Setting up a company in Saudi Arabia

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Mehak Nabila January 30, 2022 0 Comments

Setting up a company in Saudi Arabia

In recent years, Saudi Arabia has turned into an energetic place to do business. Setting up a company in Saudi Arabia is an interesting financial investment today. The reson behind this is country’s new policies, which dedicate to opening up the economy to foreigners. Saudi Arabia’s developmental future looks brighter than ever.

In this article, you will learn what there is to know about setting up a company in Saudi Arabia. If you are looking to expand operations into this country. Arriving in a new market can be grueling, with the support of this guide, you will understand how to proceed.

  1. Why should you invest in Saudi Arabia?
  2. What are the legal procedures for setting up a company in Saudi Arabia?
  3. How to start a business in Saudi Arabia?
  4. What type of business can you set up in Saudi Arabia?
  5. How much does it cost to set up a company in Saudi Arabia?
  6. How can EOR Middle East help you?

1. Why should you invest in Saudi Arabia?

The Kingdom of Saudi Arabia is one of the biggest nations in the Middle East. It is the largest economy in the region. Subsequently, proving itself to be the perfect platform for foreign business investors to expand.

Ultimately, Saudi Arabia’s economy primarily revolves around oil exportation. With 5% natural gas reserves and 16% of global petroleum reserves. It has quickly become the world’s biggest petroleum exporter.

Over the years, the country’s government has been actively working by putting incentives into place to attract foreign investors. Subsequently, many business owners are looking for local companies to help them deal with their immigration process in Saudi Arabia.

To help outsiders set up their businesses, the Saudi Arabian Government is introducing plans to keep diversifying the country’s economy. Looking to grow in areas like:

  • Health
  • Education
  • Infrastructure
  • Tourism and many others

These adjustments are helping the nation’s economical growth. For this reason, many consider that setting up a company in Saudi Arabia is a brilliant business idea. All thanks to the changes the country is going through.

There are many things to consider before setting up a company in Saudi Arabia. The first is that you should get familiar with the legal procedures in place for new businesses:

2.1 Obtain a Foreign Investment License

This license is necessary so you can legally invest in the country. It is also known as SAGIA or MISA License. And it can be obtained at the Ministry of Investment of Saudi Arabia. In effect, this authorization provides a business-friendly atmosphere for investors. Its benefits include:

  • Completely foreign ownership of the company
  • The possibility for investors to sponsor workers
  • Improve local business opportunities for investors
  • Capability to foreign investors to legally serve the local market without a sponsor

It is important to note that there are certain restrictions within the ownership and share capital. This is related to the company’s intended licensed activity. For example, corporate activities such as trading require at least 25% of local ownership.

On the other hand, services-related companies can be 100% foreign-owned. Requirements include:

  • A Financial statement certified by the Saudi Embassy prior to a year
  • The business’ commercial registration qualified by the Saudi Embassy

2.2 Visit the Ministry of Commerce and Industry

Investors coming from outside the county need to visit the Ministry of Commerce to get a Memorandum of Association. Documents have to be drawn in front of a public notary before setting up a company in Saudi Arabia.

Then, you will need to issue a Commercial Registration. Requirements are:

  • Provide the Memorandum of Association
  • ID Card of the owner and general director of the company

When setting up a company in Saudi Arabia, you will need to make the name of the company public. Also, you will have to collect a list of the business’s articles of association. You must do this through the country’s official gazette.

2.3 Open a bank account

According to the legal entity for incorporation when setting up a company, investors need to open a bank account. Subsequently, they will need to deposit the least share capital ruled by the Saudi Arabia laws. 

2.4 Submit documents to the Ministry of Investment

The last step is to visit the Ministry of Investment to submit all the documents. Therefore, the ministry will grant you a General Director’s Visa. To obtain it you must have a letter of appointment of the General Director and their ID Card.

Nevertheless, it is important to note that after 2023, Saudi Arabia will not sign contracts with companies without local offices.

3. How to start a business in Saudi Arabia?

The process of setting up a company in Saudi Arabia is pretty difficult, especially for a foreigner. At EOR Middle East, we can assist with the development of your company. Starting from the initial registration until the full operation. Saving you time and money while you focus on expansion.

Saudi Arabia has slowly become one of the biggest markets in the world. To start company operations in the country you must follow these steps:

3.1 First, choose your industry and company organization

You need to be sure about the type of business you want to get into. By all means, it is beneficial to know what a certain industry can accomplish in a designated location.

At the same time, you have to be careful about the company’s organization. Because it is subjected to the quantity of capital available and shareholders.

3.2 Second, pick a name for your business

This is the most important step of setting up a company in Saudi Arabia. The name of your company acts as the face of the organization, therefore, you will need to be wise. However, in this process, it is important to remember:

  • The name cannot be offensive to anyone.
  • It should not be a copy of another business’ name.
  • In case your company is an LLC it needs to have the word “limited” or “ltd” in the title.

3.3 Third, outline a plan for your company

Drafting the vital points will help you move successfully into the next phase. This will save you time and let you have a clearer vision of what to do with your business.

Mapping out future moves is an essential part of managing a company. Therefore, it will allow you to convey things smoothly while expanding.

3.4 Fourth, present the crucial documents to their respective departments

Firstly, documents need to be prepared before. Secondly, they have to be presented to the registry. Thirdly, they can be verified by the government. Finally, every document must be translated in Arabic to be taken into consideration. The following list includes:

  • Duly filled out company registration application form.
  • Board determination of the parent company confirming the creation of the company.
  • Copy of your business’ name approval.
  • ID Cards and address proof of the company directors and shareholders.
  • Memorandum and Articles of Association.
  • Scheme of the business.
  • Bank account reference letter.

3.5 Fifth, obtain the necessary approvals

After presenting your documents, a thorough inspection takes place by the government authorities. It is an important step done to recognize the status of the presented paperwork. Depending on your business, the authorities needed to provide the approvals are the following:

  • Ministry of Commerce
  • Chamber of Commerce
  • Ministry of Health
  • The Municipality
  • The Labor Office
  • General Organization for Social Insurance
  • Ministry of Tourism
  • Department of Zakat and Income Tax

4. What type of business can you set up in Saudi Arabia?

The types of companies allowed in Saudi Arabia are the following:

  • General Partnership
  • Joint Ventures
  • Limited Partnership
  • Corporations
  • Joint Stock Company
  • Variable Capital Companies

While the most important kinds of businesses permitted in the country are:

4.1 Limited Liability Company

This is the most common type of company. Usually, is a venture between 2 and 50 investors. Also, they need to be represented by one or more managers. A local partner is not necessary, since there are not any legal limitations on the foreign ownership percentage.

LLCs involve local and international associates holding a private business. It typically develops:

  • Services
  • Agricultural Ventures
  • Commercial businesses
  • Contracting Ventures

Nevertheless, they cannot participate in activities such as:

  • Investments
  • Banking
  • Insurance

Consequently, these businesses will not be able to give public contributions to raise capital. And, without the settlement of all associates, their interest cannot be moved.

4.2 Foreign Branch Office

When setting up a company in Saudi Arabia, foreigners need to obtain the required licenses before registering a branch office. Most branches located in the country perform industrial or contracting works. Licenses outside of these industries are unusual.

It is important to note that:

  • Subdivisions will only participate in commercial activity within the space of their license
  • Parent companies will assume full responsibility for their branches’ activity
  • Subsidiaries can also take projects in the private and public sectors
  • They can solicit and promote business all over the country
  • This kind of business needs more expansion in the country

4.3 Representative Offices

Representative offices allowed in Saudi Arabia are:

  • Technical and Scientific Offices (TSO)
  • Temporary Company Registrations (TCA)

Usually, TSOs exist to give technical resources to manufacturers through a distributor. On the other hand, TCAs occur to get government contracts. Solicitation and promotion of their business are strictly prohibited.

The activities that these companies can carry out are very restricted. For example, TSOs are prohibited to culminate any commercial chores or generate an income. Instead, they are only allowed to give technical knowledge and help suppliers and customers with goods and technical analysis.

5. How much does it cost to set up a company in Saudi Arabia?

Accordingly, the cost of setting up a company in Saudi Arabia varies depending on the type of business. For example:

  • A subsidiary company or LLC needs a minimum of 500.000 SAR to be established. Besides, you will need another 100.000 SAR to be paid upon the formation of the business.
  • Foreign company branches in Saudi Arabia also need to meet the 500.000 SAR quota.
  • Additionally, there are application feeds valid for all types of businesses. Costs for these fees run from 2.000 SAR to 20.000 SAR.

On the other hand, business investors do not need to pay income tax. The Kingdom of Saudi Arabia signed tax treaties with more than 50 countries. Subsequently, double taxation is not mandated. As the country is under the GCC Framework Agreement the standard VAT rate imposed on businesses is 5%.

6. How can EOR Middle East help you?

Here at EOR Middle East, we offer an extensive range of services meant for companies to expand into our market. Our team will guide you through the process of setting up a company in any Middle East country. Our services include:

Our specialists will help you with the complications of dealing with laws and further paperwork. While saving you time and money. Providing you answers to any doubt that you may have about the process. Thanks to our team of professionals, technology, and skills your business will grow.

Would you like to contact EOR Middle East? You can send an email to [email protected]. Also, you can call us at 00 971 433 16 688 and one of our representatives will talk to you and answer any of your questions in no time.

Go to thetalentpoint.com if you want to send us your resume. We do not store any personal information you send to [email protected]

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