Doing business in Yemen
- How quickly can I set up a business?
- What is the minimum investment needed?
- How can I raise finance?
- What are the legal requirements for setting up my business?
- What structure should I consider?
- What advice can you give me in regards to payroll and taxation requirements?
- Is there anything else that I should know?
How quickly can I set up a business?
It depends on the form of the business:
- Joint Stock Company (Public or private) company takes officially 15 working days to obtain licences and other legal documentations from authorities.
- Limited Lability Company and Sole Proprietorship takes officially 7 working days to obtain licences and other legal documentations from authorities.
What is the minimum investment needed?
It depends on the type of business and the size of activities, whereby the minimum capital for establishing a business is as follows:
For the following types of entities an official minimum capital limit is not specified. However, the capital should be adequate to meet business objectives of the entity:
- Sole Proprietorship
- General Partnership Company
- Limited Liability Company (LLC)
For the following types of entities, the minimum capital should be as follows:
- Joint Stock Company (Public), (YER50 million)
- Joint Stock Company (Private) (YER15 million)
- Company Limited by Shares) YER3,000,000)
- Branch of a foreign company (USD30,000)
How can I raise finance?
The investors are expected to finance their business from their own resources or through introducing partners to their venture. Bank facilities are not normally available before the establishment of the company.
What are the legal requirements for setting up my business?
To set up business in Yemen you need to carry out the following:
- Select a business entity available under the following laws:
- The Commercial Companies Law and the Branches of Foreign Companies Law.
- The special laws such as Investment Law, i.e., registering an investment project company, by presenting an application to the General Investment Authority (GIA), an independent body to govern activities of all investment projects or registering under the Free Zones Law No. 4 of 1993 in the Republic of Yemen which are located in specific areas for activities specified by the law.
- Under special agreements such as the Production Sharing Agreement (PSA) or the Gas Development Agreement (GDA).
Register the company’s name
Once the business structure for the company is chosen and the initial approval is obtained from the relevant authority, the next step is to register the business name in the commercial register at the Ministry of Industry and Trade (MOIT).
Register for a license
After obtaining the approval of MOIT the company would be registered with the Yemeni Chamber of Commerce & Industry and complete the necessary procedures specific to the form of business selected at the Ministry of Industry and Trade and the municipality.
Register with the Income Tax Authority
The company is then registered as a taxpayer at the Yemeni Tax Authority under the income tax law No.17 of 2010 and under the General Sales Tax Law No.19 of 2001 and obtain a tax card. This registration is required even if the company is tax exempted.
Register with the Social Security Authority
The company is then registered with the Social Security Authority at the General Corporation for Social Security (GCSS) by providing a full list of employees in the prescribed forms to obtain the registration card.
Register for Zakat (i.e. religious charity)
The company is further obliged to with the General Authority of Zakat. The Zakat rate is 2.5775% but foreign capital share is not required to pay Zakat to the Authority.
What structure should I consider?
The Limited Liability Company (LLC) is considered a preferred form of business for the foreign companies and individuals since the Authorities are simplifying the process of LLC registration and the non-Yemeni investors can hold 100% ownership in a Yemeni Limited Liability Company. In addition, the Limited Liability Company needs to have enough capital to meet its objectives. Hence no minimum capital is required.
What advice can you give me in regards to payroll and taxation requirements?
The Income Tax Law No.17 of 2010 and its amendments governs the taxation on incomes of corporations and personal incomes of natural persons. The General Sales Tax Law No.19 of 2001 governs the Value Added Tax (VAT).
The standard corporate tax rate is 20%. A 35% for international telecommunication service providers, cigarette manufacturers and importers, and the rate is 50% for mobile phone service providers. While the tax rate on investment projects registered under the Investment Law is 15%.
Personal Income Tax
Payroll tax is applicable on both resident individuals at rates ranging from 10% to 15% and for non-residents the rate is 20% on the income earned from their activities inside Yemen.
An annual tax is imposed on the rental value of real property, in an amount equal to one month’s rent, and 1% tax is imposed on income from the sale of land and constructed property and land prepared for construction.
Withholding Tax (WHT)
Widely applicable WHT rate is 10% on payments made to residents and non-resident entities for availing services in Yemen.
General Sales Tax (GST)
Companies whose annual turnover exceeds YER50 million or its equivalent are required to register for sales tax purposes. The general rate is 5%, although a 10% rate applies to telecommunication and global system mobile communications services.
The employer is required to contribute 11% of a national or foreign employee’s salary and the employee contributes 7%, i.e., the total of 18% is payable monthly to the General Corporation for Social Security (GCSS).
Companies registered and incorporated in accordance with the regulations for companies in Yemen are required to submit their audited accounts in accordance with the local laws and practices prevailing in the Republic of Yemen. Also, such companies are required to file annual corporate tax returns by the following 30 April from the end of tax year. The annual tax declarations are required to be certified by a licensed charted accountant and be accompanied by the audited financial statements.
Is there anything else that I should know?
- In general, all types of businesses, regardless of the activities, whether local or foreign companies are required to follow the International Financial Reporting Standards (IFRS) and the International Accounting Standards (IAS).
- Banks use IFRS and instructions issued by the Central Bank of Yemen.
- The Yemeni government encourages foreign investment across all sectors and projects and grants profit tax exemptions for a period of 7 years.
- Yemen is not a rich country, but the presence of oil, gas and mineral deposits, the amount of development aid flowing into the country mean that commercial opportunities exist.
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