Do you or someone you know dream of doing business in Saudi Arabia (KSA)? If yes, we have some important information for you here in this blog. Saudi Arabia has become the premier destination for investors, entrepreneurs, and businesses worldwide. The kingdom, being the largest economy in the Middle East, has turned into an ideal location for businesses aspiring for global expansion. With the ambitious Vision 2030, Saudi Arabia is diversifying its economy and creating prime opportunities for investors for business enlargement and success.
With more than a decade of experience in the KSA business landscape, Analytix has got you covered here with some vital insights on conducting business in Saudi Arabia.
Main Sectors to Focus for Doing Business in Saudi Arabia
Service Sector
Saudi Arabia allows foreign investors to participate in different sectors of the service industries under certain rules and regulations. The Ministry of Investment (MISA) is responsible for licensing foreign investments and has opened new avenues to invest in foreigners in the past few years. Moreover, the requirements regarding minimum capital of SAR 500,000 for service licenses have been scraped off.
The service sectors include construction, consultation services including Information Technology, tourism, training and education, health, insurance and banking, media and advertising, logistics and transportation, event organizing and management, catering and restaurant, funding and financing, oil and gas support services, aviation and handling services among others.
While foreign investors can wholly own most service businesses, there are certain exceptions. Let us have a look at those:
Professional Activities
Professional Consultation services to be provided by foreign companies must be at least 25% Saudi-owned and must have one licensed Saudi partner, except for engineering consultation services where specific conditions apply.
Telecom Services
Telecom investment is also restricted and to invest in this sector one needs a Saudi partner to be a holder of 30% to 40% of the company’s equity. The determinations of the category of value-added services are entirely within the purview and control of MISA.
Engineering, Procurement, and Construction (EPC)
To start EPC companies, foreign investors require to have a local or domestic partner with at least 25% shareholding.
Real Estate
A real estate business being partly or wholly owned by a foreigner should be worth at least SAR 30 million and situated in any place apart from the two holy cities of Mecca and Medina. An additional financial activity is real estate financing which should be at least 40% held by locals and have a capital of not less than 200 million Saudi Arabian Riyal.
Other Restrictions
However, it should be noted that there are restrictions concerning investment in insurance and reinsurance sectors, digital brokerage, public and land transportation, and debt collection services.
Wholesale and Retail Trade
Any trading company involved in the wholesale and retail business must also adhere to the minimum capital requirements and other measures that are likely to be put in place depending on the sector and type of activity of the company in the Kingdom of Saudi Arabia. The Ministry of Investment of Saudi Arabia (MISA) offers foreign investors two main options for entering the wholesale and retail (trading) sector:
1. Trading Joint Venture with a Saudi Partner
Foreign investors can partner with a Saudi entity to conduct trading activities. However, the joint venture company (JVC) must adhere to the following requirements:
Minimum Saudi Ownership
The Saudi partner is required to hold not less than 25% of the shares of the JVC while the foreign partner can hold up to 75% of the share capital, unless an exemption is granted by MISA.
Capital Contribution
Foreign investors must invest at least SAR 20 million in JV’s subscribed capital. Saudi partner can only contribute their fair share of the investment in line with the percentage of the ownership they have.
2. Wholly Foreign-Owned Trading Entity
Foreign investors can establish a wholly foreign-owned trading company under one of the following options:
- From the date of receipt of its foreign investment license, the entity must invest SAR 300 million (about US$80 million) in five years.
- The entity must invest an amount of not less than SAR 200 million (approximately US$ 53.3 million) during a five-year period starting from the date of obtaining the foreign investment license. The investment should also create value to the Kingdom in at least one of the following ways:
- Local Manufacturing: The business needs to locally manufacture at least thirty percent of the products they sell in the Kingdom.
- Research and Development: Spend no less than 5% of its turnover on its research and development programs.
- Regional Hub: Open a regional hub in the Kingdom for supply chain/logistics support and as a local base for after-sales services.
Manufacturing
The Saudi government is actively promoting investment in manufacturing sector by providing various incentives such as:
- The Ministry of Investment Saudi Arabia (MISA) does not impose capitalization or local ownership conditions up on foreign investors, willing to set up manufacturing firms in the kingdom.
- The Zakat, Tax, and Customs Authority and the Ministry of Industry may grant customs exemptions to manufacture projects regardless of their foreign investment.
- MODON (Saudi Authority for Industrial Cities and Technology Zones provides:
- Industrial lands with developed infrastructure and services.
- Prefabricated Industries
- ‘Factory and loan’ product in cooperation with the Saudi Industrial Development Fund (SIDF)
Analytix Can Help You for Doing Business in Saudi Arabia
Every investor or entrepreneur would love doing business in Saudi Arabia. However, you may find the process hectic and confusing as there would be so many things going around. Fortunetly, there is a solution. With Analytix, as your all-in-one business partner, you can effortlessly establish your business in Saudi Arabia.
With more than a decade of experience and expertise in the field, we are more than an incorporation specialist. Analytix your strategic business partner, providing top-quality business/allied services to make it all easier for you. Besides helping you set up a business in the country and enter the Saudi Market, we offer allied services like accounting and bookkeeping, company dissolution service, tax and auditing, trademark registration service, GRO and PRO services, business expansion and restructuring support etc.
We make our clients able to sit back and relax and focus on core business while we take care of the rest.
Conclusion
Glad you are here.
How did you feel reading our blog?
We hope you enjoyed it and got a clearer picture regarding various aspects of conducting business in Saudi Arabia.
Do you think we have missed out on something?
If yes, let us know in the comments.
Happy reading!
- FAQs
Frequently Asked Questions
If your question is not addressed here, please feel free to reach out to us. We value your inquiry.
Can Indians do business in Saudi Arabia?
Yes, Indians can do their business in Saudi Arabia. The KSA encourages all foreign investors to establish their business there. However, the investors should have a clear idea about the laws and regulations regarding the conduct of business in Saudi Arabia, which might include obtaining legal documents such as visas, permits, and licenses.
Can foreigners do business in Saudi Arabia?
Yes, foreigners can do business in Saudi Arabia. The Saudi government is offering several opportunities for businesses, promoting foreign investment and participation in the economy through various initiatives like Vision 2030. A foreigner looking to do business in Saudi Arabia should do their homework and get familiar with the country’s regulations, business laws, and cultural norms.
