Sales Representative in Saudi Arabia

Overview by

Commercial Intermediaries

Trading Companies
  • Type of Organization
In Saudi Arabia, it can take the shape of a Distributor or Agent. A distributor acts as an importer and typically purchases the product on his own account and stocks the products before selling it to the retailer or even to an end user.
  • Type of Organization
There are two types of wholesalers:

- Import-export wholesalers. They are particularly useful for their logistic organization, information processing, product promotion and selection.

- Normal wholesalers who mainly offer a logistic service, stocking goods so as to supply retailers, as they need them.

Useful Resources
Saudi Chamber of Commerce and Industry
Riyadh Chamber of Commerce and Industry
Jeddah Chamber of Commerce and Industry
Saudi Arabian General Investment Authority (SAGIA)

Using a Commercial Agent

The Advantages
Saudi law has provision where by companies can make direct sales to the private sector from outside Saudi Arabia. But in practice appointing an agent or distributor is the most common procedure for companies wishing to enter the Saudi market. Foreign companies need a Saudi agent to bid for Saudi government tenders since government purchasing is conducted by local tenders where only Saudi companies bid.
Where to Be Vigilant
A company should choose its agent carefully because terminating or changing agents can be a difficult process.


Moreover Saudi law only allows citizens of Saudi Arabia or wholly-owned Saudi companies to operate as commercial agents. The commercial agent also must have the appropriate license.

Though Saudi Law permits the appointment of more than one agent on a regional basis most companies prefer to appoint a sole agent to avoid conflict of interest and possible mix-up especially when bidding for Government contracts.

Elements of Motivation

Exclusivity, higher sales commissions, incentives for achieving sales targets.

Moreover, a Saudi agent will typically expect the foreign supplier to assume many of the market development costs, such as the hiring of a dedicated sales staff. Foreign suppliers often assign a sales person to the Saudi distributor to provide training, marketing, and technical support. Without such an arrangement, firms should travel to Saudi Arabia regularly to support their Saudi distributor.
The Average Amount of Commission
Agents may receive compensation not exceeding 5% of the contract value.
Breach of Contract
The Ministry of Commerce and Industry provides a model ‘commercial agency agreement' for defining the relationship between the two parties. It also contains provision for termination in case of any breach of contract.

However any termination or change of a commercial agent must be fair to the old agent. Wrongfully terminating an agent may expose a company to liability and may make it more difficult to obtain government approval for replacement with a new agent.

Finding a Commercial Agent
Saudi Chamber of Commerce and Industry
Riyadh Chamber of Commerce and Industry
Jeddah Chamber of Commerce and Industry
Find Sales and Distribution Service Providers in Saudi Arabia on

Setting Up a Commercial Unit

The Advantages
With the market opening up as required by Saudi Arabia's WTO commitments, it makes sense to set up an office in the country.

Moreover, the Kindgom is trying hard to diversify into non-oil sectors and thus offers lot of incentives & tax benefits to attract foreign companies in such domains.

Where to Be Vigilant
Set up a commercial unit only if the foreign company has long-term business interests in the country.

- Be careful about factors like availability and cost of the required labor force, labor relations and work culture, and proximity to resources and/or markets.

- The office and residential rentals are very high in Saudi Arabia.

- Females are not allowed to drive in Saudi Arabia, regardless of nationality; so make necessary additions to your office budget to provide sufficient cars and drivers for transportation of female family members and staff.

Different Possible Forms of Settlement
  • A Representative Office
The representative office may supervise and coordinate the foreign company's administrative activities within Saudi Arabia, but would be prohibited from directly or indirectly engaging in commercial activities. A foreign-company may obtain “representative office" license from the Ministry of Commerce to undertake multiple public sector contracts.
  • A Branch Office
Involving direct presence a branch office is restricted to administrative role and may not engage in trading activities. Branch office is easy to establish and is useful as a liaison presence for a foreign company without the more formal requirements of a joint venture company.
  • A Company
Although, a joint venture involves greater commitments for foreign companies, over the long-term, they may qualify for favorable tax treatment or other economic incentives from the Saudi Government.

Joint ventures are of two types:

- Contractual joint venture: Foreign firm simply signs a contract with a Saudi company and obtains an operating license from the Saudi Government.

- Limited liability company: The foreign company may create a limited liability company in Saudi Arabia. Most foreign firms prefer to use this form of joint venture to establish a presence in the country. While Saudi participation is not a legal requirement, the government strongly favors a company in which Saudi investors participate. In addition, if Saudis own a certain percentage of the company's capital, the company may qualify for certain tax breaks and other investment incentives.



Evolution of the Sector
Franchising market is steadily gaining popularity in the country to establish business. The market is expected to grow in coming years. The franchise law has been effective since 1992.
Some Big Franchises
Krispy Kreme
Ruby Tuesday
For Further Information
Riyadh Chamber of Commerce and Industry
Find more on about Selling to Saudi Arabia.

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