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Tue Jun 04 2024Admin

Business setup in Saudi Arabia Made Easy

Saudi Arabia presents substantial prospects for business expansion as a result of its swift economic expansion and the implementation of the Vision 2030 initiative. Entrepreneurs hailing from diverse sectors across the globe have been drawn to the nation on account of its adolescent populace, substantial consumer purchasing power, and governmental welfare programs.

According to the FDI summary of the Kingdom of Saudi Arabia, FDI inflows in 2021 totaled 100 billion SAR. It subsequently rose by 22% to 122 billion SAR in 2022. As a result of the comprehensive regulatory reforms that facilitate the incorporation and operation of businesses in Saudi Arabia, expansion is anticipated to continue.

Saudi Arabia is consistently enhancing its economic dominance within the Gulf Cooperation Council (GCC) region. The nation possesses copious natural resources and is experiencing rapid expansion across numerous industries. The Kingdom of Saudi Arabia provides a stable, secure, and safe environment for foreign direct investment.

This article provides an all-encompassing overview of business establishment in Saudi Arabia, including legal frameworks, lucrative industries, incentives, and factors to be taken into account by foreign nationals aiming to penetrate the Saudi market.

Types of Legal Business Structures:

Saudi Arabia provides expatriates establishing a business with the option to select from a variety of business structures. The following corporate structures are prevalent in Saudi Arabia:
Sole proprietorship This solution is most suitable for modest enterprises staffed by a single individual. All profits accrue to the proprietor, who is also held personally liable for all debts and losses. In this situation, formal business registration is not required.
The Joint Stock Firm The stock of a joint stock company is acquired by shareholders in the form of shares. A minimum of 5 to 10 million SAR in capital is required to establish a joint stock company. In addition, the criteria for listing these companies on the stock exchange are quite stringent.
Branch Location A branch office may also function as an extension of its primary company located overseas. The branch office may only participate in business operations that are carried out by its parent company. Although it provides limited liability, certain sectors impose stricter restrictions on investors.
Representative Place of Employment Representative offices are required to abstain from participating in activities that generate profits and have a restricted operational scope. Typically, their capabilities are confined to conducting market research within Saudi Arabia and promoting the operations of their foreign-based parent company.

The Joint Stock Firm The stock of a joint stock company is acquired by shareholders in the form of shares. A minimum of 5 to 10 million SAR in capital is required to establish a joint stock company. In addition, the criteria for listing these companies on the stock exchange are quite stringent.
Branch Office Additionally, a branch office may serve as an extension of the parent corporation situated in a foreign country. Participation in business operations is restricted to the branch office and is carried out exclusively by the parent company. Despite offering limited liability, specific industries enforce more stringent regulations on investors.
Representative Office Representative offices are required to abstain from participating in activities that generate profits and have a restricted operational scope. Typically, their operations are confined to market research within Saudi Arabia and the promotion of business operations conducted by their foreign parent company.

How to Start a Business in Saudi Arabia

In Saudi Arabia, the formation of a company is a complex procedure. There are numerous phases involved, and even a minor error may lead to the application's failure. Therefore, for a seamless experience, you must form a partnership with a consulting firm that streamlines the entire business formation procedure, provides assistance at every stage, and eliminates any documentation errors. The procedures for establishing a business in Saudi Arabia are as follows.
  1. Get A Foreign Investment Licence
Here is where it all starts and is important. You have to apply for a MISA license from the Ministry of Investment of Saudi Arabia (MISA) under your chosen category. Just this approach can take six to eight weeks. You can pay an experienced company establishing service provider to help you get the MISA license faster.
  1. Business Name Reservation
You must subsequently choose and register a name for your company in the KSA. The name in question is subject to Ministry of Commerce (MOC) sanction. The validity of the name reservation is sixty days.
  1. Submit Notarised Articles of Association
Following this, articles of association describing the company's operations, employee and manager obligations, and profit distribution must be drafted. Prior to submission, the articles of association must be drafted in accordance with the Companies Law of Saudi Arabia and notarized.
  1. Seek Commercial Registration
In order to establish a legal entity, you are now required to formally register with the Ministry of Commerce so that a CR (commercial registration) can be issued. This must be completed within thirty days of investment license receipt. The CR is typically delivered within two to four weeks. Collaborating with suitable consulting firms can accelerate the procedure and diminish the likelihood of errors.
  1. Deposit Share Capital
Following registration and acquisition of the necessary licenses, it is necessary to establish a bank account in Saudi Arabia and remit the share capital. Establishing a business in Saudi Arabia necessitates a minimum share capital of SAR 50,000 (approximately $13,000 USD) for registration purposes. With this stage, CIG can assist you by facilitating the opening of a bank account at one of the most reputable banks in Saudi Arabia. Legal tasks and procedures are managed by us in order to guarantee a smooth experience.
  1. VAT Registration
In Saudi Arabia, companies that generate a total taxable income of SAR 375,000 or higher are required to undergo VAT registration with the Zakat Tax and Customs Authority. For foreign nationals, the corporate tax, or Zakat, is 20% and the VAT rate is 15% in Saudi Arabia.
  1. Get an Office
In order to conduct business, office space is required. A Saudi Arabian office space can be purchased or rented in accordance with the needs and activities of the business. CIG assists you in locating the most suitable office spaces for your company's operations.
  1. Additional Documents Submission
Prior to commencing business operations, the Ministry of Commerce may require you to submit supplementary documentation. These are the documents:
  • Documents verifying the identity and addresses of all company shareholders and directors
  • A copy of the trade name declaration
  • Copies of shareholders' and directors' passports
  • A letter of bank recommendation
  1. Secure Visas
For yourself, as well as for any dependents or staff members you want to bring to Saudi Arabia, you must get a visa. If you want to employ people for your business, you must also register with the Ministry of Labour.
  1. Additional Permits

Some businesses require more permissions depending on how they operate. Such permits are issued by the Saudi Food and Drug Authority, the Ministry of Health, the Saudi Commission for Tourism and National Heritage, Social Insurance, and Municipalities. Note: Companies must have been totally operational in their home country for a year in order to be eligible for the benefits of 100% foreign ownership in Saudi Arabia.

How much does it cost to start a business in Saudi Arabia?

Establishing a business in Saudi Arabia commences at an expense of SAR 60,000*. However, this can differ based on legal structure, commercial activity, location, office space rental, and other variables. Costs are typically incurred in relation to licenses, permits, and registrations. The multitude of activities involved can quickly become overwhelming. Therefore, it is suggested that you retain the services of a Saudi Arabia-based company formation advisory firm. Typically, consulting firms charge a fixed fee to handle all expenses associated with establishing a business in Saudi Arabia.

Benefits of Company Registration in Saudi Arabia

Foreigners can derive numerous advantages from establishing a business in Saudi Arabia. Included among these are the following:
  1. Growing Economic Powerhouse
With a GDP over $1 trillion, Saudi Arabia has one of the largest economies in the world. Right now, it has the strongest GDP growth rate in the MENA region at 3.5%.At $1 trillion in GDP, Saudi Arabia has one of the largest economies in the world. Right now, it has the strongest GDP growth rate in the MENA region at 3.5%.
  1. Tech-Savvy Population
With a 98% internet penetration rate, Saudi Arabia is among the most technologically advanced nations globally. YouTube, Snapchat, WhatsApp, and Twitter are the most widely utilized digital platforms among Saudi citizens. This presents substantial prospects for social media marketing agencies and novel business concepts.
  1. Youthful Demographic
Saudi Arabia has the most youthful inhabitants per capita among MENA countries. 63% of the country's population is under the age of thirty. It signifies that any organization can obtain immediate access to the largest pool of youthful talent and can anticipate rapid, substantial growth.
  1. Business-Friendly Environment
Saudi Arabia fosters an environment conducive to business by streamlining procedures and promoting entrepreneurial endeavors. The Kingdom of Saudi Arabia imposes a nominal corporate tax rate of 20%, while individuals are exempt from paying any income tax.
  1. Tech Revolution and Global Investor Confidence
With launch.sa, KSA has witnessed one of the largest technological deployments. Twelve programs with a combined value of $1.2 billion were showcased, while over 25,000 jobs were generated. Moreover, international investors are discovering Saudi Arabia to be an optimal investment destination. Foreign investors comprised 31% of investors in the first quarter of 2021.
Post-Incorporation Considerations You still have to think about a few things after your business registration went well. Have a peek at them.
Work Visas The corporation has to sponsor the work visas of directors, founders, and foreign workers. A work visa can take four to six weeks to get.
VAT Registration Once you get underway and start making money, you might need to register for VAT in Saudi Arabia. The Zakat Tax and Customs Authority requires Saudi Arabian companies having taxable income of SAR 375,000 or more to register for VAT. KSA applies a five percent value-tax.
Hiring Challenges Running a business in Saudi Arabia means meeting certain municipal employee quotas. You also have to get by minimum pay requirements and visa quotas.
Ongoing Reporting You must keep yourself compliant by submitting your VAT declarations, corporate and zakat taxes, and yearly tax reports with MOC. It takes all of these actions to prevent fines and penalties for late or non-compliance with submissions. You can get professional advisors to help you with any reporting need. Working with a company such as CIG reduces your risk of non-compliance or postponed submissions considerably.
Key Industries and Opportunities Saudi Vision 2030 specifically encourages foreign direct investment in high-growth industries. Furthermore provided by the government to encourage expansion and draw investors in particular sectors are grants, subsidies, and tax advantages for LLCs:
  •  Tourism – Hotels, recreational centers, and historical places offer chances to encourage both religious and leisure travel. In keeping with its National Tourism Strategy, the Saudi Tourism Authority wants to welcome 100 million tourists by 2030.

  • Healthcare – Investors in the healthcare industry can concentrate on companies that upgrade care facilities, hospitals, and medical research and development to raise healthcare results and accessibility. Preventive care, medical education, and digital health are given a lot of weight in Vision 2030. Additionally, outsourcing possibilities are created, which might help young entrepreneurs and business owners.

  • Financial Services – Most Saudis are youthful, tech-savvy individuals. Government support for creative fintech initiatives comes in the form of several platforms, such as sandbox testing. This offers foreigners with a favorable FDI inflow chances to set up businesses in Saudi Arabia.

  • Technology – Strong infrastructure and one of the world's highest social media use rates are features of Saudi Arabia. Opportunities abound in domains including digital payments, cybersecurity, and e-commerce.

  • Manufacturing – To wean itself off of oil, Saudi Arabia has begun to draw in technology, aerospace, manufacturing, and defense companies. Newcomers have a fantastic chance to launch a business and make a name for themselves in one of the world's fastest-growing economies.

Challenges and Restrictions
  • Saudi Arabia is putting up a lot of effort to boost direct foreign investment. There are nonetheless certain restrictions, though:
  • To operate a company in certain sectors, such real estate, legal, or accountancy services, you might require a local partner.
  •  Importing and exporting some products is still hampered.
  • Restrictions on bringing family and inability to get permanent residency status apply to expatriates.
  • Sometimes applying for licenses and permits may be hampered by bureaucratic delays.
  •  Some foreigners may initially find it difficult to comprehend Arabic and Islamic traditions

Why CIG Business Setup for Your KSA Company Formation Opening a business in Saudi Arabia provides excellent chances to reach the biggest economy in the area. Given the flourishing economy and the steady and rapid increase in foreign direct investment intake, the future appears bright. Other incentives and the regulatory framework can enable international companies to realize enormous potential and expansion. For startups and enterprises, however, the company formation procedure and the registration for different licences can seem convoluted and daunting. Working together with a business setup consulting company like CIG is strongly advised for business setup in Saudi Arabia and to maintain compliance with all requirements. In Saudi Arabia, CIG provides tailored business setup solutions together with continuous operational assistance to guarantee your success.
We offer Saudi Arabian corporation establishment services including the following: Complete company incorporation; help with bookkeeping, hiring, visas; and special packages for LLC setup To arrange a free consultation, email enquiries@cigdubai.ae or call +971521207238. Our staff of knowledgeable company setup specialists will help you to smoothly register and expand your Saudi business over time.