Company Registration in YEMEN

Company Registration in Yemen

Yemen, officially the Republic of Yemen, is a country in Western Asia, on the southern end of the Arabian Peninsula. It borders Saudi Arabia to the north and Oman to the northeast and shares maritime borders with Eritrea, Djibouti, and Somalia.

Yemen is a member of the Arab League, the United Nations, the Non-Aligned Movement, and the Organization of Islamic Cooperation. It belongs to the least developed country group, referring to its numerous "severe structural impediments to sustainable development". In 2019, the United Nations reported that Yemen is the country with the most people in need of humanitarian aid, about 24 million people, or 85% of its population. As of 2020, the country is placed the highest in the Fragile State Index, the second-worst in Global Hunger Index, surpassed only by the Central African Republic and has the lowest Human Development Index out of all non-African countries.

Yemen is an Arabic country present in the Arabian Peninsula. It is one of the largest countries in the Arabian Peninsula. Yemen is officially known as the Republic of Yemen. The coastline of Yemen stretches more than 1800 Kilometers. The political crisis in Yemen started in 2011 with more amount of unemployment, corruption, and constitutional drawbacks. Hence doing business in Yemen is not easy. Company registration in Yemen is quite straightforward; however, it is important to comply with the local regulations in Yemen.


Why Register a Company in Yemen?

  • The restriction on a foreign business to have a Yemeni partner has been eliminated therefore a foreign investor can set up a business in Yemen without needing a Yemeni partner.
  • In Yemen, the transfer of investment capital and profits is allowed without limitation on the amount of currency.
  • Yemen authorities, with the help of foreign donors and DFIs, continuously review legislation related to trade and investment in order to ascertain its effectiveness. This states that the government is actively involved in strengthening the business sector in Yemen.
  • An effort to encourage more investment and to promote the private sector growth has been made through a new Investment law promulgated in 2010, which offers a reduced tax rate base, the right of ownership in real estate, customs exemptions, and guarantees of no expropriation of the project.


Types of Business Entities in Yemen

For doing business in Yemen, one can choose from among the following business entities:

1. Limited Liability Company

A limited liability company (LLC) is a type of company formation where the liability of the members of the company is limited to the extent of their share in the capital. To form a limited liability company in Yemen, a local partner is not mandatory. The minimum requirement of shareholders is 2 and the maximum requirement is 25 to form an LLC in Yemen. Also, they are not allowed to engage in banking, insurance, and savings activities. The minimum share capital of a Limited liability company is YER 1 million (approximately US$5,000), which must be fully paid upon incorporation. A bank certificate is required for confirmation.

2. Public Shareholding Company

A public shareholding company is a legal business entity where the share capital is divided into equal shares whose value is negotiable and transferrable. The minimum requirement of shareholders under this entity is five. The Ministry of Industry and Trade’s supervision of public shareholding companies is mandatory as per the procedures given in the law. The minimum capital requirement for a public shareholding company is YER 5 million. Also, the Board of Directors whose maximum limit is 11 must not be public employees.

3. Partnership Limited by Shares

It is a hybrid between a partnership and a company limited by liability. The capital and ownership is divided between shareholders who have limited liability and one or more partners who have full liability for the remainder of debts. In Yemen, to start a partnership limited by shares, a company needs to have at least 5 participating shareholders and one general partner, making a total of 6 founding members. A local partner requirement is not mandatory under this entity. The minimum share capital required is YER 3 million. And the appointment of an external auditor is mandatory.

The other types of business entities permitted in Yemen are General Partnership, Limited Partnership, and Joint Venture.


How to Set Up a Business in Yemen?

While establishing a company in Yemen it is critical for an investor to understand the legal process, international regulations, and sufficient investment needed for the success of the business. The cultural, social, political factors that will affect the establishment of and growth of one’s business must be known, as the failure to do so could result in unintended consequences. Even though Yemen faces a lot of problems with foreign investment, people across the globe show a lot of interest in setting up a business in Yemen. Let us have a look at how one can set up a business in Yemen.

1. Select a Business Entity

One can set up a business in Yemen through various business entities. The different types of business structures available in Yemen are a Limited Liability Company, Joint-stock Company (public or private), Joint venture, Branch of a foreign company, Sole proprietorship, and a Partnership company.

2. Register Your Company Name

Once you are done with deciding on a business structure for the company, the next step is business name registration in Yemen. One should always check the list at the company registrar if the name you want for the company is available, as two companies cannot have the same name. You can register the Unique Company Name at the Commercial register under the Ministry of Trade & Industry, on the application form type.

3. Register for a License

The Founders are required to provide the request for a license to the controller (the Director-General of the Directorate General of Companies) with a signed copy of the incorporation agreement and a copy of the proposed article of association. This shall be done after filing an application for setting up a business in Yemen.

4. Sign on the Articles of Association

The Articles of Association have to be amended in compliance with the company’s law and after completing so record the signature in front of the controller, or whoever they delegate for the same, or with the related courts. The requested license and article of the association are approved by the Ministry within a month from the date of receiving the request for the license. If the request is rejected, a reason will be defined.

5. Register for Income Tax

Register as taxpayers with the General Taxes Department for the Payment of Income-tax, obtain taxation card, and register the employees, and also register for other taxes. It has no cost but just lengthy documentation that must be submitted for doing all these activities on the company’s behalf.

After you are done with these steps, you can also apply for a membership at the Chamber of Commerce. It is mandatory for all the companies incorporated in Yemen to apply for the membership at Chamber of Commerce after paying YER 15,050. Lastly, the company also needs to register its employees for social security. It is an obligation to register in the social security department under the Ministry of Social Security by providing a full list of employees in the prescribed form to obtain the registration.


Benefits of Company Formation in Yemen

  • 100% foreign ownership
  • Local sponsorship is not mandatory
  • Yemen is not a rich country, but the presence of oil, gas, and mineral deposits, the amount of development aid flowing into the country, and the unequal distribution of wealth amongst the population mean that commercial opportunities exist
  • The Yemeni government encourages foreign investment across all sectors and projects are exempted from profit tax for a period of 7 years, extendable up to 16 years
  • Freedom of transfer of hard currency to and from Yemen
  • No nationalization, reservation, or seizure of investment projects


Documents Required to Set Up a Business in Yemen

  • An application form filled with complete details of the number of shareholders, directors, and personal as well as company details
  • A copy of company registration and Articles of Association of the company
  • Passport copies of the members are of foreign national
  • Detailed business plan
  • Incorporation license
  • Copy of the reservation of company name


Compliances for Company Registration in Yemen

The following compliances have to be carried out for company registration in Yemen:

  • Tax

A Company has to pay corporate tax at the rate of 20%. Previously, the corporate tax levied in Yemen was 35%. For this, the company would have to register with the General Taxes Department. VAT and other forms of taxes also have to be paid in Yemen.

  • Register with the Chamber of Commerce and Trade registry

The Company has to follow compliances while registering with the Chamber of Commerce and Trade Registry.

  • Social Security Registration

If the firm employs more than two workers, then it must register with the requirements of Social Security. Every month an employer must deposit about 15% of the employee’s salary with social security. Out of 15%, 9% is paid by the employer and 6% is deducted from the employee’s salary.

  • Shareholders Meeting

Annual General Meetings have to be held at least once a year.

  • Board Meetings

Board Meetings have to be held if stated in the articles of the company.


Frequently Asked Questions

1. What is the official authority for company registration in Yemen?

The main authority for company registration in Yemen is the Companies Registry and the Chamber of Commerce.

2. What is the corporate tax rate in Yemen?

The corporate tax rate in Yemen is 20%. Previously, companies had to pay corporate tax at the rate of 35%.

3. What are the benefits of company registration in Yemen?

The following are the benefits of company registration in Yemen:

  • Services Sector
  • Agriculture Sector
  • Industrial Sector.

4. What are thriving activities in Yemen?

In terms of economy, thriving activities include agriculture services. Most of the individuals in Yemen work in this sector. In the manufacturing and services sector, commercial ships, garments production, food processing industries are prominent.

5. Are there any drawbacks in Yemen?

The country has been at war ever since its independence. Apart from this, the political crisis has severely affected the GDP of this country.