Business Setup in Saudi Arabia

Business Setup in Saudi Arabia

Saudi Arabia, often regarded as the Kingdom of Saudi Arabia (KSA), is a sparsely populated nation in the Middle East, has been one of the emerging business-investment grounds. It is one of the largest economies in the Arab world. It has proven to be a perfect business platform for global business investors in the Middle East and other foreign nations.

With Riyadh as the capital, the government has been eyeing to strengthen the non-oil business segments to grow amidst headwinds and provoke the global investors to focus on business set up in Saudi Arabia.  

If you are planning to start your business in Saudi Arabia, then this treatise will help you to draw the relevant insights before investing.

Overview of Saudi Arabia's Economy

The economy of Saudi Arabia is one of the top twenty economies of the world

Known as the "energy superpower", the economic growth primarily relies on the petroleum industry and the other related industries, as they have been optimistic about the future.

The government has been eyeing the non-oil segments. In the year 2020, inflation was seen at 2.9%; however, the projected GDP for 2021 is 3.2%. Starting a business in Saudi Arabia helps a business investor to earn huge returns on the investments made.

Foreign Investment in Saudi Arabia

The FDI investment in Saudi Arabia increased to 1034 USD Million in the third quarter of 2020

Saudi Arabia has always been a significant exporter of petrochemical products and left its footprints globally. Few of the leading players that invest in the region include:

• The United Arab Emirates
• The USA                                                                                                                                                     
• France
• Singapore
• Kuwait
• Malaysia

      Opening a business in Saudi Arabia is a profitable move, and a few major sectors that drive the FDI  in Saudi's economy and can be considered are:

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

Free Zones in Saudi Arabia

Intending to diversify, Saudi Arabia has two free zones to attract foreign investors and increase the FDI.

· Industrial Cities

Established in the 1980s, the industrial cities in Saudi Arabia has become an important economic centre. Today, the Kingdom has more than 28 industrial cities that are built to promote industrial estates. MODON is the government body that looks into the matters of the industrial cities.

· Economic Cities

Another segment is the economic cities that provide a comprehensive package to the business investors to step forward and invest in Saudi. The central concept of the cities involves Mega Initiative, New Concept and Integrated Cities.

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

Ministry of Investment of Saudi Arabia (MISA)

Back in the 2000s, the initiative was taken to drive foreign investment in Saudi Arabia by streamlining the market approach. The foreign investment concept was established in the Kingdom by introducing the Saudi Arabia General Investment Authority (SAGIA) License, known as the Ministry of Investment of Saudi Arabia (MISA).

The authority focuses on the Saudi Arabia Vision 2030 that is looked upon as an eye-opener for numerous business opportunities. MISA facilitates the same by facilitating developing a cross-government system and providing a business-friendly environment to the business investors.

The lead role also involves improving the overall business environment, dealing with the market intelligence, and creating more local opportunities for the business investors.

The benefits of MISA company formation involves:

• 100% foreign ownership of the business
• No restrictions or repatriation of capital
• The business investors sponsor employees

When it comes to setting up a business in Saudi Arabia, it becomes essential for any investor to get a commercial license issued under the regulations of MISA.

Why Invest in Saudi Arabia?

Stands as a focal point to international investors, Saudi Arabia's ground holds exciting potential and opportunities for business investors. With a population of over 30 million, the strategic location is the heart of major trade routes.

The question of investment in Saudi Arabia holds the following answers:

1.A Growing Nation

Saudi Arabia has successfully managed to combat with COVID-19 scenario and is all set to spike the economy again. Recently, the nation has announced its budget for 2021, which stood at 990 billion Riyal ($263.91 billion). In 2020, the nation grew 2.85% in the fourth quarter and was expected to grow by 2.6% in 2021 and 4% in 2022.

By the end of 2025, the population of Saudi Arabia is expected to reach 38.38 million.

2.Emerging Business Opportunities

A positive inclination can be seen on the population and the business front that opens new gateways for the business investors to start their own business. Be it F&B or hospitality, the region has massive opportunities for the newbies and established business owners.

3.Easy Company Incorporation

Another reason that provokes business investors to start a business in Saudi is the easy company formation process. According to the reports, the maximum business owner prefers to go ahead with professional experts as the legal proceedings can be cleared in a hassle-free manner.

4.Double Tax Treaties

The double tax treaties are meant to give exemption on the import and export of goods. Signing a DTT help both the nations involved to get a complete exemption from the same. Currently, Saudi Arabia has gained more than 50 tax treaties, and recently, the nation has signed the same with Taiwan.

5.Vision 2030

Vision 2030 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 fetches numerous business opportunities for global business investors. It is seen as an investment powerhouse and a central hub that connects three continents.

Top Business Sectors in Saudi Arabia

Saudi Arabia is simplifying the laws for numerous business industries to come forward and settle.

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

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

Restricted Business Activities for Foreigners in Saudi Arabia

Contrary to the above business industries mentioned, certain activities are restricted for foreigners to carry out in the region. The list includes:

• Manufacturing of civilian explosives
• Oil exploration, drilling
• Manufacturing of military equipment
• Security and detective services
• Catering to military sectors
• Real estate investment in Mekkah and Madina
• Tourist guidance services to Hajj and Umrah
• Printing and Publishing
• Audio-visual and media services
• Land transportation services

Growth of Online Business in Saudi Arabia

Estimated number of online shoppers by 2022: 19.28 million

Post COVID-19, a massive change that got noticed was the business entities adapting and transforming from "Brick" to "Click". The online business model has been tremendously growing, uniting every seller and buyer across the world.

To smoothen the business operations, the government has taken respective measures to facilitate business transactions through electronic methods like:

• SADAD: an online platform that helps individuals to pay their tax, electricity, water bills efficiently.
• SAREE: helps the user to make remittances automatically to reduce the financial risks
• MADA: an online portal that enables ATM, POS and online transactions to easily

Saudi Arabia Business Rules and Regulations

Most of the business investors prefer entering the Saudi market when it comes to import/export business. The nation has got specific rules for different categories of industries and professionals.

• Most of the consumer products are duty-free (rice/sugar/roasted coffee/livestock/corn/barley)
• The imposition of 20% customs duties on imported commodities protecting the national infant industries
• Accountants, auditors, lawyers must obtain the license from the Ministry of Commerce
• In case if one is dealing with the import of meat products, a certificate of “Halal” meat is to be obtained
• Business owners dealing with the export of seeds and grains must keep a check that the ingredients in the packet are written in both Arabic and English.

Types of Business Entities in Saudi Arabia

In Saudi Arabia, the following business structures can be established, which involves:

• Joint Liability Company
• General Partnership Company
• Limited Partnership Company
• Corporations
• Partnership Limited by Shares
• Joint Venture
• Joint Stock Company
• Limited Liability Company
• Branch Office
• Representative Office
• Variable Capital Companies
• Technical and Scientific Offices
• Temporary Commercial Registration

Business Activity License in Saudi Arabia

When it comes to incorporating a business in Saudi Arabia, the business owners must hold the specific license for the focused business activity.

Business Activity	Name of the License
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

How to Start a Business in Saudi Arabia?

Company registration in KSA must comply with the rules of the Saudi Arabia Company Registry.

Saudi Arabia has been one of the booming investment grounds that allow business investors to step forward and form a business entity. The commercial registration gets handled by the Ministry of Commerce and Industry (MOCI), who holds the power to approve the process.

Business Setup in Saudi Arabia requires an investor to go through the following steps:

1.Select the Industry & Business Structure

The very first step is to be crystal clear regarding the business that you want to start. Holding knowledge on how the industry performs in the selected location turns out to be beneficial. At the same time, you need to be sure regarding the corporate structure, which depends on the total number of shareholders and initial capital available.

2.Select a Trade Name

Selecting a business or trade name is one of the essential and crucial tasks at the same time. A business name acts as the organisation's face, and thus, one needs to choose it carefully.

While proceeding ahead with the process of finalizing the trade name, 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 the religious values
• Limited companies should hold the word "Limited" or the abbreviation "Ltd."

3.Understand the Saudi Arabia Corporate Rules

Any investor must abide by the laws set by the selected jurisdiction's government, which is mandatory while doing business in Saudi Arabia.

This is one of the main points of discussion that you should have with your selected business advisor, which will help you understand the ground level.

4.Draft a Busines Plan

Outlining a business plan or mapping down the essential points will help you effectively move on to the next step.

Planning is an essential step in business management, and thus, being a business investor, you have to outline the necessary moves. This step will help you to save time and carry out the process smoothly.

5.Submit the Essential Documents

Commercial registration in Saudi Arabia demands the submission of essential documents to the registry that the government authorities will verify. The list includes:

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

Note: The documents are to be translated into Arabic accordingly.

6.Get the Required Approvals

A strict inspection takes place in 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 approvals from the following authorities:

• 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

Any business's location is one of the critical factors to be sorted at the initial stage. Location is essential as it helps one to grab the target market's attention.

8.Get the Government Approvals

Incorporating a business entity in Saudi Arabia can be completed only after availing of the relevant approvals from the respective government authorities.

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). On the other hand, if it is a tourism business, approvals from the Ministry of Tourism (Saudi Arabia) is mandatory.

What is the Cost of Setting Up a Business in Saudi Arabia?

For any investor aspiring to start a business in Saudi Arabia, the overall cost depends on business activity. However, one has to incur the cost to get the following:

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

Tax Scenario in Saudi Arabia

When it comes to tax purpose, business investors are not entitled to pay income tax. Since Saudi Arabia comes under the GCC’s Framework Agreement, the standard VAT rate applied to the business entities is 5%.

Saudi Arabia has signed more than 50+ tax treaties with various nations, which means that double taxation gets abolished.

Recently, Saudi Arabia has signed the OECD Multilateral Agreement (MLI) and deposited its ratification instrument with the OECD ON 23^rd January 2020.

Things to do After Business Setup in Saudi Arabia

Once the business investor incorporates a business entity, the next step is to avail the relevant services required to manage the company efficiently.

Few of the core services that are to be availed after business incorporation in Saudi Arabia include:

1.Apply for a Bank Account

A bank account is something that no business can ignore when it comes to carrying out business operations.

After you receive the Certificate of Incorporation, you can select the best bank under the expert’s guidance and submit the following essentials to the bank:

• A duly filled bank account opening application
• Certificate of incorporation
• Passport size photos of company directors and shareholders
• Identity and address proof of company directors and shareholders
• Initial deposit amount

2.Hire the Required Staff

In the next phase, you need to hire the relevant staff to maintain the core functions of your organization and make the company run smoothly.

The Kingdom of Saudi Arabia also provides business owners with complete flexibility to step forward and hire talented staff internationally.

It is to be noted that the selected candidates are to be backed by an employment visa. To know more about it, have a look at Visa Services in Saudi Arabia.

3.Avail for IP Protection

Every business has got a specific logo or symbol that becomes the business's face at a later part. It is a known fact that selecting a business name and designing a logo takes a massive amount of creativity and time.

So, being a business investor, you need to protect your business creations. Thus, it is recommended to proceed with Intellectual Property Services in Saudi Arabia to protect the business creations from the existing customers in the market.

4.Get a Web Presence

Today, businesses take place with a click of a button. The COVID-19 scenario has widened up remote business opportunities to the business investors who plan to start their entity.

Holding a web presence turns out to be an excellent step to capture the international market at ease. Make sure to select a suitable domain name and proceed towards hosting your website online.

5.Initiate Accounting and Bookkeeping

Maintaining a proper record of the business income and expenditure starts even before the business's first closure. Keeping track of every penny is essential as it helps you to monitor the business growth.

It is recommended to maintain the company books from the initial stage, and to know more about it, look at Accounting and Bookkeeping Services in Saudi Arabia.

Saudi Arabia Post COVID-19 Scenario

WHO, Saudi Arabia join forces to fight COVID-19

The pandemic has widened the breadth and depth of the business concept at the global front. Saudi Arabia, too, has seen a drastic change in the buying and selling process of the offshore market.

As per the sources, only 6% of the respondents have stated that their shopping habits haven't changed. On the other hand, 52% of respondents claimed that their buying habits had changed temporarily.

The Saudi government has taken strategic calls to combat the same and establish the nation as one of the strongest nations. Respective measures were taken at the regional, national and global level to sort the process.

Initiatives by the Saudi Government

Saudi Arabia holds an absolute monarchy, yet, futuristic government

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

• SAR 4 billion to employment and training programs
• SAR 1 billion to direct and indirect loans to finance working capital business
• SAR 1 billion to the private sector employees who haven't been benefited from the support programs
• Direct lending of SAR 2 billion  to the SMEs to help the entrepreneurs start their business

Apart from the ones mentioned above, the Saudi Ministry of Finance has taken the following step of providing the necessary industrial funds have been introduced to restructure the small and medium project terms.

­­Our Business Setup Services

Business Setup Worldwide is a team of specialized professionals who take the necessary initiatives to provide customized business setup solutions. From pre-incorporation to post-incorporation, we deliver a wide range of company formation services. Our team is of highly-experienced individuals positioned in Dubai that can help you with:

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

Business Setup Worldwide- A One-Stop Business Incorporation Solution

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

Suppose you plan to incorporate your business in the Kingdom of Saudi Arabia and need assistance from strategic thinking to legal compliance. In that case, we are here to help you.

With years of experience, our business advisors can provide you with tailored solutions that make us one of the top ten business consultants in Dubai.

We have a legal alliance with government bodies and can help you to set up your company quickly at an affordable cost.

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

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