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Business Setup in Saudi Arabia | Company Formation in KSA

Setting up a business in Saudi Arabia offers unparalleled opportunities in one of the world’s fastest-growing economies. As the Kingdom accelerates its Vision 2030 initiatives, aimed at diversifying its economy and reducing reliance on oil, company formation in KSA is becoming increasingly attractive for global investors and entrepreneurs. Saudi Arabia has introduced a series of regulatory reforms, creating a more streamlined and investor-friendly environment. With significant incentives in sectors like technology, renewable energy, healthcare, and tourism

Saudi Arabia, with its growing economy and strategic location, presents exciting opportunities for businesses of all sizes. If you are considering setting up a company in the Kingdom. If you are looking to establish your company in the Kingdom, We will assist and guide you with the essential steps and considerations for a smooth setup process.

Key Updates for Business Setup

  1. New Commercial Registration Law:

    • The Commercial Registration Law (CR Law) introduced in September 2024 eliminates the need for branch registrations and replaces it with a unified national registration system. This simplifies the process for businesses operating across multiple regions by centralizing all operations under a single commercial license.
    • Annual confirmation of operations is now required instead of periodic renewals, helping to streamline the administrative burden for companies. Businesses must confirm their operational status yearly to avoid suspension.
  2. Trade Name Flexibility:

    • The new Trade Names Law allows businesses to use non-Arabic trade names and numbers, offering greater flexibility for companies to align their brand identities with international standards. This is a major change from the previous regulation, which restricted business names to Arabic
Business setup and company formation in Saudi Arabia (KSA) – handshake symbolizing corporate partnerships with the Saudi skyline and economic icons.

Why Invest in Saudi Arabia?

Strategic Location

Positioned at the crossroads of major international trade routes connecting Asia, Europe, and Africa.

Economic Diversification

Under Vision 2030, Saudi Arabia is diversifying its economy beyond oil, opening up sectors like tourism, entertainment, and technology.

Government Incentives

The Saudi government offers various incentives, including tax exemptions and financial grants, to attract foreign investment.

Advanced Infrastructure

World-class infrastructure supports business activities, including transportation, telecommunications, and industrial zones.

Large Consumer Market

Access to a population exceeding 34 million with high purchasing power.

Contact GloboPrime Corporate Service Provider business setup specialist today to explore the exciting possibilities!

The Steps Involved

How to Start a Business in Saudi Arabia

Effortlessly Launch Your Business in Saudi Arabia: Business Setup in Saudi Arabia a Step-by-Step Guide

Steps to Establish a Company in Saudi Arabia

Follow these steps to successfully establish your company in the Kingdom of Saudi Arabia (KSA).

Step 1: Obtain Investment License from MISA

MISA: Ministry of Investment of Saudi Arabia.
Application Submission: Provide business plan, financial statements, and corporate documents.
Approval Timeline: Typically 2-4 weeks.

Step 2: Reserve Company Name & Draft Articles of Association

Name Reservation: Submit request to MOC.
Articles of Association: Prepare and notarize constitutional documents.

Step 3: Commercial Registration

Register with MOC: Obtain Commercial Registration (CR).
Publication: Announce establishment in the Official Gazette.

Step 4: Open a Corporate Bank Account

Bank Selection: Choose a bank and open an account.
Capital Deposit: Obtain a capital deposit certificate.

Step 5: Register with Tax and Social Insurance

GAZT: Register for taxation purposes.
GOSI: Register for employee social insurance contributions.

Step 6: Obtain Municipal Licenses & Approvals

Municipality License: Required for the business location.
Chamber of Commerce: Membership is mandatory.

Taxation Overview

Corporate Tax

Rate: A flat rate of 20% on taxable income for non-Saudi/non-GCC shareholders.

Zakat

Rate: 2.5% on the company’s net worth for Saudi and GCC nationals.

Value Added Tax (VAT)

Rate: Standard rate of 15% on most goods and services.

Withholding Tax

Applicability: Payments to non-residents for services performed in KSA.

Employment and Saudization

Labor Laws

Employment Contracts: Must be in Arabic and comply with the Saudi Labor Law.
Working Hours: Standard working hours are 48 hours per week.

Saudization (Nitaqat Program)

Objective: Increase employment opportunities for Saudi nationals.
Compliance: Companies are categorized based on their percentage of Saudi employees and must meet specific quotas.

Intellectual Property Protection

Trademarks

Register: Register with the Saudi Authority for Intellectual Property (SAIP) to protect your brand identity.

Patents and Copyrights

Protection: Legal mechanisms are in place to protect innovations and creative works under Saudi law.

The 10 Essential Market Rules for Business Setup in Saudi Arabia

When establishing a business in Saudi Arabia, it’s crucial to comply with the ten market rules set by government entities. These rules are actively monitored to ensure a smooth, legal operation and alignment with local regulations. Here’s a breakdown of these essential rules.

1. Valid Commercial Registration

Ensure your company has a valid Commercial Registration (CR). Regularly update your business information to avoid penalties.

2. Separate Business Bank Account

Open a corporate bank account exclusively for company transactions. Personal accounts cannot be used.

3. Renewal of Licenses

Renew licenses periodically and update any changes in company address or details in government records.

4. Wages Protection Program

Register with the Wages Protection Program (WPP) to document and record employee salary payments.

5. Electronic Employee Contracts

Document all employee contracts electronically, and ensure legal employment of workers.

6. Documentation of Financial Transactions

Ensure that all income and expenses are fully documented to comply with accounting regulations.

7. Non-Saudis’ Control Over Business

Foreign nationals cannot have complete control over any business entity; local partnerships are required.

8. Electronic Payment and Invoicing

Use electronic payment methods and issue e-invoices to align with Saudi Arabia’s digital economy goals.

9. Legal Financing Channels

Ensure that your business is financed through legal and regulated channels, with proper documentation.

10. Compliance with Business Activity Regulations

Follow all sector-specific regulations and instructions to ensure smooth regulatory oversight.

Free Zones and Economic Cities

Saudi Arabia’s free zones and economic cities (e.g., King Abdullah Economic City) offer tax exemptions and streamlined regulations, making them ideal for various industries.

Types of Business Entities in Saudi Arabia

The legal structure you choose for your business in Saudi Arabia significantly impacts your operations and growth potential. Here's a breakdown of the most common options for foreign investors and local entrepreneurs:

Limited Liability Company (LLC)

The go-to choice for SMBs (Small and Medium Businesses) in Saudi Arabia. Owners enjoy limited liability for their investment, making it ideal for ventures with moderate capital needs.

Joint Liability Company

Simple and inexpensive to establish, this structure is suitable for small, informal businesses. However, all partners share responsibility for debts, so consider this for low-risk ventures.

General Partnership Company

Similar to a Joint Liability Company but with a formal agreement outlining partner roles and responsibilities. This option provides clarity for partnerships with shared goals.

Limited Partnership Company

Offers flexibility by combining partners with limited and unlimited liability. This structure can attract investment while protecting some partners' assets.

Joint Stock Company (JSC)

Functioning like a corporation, JSCs have ownership divided into shares. Public JSCs can even list on the Saudi Stock Exchange (Tadawul). This structure is ideal for large businesses seeking significant capital through public offerings.

Branch Office

An extension of a foreign company operating under the parent company's regulations. This option allows foreign businesses entering the Saudi market to maintain control over operations.

Representative Office

A cost-effective way for foreign companies to establish a presence in Saudi Arabia for market research and relationship building. However, these offices cannot engage in commercial activities or generate revenue.

Partnership Limited by Shares

This structure offers some liability protection while maintaining a partnership format. Liability is limited to each partner's investment amount.

Variable Capital Companies

A relatively new structure, this type of company allows capital to fluctuate based on shareholder contributions. It offers flexibility for businesses with evolving capital needs.

Technical and Scientific Offices

Established by foreign companies for conducting R&D activities in Saudi Arabia. This option allows foreign entities to contribute to the Kingdom's scientific advancement.

Book a free consultation today and let us guide you through the process!

Costs of Setting Up

SAGIA License

2000 SAR

Company Gazette Publication

600-5500 SAR

Bank Account Deposit

100,000 SAR for LLC

Office Spaces

4000-1700 SAR

Commercial Certificates

100-8100 SAR

Chamber of Commerce Membership

2000 SAR

Our Services

Consultation

Expert advice on business setup and regulatory compliance.

Documentation

Assistance with paperwork and formalities.

Legal Support

Guidance through legal processes and requirements.

Continued Support

Ongoing business support post-establishment.

Seek Professional Help

Consider partnering with a business setup consultant like GloboPrime Corporate Service Provider to ensure a smooth and compliant company formation process.

Regulatory Compliance and Legal Considerations

Foreign Investment Regulations

Understanding the regulatory landscape is crucial for foreign investors in Saudi Arabia. Here’s an overview of restricted sectors for foreign investment:

Prohibited Sectors

  • Oil Exploration, Drilling, and Production: Foreign investment is generally not permitted in companies engaged in these activities, subject to certain exceptions.
  • Real Estate Investment in Mecca and Medina: Foreign investors are prohibited from investing in real estate within the holy cities.

Limited Investment Sectors

  • Communications
  • Healthcare
  • Education

It’s crucial to consult the Ministry of Investment (MISA) for the most current information on restricted sectors and any exceptions that may apply.

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We look forward to partnering with you!

FAQ

Frequently Asked Questions

Yes, in most sectors, foreign investors can fully own a company, subject to approval from the Ministry of Investment.

Foreign investment is prohibited in certain sectors such as oil exploration, drilling, and production (with some exceptions), and real estate investment in Mecca and Medina. Limited foreign investment is permitted in sectors like communications, healthcare, and education.

Foreigners can start a business in Saudi Arabia by obtaining an investment license from the Ministry of Investment (MISA). The process involves submitting required documents, choosing a suitable legal structure, registering the company with the Ministry of Commerce, and fulfilling capital requirements. It's advisable to consult with legal experts familiar with Saudi laws to navigate the process smoothly.

Foreign investors can establish various types of businesses, including Limited Liability Companies (LLCs), Joint Stock Companies (JSCs), branch offices, and representative offices. The choice depends on factors like the nature of the business, capital investment, and long-term objectives.

While many sectors allow 100% foreign ownership, certain industries have restrictions or are closed to foreign investment. For example, foreign investment is prohibited in oil exploration, drilling, and production (with specific exceptions) and real estate investment in Mecca and Medina. Limited foreign investment is permitted in sectors like telecommunications, healthcare, and education. Always consult the Negative List provided by MISA for up-to-date information.

  • Corporate Tax: A flat rate of 20% on taxable income for foreign-owned entities.
  • Zakat: An Islamic levy of 2.5% on net worth, applicable to Saudi and GCC nationals.
  • Value Added Tax (VAT): Standard rate of 15% on most goods and services.
  • Withholding Tax: Applies to payments made to non-residents for services rendered in KSA.

Saudization, or the Nitaqat program, is a government initiative to increase employment opportunities for Saudi nationals. Companies are categorized based on their percentage of Saudi employees and are required to meet specific quotas. Non-compliance can result in penalties and restrictions on business operations.

Yes, having a physical office is generally required for company registration and obtaining a municipal license. The office address is needed for official communications and inspections.

You should register your trademarks, patents, and copyrights with the Saudi Authority for Intellectual Property (SAIP). Saudi Arabia has stringent laws to protect intellectual property rights, and registration is essential for enforcement.

To open a corporate bank account:

  1. Commercial Registration: Provide your company's Commercial Registration certificate.
  2. Identification Documents: Submit identification for company directors and authorized signatories.
  3. Company Documents: Include Articles of Association and investment license.
  4. Compliance Checks: Banks may conduct due diligence under anti-money laundering regulations.

Key aspects of Saudi labor laws include:

  • Employment Contracts: Must be written in Arabic and specify terms like salary, working hours, and duration.
  • Working Hours: Standard working hours are 48 hours per week, reduced to 36 during Ramadan for Muslim employees.
  • Leave Entitlements: Employees are entitled to annual, sick, and maternity leave.
  • Termination: Regulations govern notice periods and severance pay.

Previously known as SAGIA (Saudi Arabian General Investment Authority), the organization responsible for facilitating foreign investments in Saudi Arabia has been rebranded as MISA (Ministry of Investment of Saudi Arabia). This name change reflects Saudi Arabia's strategic shift under Vision 2030 to streamline investment processes and make the Kingdom more attractive for foreign investors. Today, MISA offers various industry-specific licenses such as the Service License, Regional Headquarters License, and Trading License, aimed at simplifying business setup​.

Key documents include:

  • MISA License.
  • Company Name Reservation Certificate.
  • Articles of Association (AoA).
  • Commercial Registration (CR).
  • Bank Account Certification.
  • Relevant Special Permits (if required by your business activity, e.g., SFDA permits for healthcare companies).

In 2024, several updates impact foreign businesses:

  • Regional Headquarters (RHQ) Program: As of January 1, 2024, multinational companies intending to contract with Saudi government entities must establish a regional headquarters (RHQ) in Saudi Arabia. The program offers a 30-year corporate and withholding tax exemption for specific RHQ activities, as well as 10-year Saudization exemptions for RHQs.
  • Government Portals: Compliance with portals such as Muqeem, Qiwa, and Mudad has become increasingly crucial. These portals manage employee records, Saudization compliance, and wage protection. Non-compliance with these portals can result in severe penalties, including blocked services and visa issuance difficulties.

To establish an RHQ, a company must:

  1. Obtain a MISA RHQ License.
  2. Begin operations within six months of license issuance.
  3. Hire a minimum of 15 full-time employees in the first year, with at least three senior executives​.

 

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