Doing Business in the Middle East through a local distributor
Doing Business in the Middle East through a local distributor
Registration of a company in Middle Eastern countries often require high amounts of paid-up capital and a local joint venture partner. A simpler, more cost-effective way of doing business within these countries is to trade through a local agent.
Since 2003, Healy Consultants has consequently assisted our Clients in securing a reliable local distributors and agents in the Middle East including: Saudi, UAE and Qatar Services we can also offer include i) conducting due diligence on the potential partners ii) drafting and negotiating terms and conditions of the agency agreement iii) securing an import license (if required) and iv) other business support services.
How we proceed
Before contracting an agent or distributor, Healy Consultants will assist our Client to i) secure confirmation of interest from multiple professional agent companies ii) negotiate the best terms and conditions with the agents iii) obtain detailed due diligence on our Client’s preferred agent including passport copy, resume, professional reference letters;
Thereafter, Healy Consultants will draft on behalf of our Client a quality agency contract. We usually include the following clauses in the document: i) the agent will not interfere with the business’s management or activities and ii) he will be paid a lump sum and/or a percentage of profits or turnover and iii) the agency agreement is for a fixed term and expires on a future agreed date, unless both parties agree renewal and iv) select binding arbitration as the method of dispute resolution with the arbitration centers in Europe or North America;
If needed, we engage a local lawyer or accountant to critically review legal agency agreements. We also recommend our Clients to visit the country for a face to face meeting with the agent before signing the agreement and starting to do business.
Agency rules for different Middle East countries
In Saudi Arabia, the legal agency contract is covered by the Kingdom’s commercial agency law. The Saudi agent or distributor must register the contract with the Ministry of Commerce and Industry, failure could result in fines and other penalties, the foreign company may be barred from participating in public sector tenders;
In Qatar, the Qatar Commercial Agents Law No.(8) 2002 regulates the appointment of commercial agents, sales representatives, and distributors within Qatar. A commercial agent is appointed to distribute, sell, offer, or provide goods or services within the Qatar for commission or profit;
In Dubai and Abu Dhabi, the UAE Commercial Agencies Law regulates the appointment of commercial agents, sales representatives, and distributors within the country. A commercial agent is appointed to distribute, sell, offer, or provide goods or services within the UAE for commission or profit.
Things to note about engaging agents or distributors or sponsors
Middle Eastern nationals prefer to do business with someone after they are properly introduced and have met face-to-face. An agent can act as a “go-between” to vouch for the reliability and credibility of both parties;
Whilst English is widely spoken in business and government circles, all correspondence with the government authorities is conducted in Arabic and the agent will be able to offer help in this aspect;
Disputes with agents and distributors can cause serious problems for foreign investors. It is essential for our foreign investors to take steps to protect themselves including i) completing thorough due diligence of the proposed agent and ii) retaining legal counsel to review and approve a well-drafted agency agreement.
Middle East trading companies comparisons
Summary at a Glance Dubai Saudi Arabia Qatar Oman Bahrain Abu Dhabi
Total company engagement set up costs $22,000 $75,190 $30,914 $26,900 $23,131 $29,690
Subsequent annual costs (incl audit and tax) $9,850 $18,840 $6,600 $5,970 $7,662 $15,350
How long to set the company up? 1 month 6 weeks 1 month 3 weeks 3 weeks 1 month
How long to open company bank account? 2 weeks 3 weeks 2 weeks 2 weeks 2 weeks 2 weeks
Issued share capital required $1 $27,000 $55,000 $390,000 $2,660 $55,000
Corporate bank account location SCB Dubai NCB KSA SCB Qatar HSBC Oman SCB Bahrain SCB Dubai
Tenancy agreement required before incorporation? Yes Yes Yes Yes Yes Yes
Do you travel for company incorporation? Yes Yes No Yes Yes Yes
Resident director required? No No No No No No
Incorporation requirements
Resident shareholder required? Yes No Yes Yes No Yes
Minimum number of directors 1 1 1 2 2 1
Minimum number of shareholders 2 2 2 2 2 2
Resident company secretary required? No Yes Yes Yes Yes No
Individual shareholders allowed Yes Yes Yes Yes Yes Yes
Corporate shareholders allowed Yes Yes Yes Yes Yes Yes
Corporate director(s) allowed Yes Yes No Yes Yes Yes
Public register of shareholders and directors Yes Yes Yes Yes Yes Yes
Tax and accounting considerations
Corporate tax payable % 0% 20% 10% 12% 0% 0%
Statutory audit required Yes Yes Yes Yes Yes Yes
Annual tax return to be submitted Yes Yes Yes Yes Yes Yes
Access to how many double tax treaties 66 31 37 28 61 66
Tax exempt free zones available 31 6 2 4 3 4
Resident company for local tax purposes Yes Yes Yes Yes Yes Yes
Withholding tax payable 0% 5-15% 0% 0% 0% 0%
How long to get work permit approved 1 month 1 month 1 month 1 month 1 month 1 month
Can the entity hire expatriate staff in the country? Yes Yes Yes Yes Yes Yes
Logistics considerations
Allowed to sign sales contracts with local clients Yes Yes Yes Yes Yes Yes
Allowed to invoice local clients Yes Yes Yes Yes Yes Yes
Average monthly salary of skilled labour $3500 $3700 $4500 $4000 $3500 $3500
Average monthly salary of unskilled labour $800 $1300 $700 $1000 $2000 $800
English spoken by what % of the population (estimate) 78% 40% 60% 30% 45% 50%
Literacy rate % 94% 95% 97% 91% 96% 94%
Office rental per square meter per month US$65 US$25 US$58 US$25 US$20 US$45
Warehouse rental per square meter per month US$30 US$13 US$30 US$13 US$10 US$20
Country credit rating AA A+ AA A- BBB- AA
Internet connectivity rating Strong Poor Strong Fair Strong Fair
GDP per capita (US$) US$64,500 US$52,200 US$143,400 US$39,700 US$51,700 US$64,500
Government liberal or controlling of daily business Moderate Moderate Moderate Strict Liberal Moderate
Population % tertiary enrollment 25% 41% 12% 29% 29% 25%
Global competitiveness ranking (1-6) 5.11 5.10 5.24 4.64 4.45 5.11
Ease of doing business global ranking 2014-2015 (lower the better) 31 82 68 70 65 31
Population 2 million 28 million 2 million 3 million 1 million 0.61 million
Unemployment rate 4% 6% 0.4% 15% 4% 4%
Inflation rate (2014-2015) 1.27% 3.5% 3.1% 0.6% 2.8% 1.27%
GDP 2015 US$ billion US$82billion US$752billion US$210billion US$78billion US$34billion US$248billion
Average annual growth (2014-2015) 4.4% 2.7% 6% 2% 5.3% 4.4%
Estimate of engagement costs US$ US$ US$ US$ US$ US$
Healy Consultants engagement fees 5,950 28,750 13,025 11,250 10,900 11,140
Government fees 6,200 11,650 9,500 1,280 1,031 6,800
Corporate bank account opening 4,950 3,750 2,950 2,950 2,950 2,950
Estimate of total outgoings in Year 1 22,000 75,190 32,370 26,900 23,131 29,690
Draft sales invoice attached
Contact us
Registration of a company in Middle Eastern countries often require high amounts of paid-up capital and a local joint venture partner. A simpler, more cost-effective way of doing business within these countries is to trade through a local agent.
Since 2003, Healy Consultants has consequently assisted our Clients in securing a reliable local distributors and agents in the Middle East including: Saudi, UAE and Qatar Services we can also offer include i) conducting due diligence on the potential partners ii) drafting and negotiating terms and conditions of the agency agreement iii) securing an import license (if required) and iv) other business support services.
How we proceed
Before contracting an agent or distributor, Healy Consultants will assist our Client to i) secure confirmation of interest from multiple professional agent companies ii) negotiate the best terms and conditions with the agents iii) obtain detailed due diligence on our Client’s preferred agent including passport copy, resume, professional reference letters;
Thereafter, Healy Consultants will draft on behalf of our Client a quality agency contract. We usually include the following clauses in the document: i) the agent will not interfere with the business’s management or activities and ii) he will be paid a lump sum and/or a percentage of profits or turnover and iii) the agency agreement is for a fixed term and expires on a future agreed date, unless both parties agree renewal and iv) select binding arbitration as the method of dispute resolution with the arbitration centers in Europe or North America;
If needed, we engage a local lawyer or accountant to critically review legal agency agreements. We also recommend our Clients to visit the country for a face to face meeting with the agent before signing the agreement and starting to do business.
Agency rules for different Middle East countries
In Saudi Arabia, the legal agency contract is covered by the Kingdom’s commercial agency law. The Saudi agent or distributor must register the contract with the Ministry of Commerce and Industry, failure could result in fines and other penalties, the foreign company may be barred from participating in public sector tenders;
In Qatar, the Qatar Commercial Agents Law No.(8) 2002 regulates the appointment of commercial agents, sales representatives, and distributors within Qatar. A commercial agent is appointed to distribute, sell, offer, or provide goods or services within the Qatar for commission or profit;
In Dubai and Abu Dhabi, the UAE Commercial Agencies Law regulates the appointment of commercial agents, sales representatives, and distributors within the country. A commercial agent is appointed to distribute, sell, offer, or provide goods or services within the UAE for commission or profit.
Things to note about engaging agents or distributors or sponsors
Middle Eastern nationals prefer to do business with someone after they are properly introduced and have met face-to-face. An agent can act as a “go-between” to vouch for the reliability and credibility of both parties;
Whilst English is widely spoken in business and government circles, all correspondence with the government authorities is conducted in Arabic and the agent will be able to offer help in this aspect;
Disputes with agents and distributors can cause serious problems for foreign investors. It is essential for our foreign investors to take steps to protect themselves including i) completing thorough due diligence of the proposed agent and ii) retaining legal counsel to review and approve a well-drafted agency agreement.
Middle East trading companies comparisons
Summary at a Glance Dubai Saudi Arabia Qatar Oman Bahrain Abu Dhabi
Total company engagement set up costs $22,000 $75,190 $30,914 $26,900 $23,131 $29,690
Subsequent annual costs (incl audit and tax) $9,850 $18,840 $6,600 $5,970 $7,662 $15,350
How long to set the company up? 1 month 6 weeks 1 month 3 weeks 3 weeks 1 month
How long to open company bank account? 2 weeks 3 weeks 2 weeks 2 weeks 2 weeks 2 weeks
Issued share capital required $1 $27,000 $55,000 $390,000 $2,660 $55,000
Corporate bank account location SCB Dubai NCB KSA SCB Qatar HSBC Oman SCB Bahrain SCB Dubai
Tenancy agreement required before incorporation? Yes Yes Yes Yes Yes Yes
Do you travel for company incorporation? Yes Yes No Yes Yes Yes
Resident director required? No No No No No No
Incorporation requirements
Resident shareholder required? Yes No Yes Yes No Yes
Minimum number of directors 1 1 1 2 2 1
Minimum number of shareholders 2 2 2 2 2 2
Resident company secretary required? No Yes Yes Yes Yes No
Individual shareholders allowed Yes Yes Yes Yes Yes Yes
Corporate shareholders allowed Yes Yes Yes Yes Yes Yes
Corporate director(s) allowed Yes Yes No Yes Yes Yes
Public register of shareholders and directors Yes Yes Yes Yes Yes Yes
Tax and accounting considerations
Corporate tax payable % 0% 20% 10% 12% 0% 0%
Statutory audit required Yes Yes Yes Yes Yes Yes
Annual tax return to be submitted Yes Yes Yes Yes Yes Yes
Access to how many double tax treaties 66 31 37 28 61 66
Tax exempt free zones available 31 6 2 4 3 4
Resident company for local tax purposes Yes Yes Yes Yes Yes Yes
Withholding tax payable 0% 5-15% 0% 0% 0% 0%
How long to get work permit approved 1 month 1 month 1 month 1 month 1 month 1 month
Can the entity hire expatriate staff in the country? Yes Yes Yes Yes Yes Yes
Logistics considerations
Allowed to sign sales contracts with local clients Yes Yes Yes Yes Yes Yes
Allowed to invoice local clients Yes Yes Yes Yes Yes Yes
Average monthly salary of skilled labour $3500 $3700 $4500 $4000 $3500 $3500
Average monthly salary of unskilled labour $800 $1300 $700 $1000 $2000 $800
English spoken by what % of the population (estimate) 78% 40% 60% 30% 45% 50%
Literacy rate % 94% 95% 97% 91% 96% 94%
Office rental per square meter per month US$65 US$25 US$58 US$25 US$20 US$45
Warehouse rental per square meter per month US$30 US$13 US$30 US$13 US$10 US$20
Country credit rating AA A+ AA A- BBB- AA
Internet connectivity rating Strong Poor Strong Fair Strong Fair
GDP per capita (US$) US$64,500 US$52,200 US$143,400 US$39,700 US$51,700 US$64,500
Government liberal or controlling of daily business Moderate Moderate Moderate Strict Liberal Moderate
Population % tertiary enrollment 25% 41% 12% 29% 29% 25%
Global competitiveness ranking (1-6) 5.11 5.10 5.24 4.64 4.45 5.11
Ease of doing business global ranking 2014-2015 (lower the better) 31 82 68 70 65 31
Population 2 million 28 million 2 million 3 million 1 million 0.61 million
Unemployment rate 4% 6% 0.4% 15% 4% 4%
Inflation rate (2014-2015) 1.27% 3.5% 3.1% 0.6% 2.8% 1.27%
GDP 2015 US$ billion US$82billion US$752billion US$210billion US$78billion US$34billion US$248billion
Average annual growth (2014-2015) 4.4% 2.7% 6% 2% 5.3% 4.4%
Estimate of engagement costs US$ US$ US$ US$ US$ US$
Healy Consultants engagement fees 5,950 28,750 13,025 11,250 10,900 11,140
Government fees 6,200 11,650 9,500 1,280 1,031 6,800
Corporate bank account opening 4,950 3,750 2,950 2,950 2,950 2,950
Estimate of total outgoings in Year 1 22,000 75,190 32,370 26,900 23,131 29,690
Draft sales invoice attached
Contact us
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