The Vision 2030 strategy has turned Saudi Arabia into a top destination for foreign investment in the Middle East. The country’s strategic location, strong economy and progressive business reforms offer immense opportunities for growth to foreign investors and businesses. The Kingdom’s push to make the economy diverse and welcoming approach to foreign investment keeps drawing investors from all over the world.
Whether you are a startup or well-established business wanting to enter the Saudi market, knowing the regulations and setup process is important for a smooth and efficient entry. This detailed guide includes all that you need to know and understand about starting a business in Saudi Arabia, from the initial requirements to post-incorporation compliance.
Setting up a 100% foreign-owned business in Saudi Arabia
In order to set up a 100% foreign-owned company in Saudi Arabia, you have to obtain an investment license from the Ministry of Investment (MISA). As a next step, you have to register your company with the Ministry of Commerce and get a commercial registration (CR). The next crucial step is to open a corporate bank account in Saudi Arabia, and deposit the required amount, and get a business location. Also in order to obtain visas for your employees, you’ll need to register your company with the General Organization for Social Insurance (GOSI). As a final step, you have to comply with all the municipal regulations of the region to get any sector specific permits. Hiring a local consultant can ease the process and help you establish your company in Saudi Arabia hassle free. It is considered best to take assistance from a local business consultant to simplify this process and ensure a smooth business setup in Saudi Arabia.
Benefits of 100% foreign ownership in Saudi Arabia
There are numerous benefits associated with having 100% control over a business in Saudi Arabia. It allows foreign investors to have complete power over decision making exempting the need for local partners. Having 100% control helps you have greater autonomy in operations, strategy, and financial decisions, which can help the business to adapt to changes in the market. Also the investors can possess all profits and have a streamlined process in management of the business. Moreover, it also helps to maintain confidentiality and intellectual property. Having 100% control over business in Saudi Arabia is surely advantageous for companies which aim to establish their presence in the Saudi market with global standards and practices.
Minimum Capital Required for company formation
The minimum paid-up capital requirement for setting up a company in Saudi Arabia differs depending upon the type of business and the sector in which it is involved. In general for a limited liability company (LLC), the typical paid up capital requirement is around SAR 500,000 which is approximately around USD 133,000. But this amount can be of huge to foreign-owned entities specially for those companies that are operating in certain sectors which demand greater investment. In order to obtain latest updates regarding the paid up capital requirement, it is essential to consult with MISA as these requirements can be changed due to current investment policies in Saudi Arabia and the nature of business activities involved.
Office Space Requirements for setting up a business
Yes, you have to obtain a physical presence for setting up a company in Saudi Arabia. So in order to have a physical presence for your company in Saudi Arabia, you have to secure a registered office address and must be compliant towards the local regulations regarding company premises. A physical address is an essential element for commercial registration in the country and is essential to receive important correspondence from the government authorities. However, businesses that are involved in digital and service sectors can go with virtual offices as a temporary solution.
The Value of Professional Consulting Services
Seeking professional assistance to start your business in Saudi Arabia can be a great decision as it helps you simplify the process of setting up a company in Saudi Arabia. They can offer you with expert guidance on legal requirements, help secure the necessary licenses, and ensure compliance with Saudi regulations. Seeking help from Consultants can help the businesses to streamline their documentation preparation, ease their process of opening bank accounts, and help with the selection of suitable business structures. The local expertise of Consultants would also come in handy as they will help the investors to understand cultural nuances and business landscape of the country thus reducing risks and delays. Additionally, the valuable insights shared by the Business Consultants would help the businesses to establish a strong presence in the dynamic market of Saudi Arabia.
Documentation Process for Company Incorporation
There are several steps included in the process of preparing company incorporation documentation in Saudi Arabia. The first step is to draft the company’s Articles of Association (AOA) and Memorandum of Association (MOA), which details the objectives of the company and structure. Next step is to prepare a business plan and feasibility study to obtain an investment license. These documents should be translated into Arabic and notarized. As a next step you have to register these translated documents with the Ministry of Commerce, and should secure a commercial registration (CR). As a last step, ensure that all the necessary permits and licenses are obtained.
Registration Process with the Ministry of Investment
The first step to register with the Ministry of Investment of Saudi Arabia (MISA), is to create an account on their online portal. Then submit a detailed application detailing the information about your company like the ownership details, type of business, capital structure, etc. Along with the application, you should also upload certain documents like identification documents of shareholders and directors, Articles of Incorporation of company, Board Resolution, etc. Once your application is complete MISA will review your application and will issue an investment license.
Commercial Registration (CR) License Process
In order to get a Commercial Registration license in Saudi Arabia, you have to make use of their online platform and submit various documents such as the MISA license, Articles of Association, and other company-related documents. Also, specify the type of business activity your company wishes to undertake in Saudi Arabia. Once the application is complete, the Ministry of Commerce will review the application and issue you a Commercial Registration license.
Business Premises Selection and National Address Registration
Selection of business premises in Saudi Arabia is very crucial because it serves as the official address and base of operations of your company in Saudi Arabia. It is this address that is used for all government communications, correspondence, and inspections. It is also crucial for obtaining licenses, opening of bank accounts and maintaining compliance with local regulations.
Post-Incorporation Registration Requirements
After the incorporation of your business in Saudi Arabia, you have to register with the General Organization for Social Insurance (GOSI) for the social security of employees, the Zakat, Tax and Customs Authority (ZATCA) for tax compliance, and the Ministry of Human Resources and Social Development (HRSD) for matter related to labours. Also additional registrations would also be required depending upon the industry your company falls into.
General Manager Residency Visa Process
Inorder to obtain an Iqama for the General Manager, secure a work visa for the GM through the Saudi embassy or consulate functioning in their home country. Once the GM enters Saudi Arabia, submit an application at the Ministry of Interior through the Absher platform or via a registered sponsor (Kafeel) to convert their work visa into an Iqama, and this include medical examination and biometrics, which allows the GM to live and work legally in Saudi Arabia.
General Manager Government Registration
As a first step to register the General Manager with government authorities in Saudi Arabia is to update the Commercial Registration of the company with the GM’s details through the online portal of the Ministry of Commerce. Next, register the General Manager with the General Organization for Social Insurance (GOSI) and ensure the compliance with requirements for social insurance. Also, the details of GM should be updated in the system of the Ministry of Human Resources and Social Development (HRSD).
Corporate Bank Account Opening Process
Inorder to open a corporate bank account in Saudi Arabia, you have to choose a bank that matches with the requirement of your company. After the selection of suitable bank, submit the required documents and a thorough check will be conducted to ensure the relevance of the documents. A background check on the company directors would also be done before granting a bank account in the chosen bank. If the background check and documents are satisfactory, then the applicant would be asked to sign certain documents like terms and conditions, compliance policies, etc. of the bank. Last step is to deposit the necessary amount of cash in your account and receive documents from the bank to access the account.
Types of Legal Entity Structures
The main legal entity structures available in Saudi Arabia are :
- A LLC or Limited Liability Company is ideal for foreign investors who have liability limited to the capital invested.
- A Branch Office allows the foreign companies to function directly in Saudi Arabia.
- A Representative Office allows marketing or promotion, but direct sales are not allowed
- A Joint Stock Company or JSC is ideal for those aiming for larger investments and companies planning to get listed on the stock exchange.
Government Incentives for Business Setup
The incentives provided by the Saudi government include investment licenses, various tax exemptions like zero personal income tax and a 20% corporate tax rate, provision for 100% foreign ownership in many sectors, and access to special economic zones like NEOM which provide many incentives like reduced custom duties, tax breaks, etc. Additionally financial support is also provided through many government initiatives like the Public Investment Fund (PIF).
Restricted Business Activities for Foreigners
Foreigners are restricted from doing certain business activities in Saudi Arabia and they fall under 2 categories like industrial sector and service sector. Oil exploration, security services, manufacturing military equipment, real estate business in Makkah and Madina, certain retail sectors etc. are some of the restricted business activities in the Kingdom.
Required Documents for Business Setup
In order to set up a business in Saudi Arabia, the documents like investment license from the Ministry of Investment, Articles of Association, business plan, commercial registration certificate, passport copies of shareholders, etc, are required. For foreign investors, license from Saudi Arabian General Investment Authority (SAGIA) is also required. A lease agreement is required to get a physical office in the country. Also, a Chamber of Commerce certificate and a Commercial Registration certificate are also required to operate in the country legally.
Visit Requirement During Company Setup
Though many steps like obtaining licenses, registration with the Ministry of Commerce and filing of documents can be done remotely, visits might be required to open business bank accounts, sign official documents, etc.
An initial visit would be a great idea to explore the market and this can also help in networking. However the necessity and frequency of the visit depends upon the type of business and industrial requirements.
Timeframe for Business Setup
Typically 1 to 3 months are required to set up business in Saudi Arabia. But it can vary depending upon the nature of the business and paperworks involved.
Requirements for Startups Expanding to Saudi Arabia
Understanding of the market and its regulations, cultural landscape, etc are required for startups to expand to Saudi Arabia. You also have to obtain a Saudi Arabian General Investment Authority (SAGIA) license, and register your business with the Ministry of Commerce. Navigation of local laws like Saudization and Sharia are also essential. Partnerships with local entities and utilization of incentives from the Vision 2030 initiative would be a great idea. Startups are also required to open a bank account, and have a clear understanding of tax obligations in the country. Support from organizations like the Saudi Venture Capital Company (SVC) can streamline their market entry and growth in the country.
Documents for Established Foreign Businesses
The documents required for established businesses planning to set up a company in Saudi Arabia, include a copy of the company’s Articles of Association, a Board Resolution to establish the branch in Saudi Arabia, a Commercial Registration certificate from their home country, and a Power of Attorney authorizing a representative for their business. Also, you’ll be asked to provide audited financial statements of the last fiscal year and the documents to prove the identity of the partners or shareholders of the business.
Types of MISA Licenses
The Ministry of Investment of Saudi Arabia (MISA) offers various types of licenses in Saudi Arabia to meet your different business needs. To name a few, some of them are the Industrial License for manufacturing companies, the Service License for consulting firms, the Trading License for selling items, etc. for companies aiming to open liaison offices to support their headquarters working abroad, there is a license for Scientific and Technical Offices, so different license are provided by the MISA, and it’s up to you to choose the one that rightly matches your needs.
The Role of Commercial Registration (CR)
The Commercial Registration (CR) is an important element in the company formation process in Saudi Arabia. It is the CR that helps you officially register your business with the Ministry of Commerce in KSA, which is a crucial step to gain unique identity in the vibrant market of Saudi Arabia. The Commercial Registration is crucial in opening a bank account in the country, hiring employees, signing various contracts, and conducting other essential activities involved in starting a business and establishing it in the Kingdom of Saudi Arabia. So a Commercial Registration (CR) provides your business with the legal authority to operate within the Kingdom.
Conclusion
Starting a business in Saudi Arabia is an exceptional opportunity for those who want to be part of one of the world’s most dynamic markets. Success in the Saudi market needs careful planning, a solid understanding of regulatory requirements, and strategic execution of the business plan. With the right approach and professional guidance, your business can be successfully set up in Saudi Arabia and take advantage of the vast opportunities in this market.
If you’ve been planning to expand your business to Saudi Arabia, this is the perfect moment. Book a free consultation with us and let’s start discussing how to grow your business!
