Business Setup in Saudi Arabia (KSA) with 100% Foreign Ownership.

Here’s a concise version of the types of investor licenses for businesses in Saudi Arabia:

• Industrial License: Needed for manufacturing or industrial activities.
• Service License: For service sectors like consulting, IT, finance, healthcare, and education.
• Trading License: Required for trading, importing, exporting, and distribution.
• Contracting License: For construction and contracting services.
• Real Estate License: For real estate development and management.
• Energy License: Energy sector, including oil, gas, and renewables.
• Telecom & IT License: Telecommunications and information technology
• Tourism License: For tourism, travel services, and hospitality.
• Media License: Media, publishing, broadcasting, and advertising.
• Medical License: Covers healthcare services, clinics, and equipment
• Educational License: Establishing educational institutions

The time required to complete the licensing process for a business in Saudi Arabia varies. It can take a maximum of 30 days, depending on factors like business type, documentation, and other processing. After application submission, there’s a review period, potential additional approvals, legal steps, and setting up the physical location. Staying updated with authorities and having complete documentation can help expedite the process.

Trade licenses get issued within a span of 7-15 days post the application submission.

The cost of setting up a business in Saudi Arabia is mainly dependent on several factors, like the type of business you plan to establish, industry to which the business belongs, location you plan to establish the business, and many other specific requirements. In 2024, the costs are mainly influenced by Saudi Arabia’s efforts to streamline its vision 2030 objectives and attract foreign investment.

Let’s break down the cost of setting up the business in KSA

• The cost of registering a limited liability company (LLC) with the Ministry of Commerce and Investment in Saudi Arabia in 2024 is expected to be between SAR 10,000 to SAR 20,000 (which is approximately USD 2,700 to USD 5,300).
• Additional licensing fees ranging from SAR 5,000 to SAR 30,000 (in USD 1,300 to USD 8,000) may be added to the total cost based on the nature of the business and the industry sector.

• The rent for office or commercial space is normally between SAR 150 to SAR 500 (USD 40 to USD 133) per square meter per year. And this can vary depending on the location and size of the building.  

• The lowest capital requirement for a single-shareholder LLC and multi shareholder LLCs is around SAR 300,000 (USD 80,000) and SAR 500,000 (USD 133,000) in 2024.
• Saudi Arabian General Investment Authority (SAGIA) has set high capital requirements for certain industries or sectors in the Kingdom 

• Additional costs like Legal and consultancy fees for company formation, licensing approval, etc. also have to be arranged and this can range from SAR 20,000 to SAR 50,000 (USD 5,300 to USD 13,300), depending on the complexity of the business setup.
• The cost for Accounting and auditing services is around SAR 10,000 to SAR 30,000 (USD 2,700 to USD 8,000) per year.

• Work visa and residency permit fees for each foreign employees hired  has to raised by the business and this is expected to be around SAR 5,000 to SAR 10,000 (USD 1,300 to USD 2,700) per employee
• It’s important to be aware of the incentives and reduction given by the Saudi government for businesses operating in specific sectors or locations of the country like reduced fees, tax exemptions, or subsidies, for businesses. And these incentives can have a great impact on the overall cost of business setup and operations.

An office address of your company or firm is required for registering your business and official business communications.

The corporate tax rate in Saudi Arabia can vary depending upon several factors as listed below:

1. For the companies owned by the  Saudi nationals or citizens of other Gulf Cooperation Council (GCC) countries the corporate tax rate is 20%
2. The corporate tax rate is 20% for companies owned by non-GCC nationals on the share of non-Saudi or non-GCC partners and nil for the share held by Saudi or GCC partners.
3. The corporate tax rate is 30% for companies indulged in the activities of natural gas investment activities
4. For oil and other hydrocarbon production companies, the corporate tax rate is 85%.

Though there are many tax rates in Saudi Arabia as listed above, it is  important to note that the Kingdom of Saudi Arabia has signed double taxation avoidance agreements with several countries, and this can leave a great impact on the existing tax rate for foreign companies in KSA.
Also for businesses operating in specific sectors or locations in the Kingdom, like economic cities or industrial zones, many tax incentives and other exemptions are available.

There are many ministries responsible for setting up a business in Saudi Arabia like the few mentioned below:

1. The Ministry of Commerce and Investment (MCI) is responsible for the registration of the companies and licensing them and regulates the commercial activities in the Kingdom.
2. The Ministry of Human Resources and Social Development (MHRSD) oversees the work permits, labour laws, and visa requirements required for foreign employees.
3. Issuance of permits, regulation of real estate activities and approvals for various construction and development projects are handled by the Ministry of Municipal and Rural Affairs and Housing 
4. The Saudi Arabian General Investment Authority (SAGIA) oversees the promotion of foreign investment in Saudi Arabia and lends support and incentives to foreign investors.

Besides these ministries, other ministries like the Ministry of Industry and Mineral Resources, the Saudi Food and Drug Authority, or the Capital Market Authority, would also be involved depending upon the industry or sector chosen.

Yes, the companies are allowed to engage in multiple activities in Saudi Arabia, but are subject to certain conditions and regulations set up by The Ministry of Commerce and Investment (MCI).

Certain activities may require specific permits, licenses, or approvals from relevant authorities depending upon the nature of the businesses. For example, industries like finance, healthcare, or energy-related activities are subject to additional regulatory requirements.

While setting up a business in the Kingdom of Saudi Arabia, you have to clearly define the business activities planned  in the company’s Articles of Association or commercial registration. Specific approvals from the MCI and amendments to the commercial registrations are required for any changes or additions to the business activities mentioned.

Seeking professional help from legal or business setup professionals would help ease the process and ensure compliance with all regulations.

There are many business structures available in Saudi Arabia for foreigners each with its benefits and limitations. Below are the most common structures available for foreigners in the country:

• Limited Liability Company (LLC):

This business structure offers limited liability protection for its shareholders. It requires a minimum of two shareholders and the percentage of foreign ownership can range from 0% to 100%, depending on the sector chosen.

•  Branch Office:

A foreign company can set up the extension of a parent company in Saudi Arabia. Here it would be treated as a  permanent establishment and no separate legal entity is required. 

But requires sponsorship from the local Saudi service agent.

• Professional Company:

Foreign ownership for professional company can range from 0% to 100%, depending on the sector and it would be set suitable for professional services like consulting, engineering, or legal services

•  Joint-Stock Company:

This type of business structure is best suitable for larger businesses with multiple shareholders. The minimum capital requirement for a Joint Stock company is SAR 5 million. The foreign ownership for these types of companies can range from 0% to 100%, depending on the sector

• Joint Venture:

A joint venture can be formed by a foreigner by establishing a partnership with a local Saudi partner. The percentage of ownership and control are shared based on the agreement kept between both partners.

Yes, the authorized signatory is physically required in order to open the bank account in Saudi Arabia. For other procedures the physical presence is not required.

The popular entity options available  for businesses in Saudi Arabia are:

• Limited Liability Company (LLC):

This structure is popular among local and foreign investors as it offers flexibility and limited liability protection. LLCs can either be completely foreign-owned or can be done in partnership between Saudi and foreign shareholders. It is suitable for a wide range of business activities and is the most preferred one among different sectors.

• Branch Office:

A branch office is often considered as an entry point to the Saudi market by the  Foreign companies. It is best suitable for businesses that wish to have a direct presence in the country without creating a separate legal entity. But a local Saudi service agent or sponsor is required to set up a branch office in the Kingdom. 

• Joint-Stock Company:

This is most preferred by larger businesses which have multiple shareholders and requires substantial capital. Joint stock companies are offered with limited liability protection and it is best suitable for companies that is eyeing  on getting a public listing on the Saudi stock exchange. 

Various factors like the nature of the business, capital requirements,  planned activities,  long-term growth objectives, and ownership structure, determine the choice of entity.  It is always preferable to consult legal and business advisors to choose the most appropriate entity option for your business.

Yes, a local sponsor or service agent of a foreign company has to open a branch office in Saudi Arabia as the sponsor is considered as the legal representative of the operations of the foreign company in the Kingdom.

Below we list the role of the local sponsor:

1. Help the foreign partner to obtain necessary permits, licences, and approvals from relevant government authorities in the Kingdom.
2. They have to act  as a liaison between the Saudi government agencies and the foreign company.
3. Local sponsor has to provide administrative and logistical support for the successful operation of the branch office’s.
4. It is the responsibility of the local sponsor to ensure compliance with local laws and regulations.

Though the local sponsor has the above responsibilities, their role is typically limited to administrative and facilitative roles. It is important to note that they do not have any ownership or any control over neither operation of the foreign company nor on its branch office. 

While selecting a local sponsor, it is required to check their connections, reputation and experience as all these will significantly impact the ease of  operation of the branch office in Saudi Arabia.

Yes, in Saudi Arabia, the  foreign capital investment is required to set up a trading business branch in the country. It is the Saudi Arabian General Investment Authority (SAGIA) responsible for overseeing the capital requirements for foreign companies who wish to establish their branch office in the Kingdom for trading activities.

SAR 2.5 million (approximately USD 667,000) is the minimum capital investment required to set up a trading business branch in Saudi Arabia. Even though this is slightly higher than the previous requirement of SAR 2 million, the Kingdom still continues to attract more foreign direct investment. The main purpose of the capital investment is to ease the  operations of the company like  leasing or purchasing office space, recruitment of the staff, procurement of the inventory, and to meet other operational expenses of the business related to the trading.

However, It’s important to note that there are variations on the capital investment requirement due to the variations in the specific trading activities and the nature of the goods traded. 

Capital investments can either be made by depositing cash in a Saudi bank account or by transferring assets, like equipment,  machinery, or inventory, into the Kingdom. As part of the branch office registration process, Foreign companies have to provide evidence of the capital investment to SAGIA.