Vision to Reality: Strategic Insights for Business setup in Saudi Arabia

According to the FDI report from KSA, the FDI inflow in 2021 reached 100 billion SAR. In 2022, there was a significant increase of 22%, reaching a total of 122 billion SAR. The growth is projected to persist thanks to the comprehensive regulatory reforms that have simplified the process of incorporating and running a business in KSA.
100 billion SAR was the FDI inflow in 2021, according to KSA's FDI report. Later, in 2022, it rose by 22% to 122 billion SAR. The growth is anticipated to persist as a result of the extensive regulatory reforms that have simplified the process of incorporating and operating a business in the Kingdom of Saudi Arabia.
This article provides a comprehensive overview of the Saudi Arabian business environment, including legal structures, profitable sectors, incentives, and considerations for foreign entrepreneurs who wish to establish themselves in the Saudi market.

Types of Legal Business Structures:

Foreigners in Saudi Arabia have the freedom to select from a variety of business structures when establishing their business. Here are some of the most common business structures in KSA:

Sole Proprietorship

It is most suitable for small businesses with a single person involved. The owner retains full control over the profits and assumes complete responsibility for any debts or losses incurred. Business registration is not required in this scenario.

Limited Liability Company (LLC)

A private limited company, which is also known as an LLC, is a type of limited liability company. In order to establish an LLC, formal business registration is necessary. In order to establish an LLC, a minimum of 2 shareholders is required, and a maximum of 50 shareholders is permitted.
Foreigners are now permitted to possess a 100% stake in an LLC in Saudi Arabia as a result of recent amendments. By hiring a consultancy firm such as CIG Saudi Arabia, the process of registering and operating an LLC in the KSA region is significantly simplified. It is the most advantageous legal framework, as shareholders' assets are safeguarded within an LLC.

Joint Stock Company

Shares of a joint stock firm are acquired by shareholders. To establish a joint stock corporation, you must have at least SAR 5–10 million in capital. To list these enterprises on the stock exchange, there are additional stringent standards.

Branch Office

An overseas parent company's branch office may also function as an extension of it. The branch office is limited to conducting business in the same capacities as its parent corporation. While it does provide limited liability, there are more investment restrictions in other industries.

Representative Office

A representative office must refrain from engaging in profit-making activities and have a limited operational scope. Usually, they can only engage in market research in Saudi Arabia and promote the business activities carried out by their parent company based overseas.

How to Start a Business in Saudi Arabia

In Saudi Arabia, forming a company is a difficult procedure. There are several phases required, and even a small error could cause your program to fail.
For a seamless experience, you must thus collaborate with a consulting company that streamlines the entire business setup process, supports you at every stage, and eliminates any flaws in the documentation. The procedures for establishing a company in Saudi Arabia are as follows.

1. Get A Foreign Investment Licence

The first and most important step is this. Applying in your chosen category to the Ministry of Investment of Saudi Arabia (MISA) will provide you a MISA license. Only this step may require six to eight weeks. For assistance in obtaining the MISA license more quickly, you can work with a seasoned business setup service provider.

2. Business Name Reservation

Next, you are required to select and register a name for your business in the KSA. To obtain sanction for the name, you must obtain it from the Ministry of Commerce (MOC). The name reservation is effective for a period of 60 days.

3. Submit Notarised Articles of Association

The subsequent phase entails the creation of articles of association that delineate the company's business operations, the responsibilities of the manager and employees, and the distribution of profits. The articles of association must be drafted and notarized before submission, as per Saudi Arabia's Companies Law.

4. Seek Commercial Registration

To establish a legal entity, you must now formally register with the Ministry of Commerce for the issuance of CR (commercial registration). Upon receipt of your investment license, this must be completed within 30 days. You typically receive the CR within 2-4 weeks. Establishing partnerships with suitable consultancy firms can mitigate the likelihood of errors and accelerate the process.

5. Deposit Share Capital

After completing the registration process and obtaining the necessary licenses, it is necessary to establish a bank account in Saudi Arabia and deposit the share capital. A minimal share capital of SAR 50,000 (approximately $13,000 USD) is required for business registration in Saudi Arabia. CIG Saudi Arabia can assist you in this process by facilitating the opening of a bank account with any of the top institutions in Saudi Arabia. We ensure a seamless experience by managing the legal work and processes.

6.  VAT Registration

Businesses in Saudi Arabia that generate a total taxable income of SAR 375,000 or more are required to register for VAT with the Zakat Tax and Customs Authority. Foreigners are subject to a 20% corporate tax, which is referred to as Zakat, in addition to the 15% VAT rate in the Kingdom of Saudi Arabia.

7. Get an Office

Office space is necessary for the operation of your business. An office space in Saudi Arabia can be purchased or rented based on your business needs and operations. CIG Saudi Arabia assists you in identifying the most suitable office spaces that are compatible with your business operations.

8. Additional Documents Submission

Before commencing your business operations, you may be required to submit supplementary documentation to the Ministry of Commerce. The following documents are:

• A copy of the trade name declaration
• Copies of the shareholders' and directors' passports
• A bank reference letter

9. Secure Visas In order to work in Saudi Arabia, you must obtain visas for yourself, your dependents, and any employees you intend to bring with you. Registration with the Ministry of Labor is also required in order to employ personnel within your organization.

Additional Permits

• Note* It is crucial to mention that in order to qualify for the benefits of 100% foreign ownership in Saudi Arabia, businesses must have been operational in their home country for a complete year.

It is important to mention that businesses need to have been operational for at least one year in their home country in order to enjoy the benefits of 100% foreign ownership in Saudi Arabia.

Why CIG Saudi Arabia Business Setup for Your KSA Company Formation

It is important to mention that businesses need to have been operational for at least one year in their home country in order to enjoy the benefits of 100% foreign ownership in Saudi Arabia.
Saudi Arabia presents excellent prospects for establishing a business and tapping into the region's largest economy. The future appears bright with a thriving economy and a steady rise in foreign direct investment. Foreign businesses can tap into significant potential and experience substantial growth with the support of the regulatory environment and various incentives. Nevertheless, the process of setting up a company and obtaining necessary licenses can be quite perplexing and daunting for startups and businesses. If you're looking to establish a business in Saudi Arabia and ensure compliance with all regulations, it's highly advisable to consider partnering with a reputable business setup consultancy firm such as CIG Saudi Arabia. CIG Saudi Arabia provides continual operational support and customized business setup solutions in Saudi Arabia to guarantee your success. The following services are available for the establishment of a company in Saudi Arabia:

• Complete company incorporation
• Assistance with visas, accounting, recruitment, and more
• Special packages for LLC establishment

To arrange a complimentary consultation, please do not hesitate to reach out to us. Our team of expert business setup experts will ensure that your Saudi venture is registered and grown sustainably without any delays.