Business Setup in Saudi Arabia

Saudi Arabia, also known as the Kingdom of Saudi Arabia (KSA), is an emerging business investment ground and has one of the largest economies in the Arab world.

The government has been eyeing to strengthen the non-oil business segments to grow amidst headwinds and provoke global investors to focus on business setup in Saudi Arabia.

If you are planning for a company setup in Saudi Arabia, this treatise will help you draw relevant insights before investing.

Overview of Saudi Arabia's Economy

The growth rate of non-oil sectors was 5% in 2023. The reason behind this phenomenon is an increased VAT rate and high regulatory compliance. Non-oil revenue doubled in the past few years in Saudi Arabia. Tourism is one of the most significant sectors, contributing 4.5% to the GDP (Gross Domestic Product). 

Foreign Investment in Saudi Arabia

Saudi business setup is a profitable move and a few major sectors that drive the FDI in Saudi's economy are listed here:

  • Industrial manufacturing
  • Coal, gas and extraction
  • Automotive industry
  • Chemical industry
  • Hotels & Tourism
  • Real estate
  • Plastics

Economic Zones in Saudi Arabia

The Economic Zones of Saudi Arabia were established to attract foreign investors and increase FDI in Saudi Arabia, which is necessary to register a company in Saudi Arabia. They are described below:

  1. Industrial Cities

Established in the 1980s, Saudi Arabia's industrial cities have become an important economic centre in the Middle East. Today, the Kingdom has more than 35 industrial cities built to promote industrial estates. They also have a dedicated government body called MODON, which looks into industrial city matters. Some of the advantages of setting up a company in these industrial cities include cheap land leases and tax exemption.

  1. Economic Cities

The economic cities provide a comprehensive package for business investors to step forward and invest in the process of Saudi company formation. Some of the well-known Economic Cities for KSA business setup are:

  • Prince Abdulaziz Bin Mousaed Economic City
  • King Abdullah Economic City
  • Knowledge Economic City
  • Jazan Economic City

Why Company Formation in Saudi Arabia?

 Saudi Arabia's ground holds exciting potential and opportunities for business investors and is gradually turning into the focal point of international investors. With a population of over 30 million, Saudi Arabia is the heart of major trade routes.

The question of investment and setting up a company in Saudi Arabia holds the following answers:

1. A Growing Nation

The GDP (Gross Domestic Growth) rate was worth $1.11 trillion in 2022. According to the IMF (International Monetary Fund), new investment deals and licenses grew by 95% and 267% in 2022. Non-oil exports reached a record high of $84.4 billion in 2022. 

2. Emerging Business Opportunities

The population of the country is more inclined towards business setup in Saudi Arabia. The country provides various business opportunities to investors from all around the world.  Be it F&B or hospitality, the region has massive opportunities for new and established business owners alike to start a business in Saudi Arabia.

3. Easy Company Incorporation

The easy company formation process is another reason business investors prefer to start a business in Saudi. According to the reports, most business owners prefer to go ahead with professional experts as the legal proceedings can be cleared hassle-free.

4. Double Taxation Treaties

The double taxation treaties are meant to give import and export exemptions. If two countries Sign a DTT, it will help the investors of both nations to get tax benefits such as exemptions and rebates. Currently, Saudi Arabia has signed more than 50 tax treaties, and recently, the nation has signed the same with Taiwan.

5. Vision 2030

Saudi vision is a strategic framework, a blueprint for an ambitious nation focused on diversifying its economy by creating a vibrant society. It is a pivotal economic and social evolution that will result in the creation of numerous business opportunities for global investors. The country is an investment powerhouse and a central hub connecting three continents.

Top Business Sectors in Saudi Arabia

A few of the promising business sectors that have contributed to the progressive mode of diversifying the non-oil sector include:

  • Travel and Tourism Business
  • Food and Beverage Business
  • Construction Business
  • Hospitality Business
  • Healthcare Business
  • Cleaning Business
  • FinTech Business

Saudi Arabia Business Setup Rules and Regulations

Most business investors prefer entering the Saudi market when setting up an import/export business in Saudi Arabia. The nation has specific rules for different categories of industries and professionals.

  • The imposition of 20% customs duties on imported commodities protects the national infant industries
  • Accountants, auditors, and lawyers must obtain a license from the Ministry of Commerce
  • In case one is dealing with the import of meat products, a certificate of “Halal” meat is to be obtained
  • Business owners who export seeds and grains must ensure that the ingredients in the packet are written in both Arabic and English.

Types of Business Entities in Saudi Arabia

The following business structures can be established for company setup in Saudi Arabia:

  • Corporations
  • Joint Venture
  • Branch Office
  • Representative Office
  • Joint Stock Company
  • Joint Liability Company
  • Limited Liability Company
  • Variable Capital Companies
  • Limited Partnership Company
  • General Partnership Company
  • Partnership Limited by Shares

Saudi Arabia Business License

When it comes to Saudi Arabia company setup, the business owners must possess a specific license for the focused business activity. The list  of business activities and their requirements is provided below:

Business Activity

Requirements

Management Consulting/IT Services/ Tourism/ Training etc.

Service License

Heavy and Light Industries

Industrial License

Real Estate Business

Real Estate License

Wholesale and Retail Business

Trading License

New Business Entrepreneurs

Entrepreneur License

Recruitment Agency

Recruitment License

Audio/Visual Business

Audio-Video License

Import of meat

Certificate of “Halal” Meat

Official Health Certificate

Import of seeds and grains

Certificate of Inspection

Phytosanity Certificate

Seed Analysis Certificate

Certificate of Weight

Animal Fodder Additive

Certificate of Free Sale

Product Registration Certificate

Certificate of Analysis

Product Safety Data Sheet

Shipment of Livestock

Certificate of Weight

Health Certificate issued by USDA

Health Certificate issued by a Veterinarian

Pedigree Certificate issued by USDA

Production Records

Declaration of Inspection and Acceptance

Import of Horses

Certificate of Origin issued by the company raising and breeding horses

Health Certificate confirming that the horses are free from any disease

Vegetable and Fruit

Certificate of Free Sale

The Process of Company Formation in Saudi Arabia

Saudi Arabia isone of the booming investment grounds which allows business investors to form a business entity. The Ministry of Commerce and Industry (MOCI) handles commercial registration and has the power to approve the process.

Company formation in Saudi Arabia requires an investor to go through the following steps:

1. Select the Industry & Business Structure

The first step is to be crystal clear about the business you want to start. Knowledge of how the industry performs in the selected location can be very beneficial for an investor or entrepreneur. At the same time, you must be sure about the corporate structure, which depends on the total number of shareholders and initial capital available.

2. Select a Trade Name

. A business name acts as the organisation's face, and thus, one needs to choose it carefully when starting a business in Saudi Arabia.

While finalising the trade name for your business, the following points are to be kept in mind:

  • The name shouldn't be a copy of the existing competitors
  • It shouldn't sound offensive or hurt religious values
  • Limited companies should hold the word "Limited" or the abbreviation "Ltd."

3. Understand Saudi Arabia’s Corporate Rules

All investors must abide by the laws set by the government of the selected jurisdiction while doing business in Saudi Arabia.

This is one of the main points of discussion that you should have with your selected business advisor, as it will help you understand the basics of your company.

4. Draft a Business Plan

Outlining a business plan or mapping the essential points will help you effectively move on to the next step. This step will help you save time and smoothly carry out the process.

5. Submit the Essential Documents

For commercial registration in Saudi Arabia, all of the following essential documents need to be submitted to the government registry.

  • Blueprint of the business
  • Bank account reference letter
  • Articles of Association (AOA)
  • Memorandum of Association
  • Copy of trade name confirmation
  • A duly filled company registration application form
  • Identity and address proofs of business directors and shareholders
  • Power of attorney appointing a third party to represent the parent company
  • A board resolution of the parent company approving the incorporation of the KSA entity

Note: The documents are to be translated into the Arabic language

6. Get the Required Approvals

A strict inspection takes place by the government authorities to identify the status of the papers presented. Any business investor who wants to start a business in Saudi Arabia has to get approval from the following authorities:

  • The Ministry of Commerce- to get the company registration
  • The Chamber of Commerce
  • The Labour Office
  • The Municipality
  • The General Organization for Social Insurance (GOSI)
  • The Department of Zakat and Income Tax (DZIT)

7. Look for a Physical Office

The location of a business plays an important role in its growth and development. It can help grab the attention of the target market 

8. Get the Government Approvals

Business setup in Saudi Arabia can be completed only after the relevant approvals from the respective government authorities are recieved.

For instance, if you want to start a business in the healthcare sector, the respective approvals are obtained from the Ministry of Health (Saudi Arabia)

The Cost of Setting Up a Business in Saudi Arabia

The overall cost to start a business in Saudi Arabia mostly depends on the business's activity. One has to incur the cost to get the following services:

  • Investment License at the General Investment Authority
  • Register for Membership at the Chamber of Commerce
  • Register in the Commercial Registry
  • Legalize / Notarized Documents
  • Open a corporate bank account
  • Publication in Official Gazette
  • Office Establishment

Tax Scenario in Saudi Arabia

  • The withholding tax rate varies between 5% to 20%. 
  • Since Saudi Arabia comes under the GCC’s Framework Agreement, the standard VAT rate applied to business entities is 5%.
  • In Saudi Arabia, foreign investors are liable to pay income tax, whereas Saudi nationals are subject to Zakat. The income tax rate is 20% of the net adjusted profits. 
  • Saudi Arabia has signed over 50+ Double Taxation Treaties with various nations, which means double taxation is abolished.
  • Recently, Saudi Arabia signed the OECD Multilateral Agreement (MLI) and deposited its ratification instrument with the OECD ON 23rd January 2020.

Initiatives by the Saudi Government

Since the pandemic has hit businesses, Saudi Arabia's government has taken measures to re-flourish the economy. Allocating funds to different segments was one of the drastic steps that were taken accordingly, which included the following :

  • SAR 4 billion was allocated to employment and training programs
  • SAR 1 billion were allocated to direct and indirect loans to finance working capital business
  • SAR 1 billion were allocated to the private sector employees who haven't benefited from the support programs
  • Direct lending of SAR 2 billion to SMEs to help the entrepreneurs start their business
  • The Saudi Ministry of Finance has taken the necessary steps to introduce industrial funds to restructure the small and medium project terms.
  • Saudi Arabia’s Vision 2030 aims to drive the country’s economy based on private sectors. This was the first time that the government started promoting the private sector to the public sector. Some of the focused industries are defense, ICT, renewable energy, mining and minerals, health, education, infrastructure, entertainment, and tourism.

Our Role

At Business Setup Worldwide we assist business minds in transforming their ideas into reality. From choosing the perfect destination to incorporation and opening a bank account, our business set-up consultants will provide complete assistance in the process of Saudi company formation.

With years of experience, our business advisors can provide you with tailored solutions. We have a legal alliance with government bodies and can help you set up your company quickly and affordably. Our team is made of highly experienced company formation consultants in Saudi Arabia who can help you with the following:

  • Tax Service
  • Visa Service
  • Local Sponsorship
  • Corporate Bank Account
  • Accounting and Auditing
  • Company Secretarial Service
  • Intellectual Property Protection
  • Value Added Tax (VAT) Registration
  • Company Incorporation and Registration
  • Incorporation of Branch and Virtual Office

For further information, contact us today- we'd be glad to assist!

FAQs

Who issues a business license in Saudi Arabia?

The Ministry of Commerce and Industry issues a business license in Saudi Arabia.

How long does it take for a business license in Saudi Arabia?

It takes around five working days to start a business in Saudi Arabia.

What are the various types of business entities in Saudi Arabia?

The types of legal entities in Saudi Arabia are Establishment Limited liability company Joint stock company Partnership Branch of a foreign company

What is LLC in Saudi Arabia?

The limited liability company is the most common type of company and form of investment for foreign businesses entering Saudi Arabia.

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