade agreement was concluded in 2023 but is not yet in force.
The Korea–Saudi framework
Korea and Saudi Arabia have been economic partners since Korean contractors arrived in the 1970s oil boom. Today Saudi Arabia is Korea’s largest crude supplier: UN Comtrade data show USD 27.4 billion of Korean imports from the Kingdom in 2025, 96% of it oil. Korean exports were USD 4.86 billion — vehicles (USD 1.39 billion), machinery (USD 1.03 billion), electrical equipment, steel products, plastics, arms and, increasingly, cosmetics and food. Korean construction and engineering groups are among the largest foreign contractors in the Kingdom; Hyundai E&C’s USD 5 billion Amiral petrochemical contract with Aramco in 2023 is a recent landmark, and a Hyundai Motor joint venture with the Public Investment Fund broke ground in 2025 on a 50,000-vehicle plant in King Abdullah Economic City, due to start production in the fourth quarter of 2026.
The legal framework is newer than the relationship. Saudi Arabia’s Investment Law (نظام الاستثمار) took effect in 2025 with its implementing regulations, the Companies Law (نظام الشركات) in 2023, the Civil Transactions Law (نظام المعاملات المدنية) in December 2023, and new commercial register and trade name laws in April 2025. A Korea–Saudi tax treaty (한·사우디 조세조약) has applied since 2009. The Korea–GCC free trade agreement (한-GCC FTA) was concluded in December 2023, but as of 2026 formal signing and entry into force are still pending, so Korean goods enter at the GCC common external tariff, mostly 5%. Both countries apply the Apostille Convention, Saudi Arabia since December 2022.
Five ways in
1. A Saudi distributor or agent
Consumer goods, cosmetics, food and most industrial products start with a Saudi importer. The importer registers products with the Saudi Food and Drug Authority (SFDA) or certifies them on the SABER (SASO conformity platform), holds stock and sells. Commercial agency and distribution agreements are regulated in the Kingdom and registered with the Ministry of Commerce; exclusivity and termination compensation deserve careful drafting. File the trademark with the Saudi Authority for Intellectual Property (SAIP) before the first shipment.
2. A technical and scientific office
A non-revenue office for marketing support, technical assistance to distributors and market research, licensed through MISA. It cannot sell or invoice. It suits Korean manufacturers supporting a distributor network, much like a liaison office in Korea.
3. A branch
A branch of the Korean company itself — the usual vehicle for a single contract or project. It is registered with MISA and the commercial register, taxed on profits attributable to Saudi Arabia at 20%, and pays 5% withholding tax when it remits profits to the head office. The Korean parent is liable for everything the branch does.
4. A Saudi limited liability company
A limited liability company (شركة ذات مسؤولية محدودة) under the 2023 Companies Law, 100% owned by the Korean parent in most sectors, is the standard vehicle for a lasting business. A single shareholder is permitted; minimum capital is set by activity rather than by the Companies Law. The LLC contracts with Saudi customers, employs staff, sponsors visas and builds the Saudization record that government customers check.
5. A regional headquarters
For groups with several companies in the region and an eye on government contracts, a regional headquarters (RHQ) licence is close to compulsory. See below.
Setting up a Saudi company
Under the Investment Law and its implementing regulations, foreign investors no longer obtain sector-specific MISA licences or pay licence fees. They register with the Ministry of Investment (MISA) before starting, describing the business scope, ownership and capital; one registration can cover several activities, and the data must be updated annually. Activities on the restricted list still need MISA approval, and minimum capital requirements still apply to some sectors. Foreign investors are guaranteed treatment equal to Saudi investors in like circumstances and the freedom to transfer profits and dividends.
The sequence after MISA is: articles of association and incorporation through the Saudi Business Center; commercial registration with the Ministry of Commerce — since April 2025 a single national CR that no longer expires but must be confirmed annually; Chamber of Commerce membership; registration with ZATCA (Zakat, Tax and Customs Authority) for corporate tax, VAT and withholding; GOSI (social insurance); the labour and visa platforms Qiwa and Muqeem; a municipal licence for the premises; and a Saudi bank account. With documents ready, expect four to eight weeks.
| Document from Korea | Korean source | Treatment |
|---|---|---|
| Certificate of registered matters (법인등기사항증명서) | Supreme Court registry | Apostille by Korea’s foreign ministry; Arabic translation |
| Articles of incorporation (정관) | Company | Certified copy; apostille; Arabic translation |
| Board resolution to invest and appoint managers | Board | Notarised; apostille; Arabic translation |
| Audited financial statements | Auditor | Often requested by MISA or banks |
| Power of attorney for the Saudi representative | Authorised director | Notarised; apostille; Arabic translation |
| Passports of managers and shareholders’ representatives | Individuals | Copies; Saudi bank KYC |
Typical documents for a Korean corporate investor; Arabic translations are made by certified translators in Saudi Arabia or Korea.
The regional headquarters rule
Since 1 January 2024, Saudi government bodies generally may not award contracts to foreign companies that do not have a regional headquarters in the Kingdom. Exceptions exist — contracts below SAR 1 million, work performed outside Saudi Arabia, single-bidder situations — and a non-RHQ bidder can win only by undercutting the lowest qualified bid by a margin that makes most bids unworkable. For Korean contractors and suppliers chasing ministry, giga-project and state-company work, that makes an RHQ a commercial necessity.
An RHQ is a MISA-licensed entity that manages the group’s regional subsidiaries; it may not earn revenue from customers. It must start operating within six months, employ at least 15 full-time staff including three senior executives within a year, and perform the mandatory headquarters functions plus at least three optional ones. In return it gets 0% corporate income tax and withholding tax on qualifying headquarters activities for 30 years, unlimited visas for its staff, a 10-year exemption from Saudization quotas and relief from professional accreditation rules. Korea’s controlled foreign company rules and, for large groups, the global minimum tax need to be checked before a Korean group relies on the 0% rate: Korean tax can follow low-taxed income home.
In Riyadh, the RHQ is the price of admission to government work. Budget for it like a bid bond, not like an office.
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Saudi tax
A Saudi company owned by a Korean parent pays corporate income tax at 20% on its taxable profits. Where Saudi or GCC nationals hold part of the company, their share is subject instead to zakat at 2.5% of the zakat base, which is calculated on equity and assets rather than profit. Oil and hydrocarbon production carries much higher rates. VAT is 15%. Capital gains on unlisted Saudi shares are taxed at 20%, subject to treaty relief. Transfer pricing rules follow the OECD guidelines, with local file, master file and country-by-country filings above thresholds.
Payments from Saudi Arabia to non-residents bear withholding tax under domestic law: 5% on dividends, interest, rent and technical or consulting services; 15% on royalties and on certain payments to related parties; 20% on management fees. A branch pays 5% on profits remitted to its head office. ZATCA can apply treaty rates at source if the payer files a treaty application with the recipient’s certificate of residence and accepts liability; otherwise tax is withheld in full and refunded on claim.
| Payment from Saudi Arabia to Korea | Saudi domestic rate | Korea–Saudi treaty | Condition |
|---|---|---|---|
| Dividends | 5% | 5% | Korean company holding at least 25% of the capital |
| Dividends — other | 5% | 5% (treaty cap 10% does not raise the domestic rate) | Smaller holdings and individuals |
| Interest | 5% | 5% | |
| Royalties — equipment | 15% | 5% | Use of industrial, commercial or scientific equipment |
| Royalties — other | 15% | 10% | Patents, know-how, trademarks, software licences |
| Management fees | 20% | Business profits article | No Saudi tax without a permanent establishment, if the treaty is applied |
| Technical services | 5–15% | Business profits article | Services PE after 183 days in 12 months |
Sources: PwC Worldwide Tax Summaries, Saudi Arabia; Al Tamimi on the Korea–Saudi treaty. Treaty in force 1 December 2008, effective 1 January 2009.
Two treaty points matter to Korean contractors. First, the services permanent establishment (용역 고정사업장) rule: Korean staff furnishing services in the Kingdom for more than 183 days in a 12-month period on the same or connected projects create a permanent establishment, taxable in Saudi Arabia on attributable profits. Second, ZATCA does not always read the treaty as Korean companies expect, particularly on whether payments for services performed partly in Saudi Arabia are business profits or royalties; the mutual agreement procedure through Korea’s National Tax Service is available when the two tax authorities disagree.
Korean tax and filings on the way out
Before capital leaves Korea, the Korean company files an overseas direct investment report (해외직접투자 신고, haeoe jikjeop tuja singo) with its foreign exchange bank under the Foreign Exchange Transactions Act and its regulations; later changes, loans to the subsidiary, and liquidation are reported too, and late or missing reports bring fines and can complicate getting money back. Branches are reported as overseas branches.
When the Saudi subsidiary pays dividends, Korea excludes 95% of them from the parent’s taxable income under Article 18-4 of the Corporate Tax Act if the parent holds at least 10% of the subsidiary for the required period; the Saudi withholding on the excluded part cannot then be credited. Branch profits are taxed in Korea as part of the company’s income, with a foreign tax credit (외국납부세액공제, oeguk napbu seaek gongje) for Saudi tax under Article 57. Korean controlled foreign company (특정외국법인, teukjeong oeguk beobin) rules under Article 27 of the Adjustment of International Taxes Act can tax undistributed profits of a foreign subsidiary whose effective tax burden is at or below 70% of Korea’s top corporate rate — not an issue for a Saudi company paying 20%, but one to check for a 0% RHQ or a special economic zone entity. Transfer pricing applies to goods, services and royalties between the two.
People: Saudization, visas and labour law
Every Saudi employer is graded under Nitaqat, the Saudization programme, which sets a required share of Saudi nationals by sector and size; the band determines whether the company can obtain and renew work visas. Saudis count fully only above a minimum monthly wage, and some occupations are reserved for Saudis. A new LLC has a short grace period, after which it must hire Saudis to keep its visa quota — plan Saudi roles in sales, HR, government relations and administration from the start.
Korean staff need a work visa sponsored by the Saudi entity through Qiwa, then an iqama (residence permit). Short business trips can use the electronic visit visa. Employment is governed by the Labour Law (نظام العمل), substantially amended in 2025: written contracts registered on Qiwa, probation of up to 180 days, working hours of 48 a week (reduced in Ramadan for Muslim employees), and an end-of-service award of half a month’s wage for each of the first five years and a full month for each year after. Employers pay GOSI contributions — for expatriate employees, occupational hazard insurance only; for Saudi employees, pension and other branches as well. Korea and Saudi Arabia have no social security agreement, so Korean staff seconded to the Kingdom normally stay in the Korean National Pension through their Korean employer; see Korean social insurance.
Products and certification
Imported products must meet Saudi technical regulations. Most consumer and industrial products are certified on the SABER platform, which issues product and shipment certificates before customs clearance. Food, cosmetics, medicines and medical devices are regulated by the SFDA, with halal requirements for food and listing of cosmetics; Arabic labelling is mandatory. Korean K-beauty and K-food exporters should budget months, not weeks, for the first registrations; see K-beauty export rules. Strategic and defence goods need Korean export licences and Saudi end-user documentation; see export controls.
Contracts, disputes and money
Saudi law is now largely codified: the Civil Transactions Law governs contracts, damages and limitation, the Commercial Courts Law commercial disputes, and the Arbitration Law arbitration. For Korean contractors the practical points are the ones that have always mattered: payment security, variations, delay penalties and the language of the contract — Arabic prevails before Saudi authorities unless agreed otherwise. Government contracts follow the Government Tenders and Procurement Law with local content preferences administered by the Local Content and Government Procurement Authority.
Disputes with private parties are often referred to the Saudi Center for Commercial Arbitration (SCCA) or to international arbitration seated outside the Kingdom; Saudi Arabia is a New York Convention state and its enforcement courts have become markedly more predictable. Profits and capital can be transferred abroad freely under the Investment Law; banks need the supporting documents. Korean exporters and investors can insure Saudi buyer and political risk with K-SURE and finance projects with Korea Eximbank; infrastructure developers can work with KIND, Korea’s overseas infrastructure corporation. KOTRA’s Riyadh trade centre runs market and partner support.
Where Korean companies win
Construction and plant engineering remain the core, now alongside operation and maintenance, smart cities, water and power. Vision 2030 has created demand in sectors where Korea is strong: automotive and parts around the King Salman Automotive Cluster; defence and shipbuilding with localisation requirements; hydrogen and power equipment; digital government, telecoms and data centres; healthcare and hospital operations; and consumer markets — Saudi Arabia is one of the fastest-growing markets for K-beauty and Korean entertainment in the Middle East. The giga-projects have been re-phased, and some scaled back, since 2025; Korean firms that diversified into Aramco, SEC, water and municipal work have been less exposed than those betting on a single giga-project.
A worked example
A Korean maker of water-treatment membranes and systems has sold into Saudi Arabia through a Jeddah distributor for six years. With a national water company tender coming, it forms a Saudi LLC in Riyadh with SAR 2 million of capital, wholly owned by the Korean parent. Its certificate of registered matters, articles and board resolution are apostilled in Seoul and translated into Arabic; it registers with MISA, obtains its commercial registration and ZATCA, GOSI and Qiwa registrations, and opens accounts with a Saudi bank. Before wiring the capital it files the overseas direct investment report with its Korean bank.
The tender is with a state-owned company. The group, which also owns companies in the UAE and Egypt, establishes an RHQ in Riyadh with 15 staff to manage them, which keeps it eligible for government work. The LLC hires four Saudi engineers and two Saudi administrators to reach its Nitaqat band and sponsors three Korean engineers. In year three it earns SAR 6 million of profit, pays SAR 1.2 million of corporate income tax and a SAR 4 million dividend with 5% withholding; in Korea 95% of the dividend is excluded from taxable income. Royalties for the membrane technology are charged at 10% treaty withholding, supported by a transfer-pricing file.
Mistakes we see
- Bidding for government work without an RHQ after January 2024.
- Skipping the Korean overseas investment report before sending capital.
- Under-planning Saudization and losing visa capacity in year one.
- Korean staff on site for more than 183 days without considering the services PE.
- Withholding at full domestic rates because no treaty application was filed with ZATCA.
- English-only contracts with Saudi counterparties and no clear dispute clause.
- Assuming the Korea–GCC FTA already applies.
- Relying on a 0% RHQ without checking Korean CFC and minimum tax rules.
Terms you will meet
Questions readers ask
How does a Korean company set up in Saudi Arabia?
By registering with MISA under the 2025 Investment Law, then incorporating — usually an LLC — through the Saudi Business Center, obtaining commercial registration, and registering with ZATCA, GOSI and Qiwa.
Can a Korean company own 100% of a Saudi company?
In most sectors, yes. Some activities are restricted and need MISA approval or a Saudi partner.
What tax does a Korean-owned Saudi company pay?
20% corporate income tax on profits attributable to foreign owners, zakat of 2.5% on any Saudi or GCC-owned share, and 15% VAT.
What is the withholding tax on dividends from Saudi Arabia to Korea?
5%. The Korea–Saudi treaty caps it at 5% for a Korean company holding 25% or more and 10% otherwise, and Saudi domestic law already charges 5%.
Is there a free trade agreement between Korea and Saudi Arabia?
The Korea–GCC FTA was concluded in December 2023 but had not entered into force by 2026.
Do Korean companies need a regional headquarters in Saudi Arabia?
To win most government contracts, yes, since January 2024. RHQs receive 30 years of 0% tax on qualifying activities.
Are Saudi dividends taxed again in Korea?
Only lightly: 95% of dividends from a foreign subsidiary held at 10% or more are excluded from Korean corporate tax.
- Trading Economics / UN Comtrade — Korea exports to Saudi Arabia
- Trading Economics / UN Comtrade — Korea imports from Saudi Arabia
- Clyde & Co — Saudi Investment Law implementing regulations
- Al Tamimi — New commercial registration and trade name laws, 2025
- Vistra — Saudi Arabia’s regional headquarters rule
- PwC — Saudi Arabia withholding taxes
- Al Tamimi — The Korea–KSA double tax treaty
- GCC Secretariat — Korea FTA progress, January 2026
- Argaam — Hyundai plant in King Salman Automotive Cluster
Alexander Baranov
Founder of the BCA Group · cross-border corporate and tax adviser since 2008
Alexander advises foreign founders and groups on company formation, tax structuring and corporate law in more than 40 jurisdictions across Europe, the Gulf, Asia and Latin America. He is the author of nine books on international business and tax and writes regularly for professional finance and tax journals. He works in English, German, Spanish and Russian.
This guide is based on the Korean statutes cited in the text and on our own filings. It is reviewed when the law or official rates change.