This article will help you understand the process of business setup in Saudi Arabia.
Business Setup in Saudi Arabia
Saudi Arabia is widely regarded as an excellent place to invest. The country has a stable and diversified economy driven by a thriving oil industry and a range of other sectors, including finance, construction, and tourism.
With a population of over 34 million, Saudi Arabia offers a large market, particularly with a growing middle class increasingly demanding high-quality products and services. The Saudi Arabian government has also improved the country’s business environment by simplifying regulations, streamlining procedures, and providing incentives for foreign investors.
The government’s Vision 2030 program aims to diversify the country’s economy, reduce its reliance on oil, and promote private sector growth, making it an attractive destination for foreign investment. All these factors contribute to a business-friendly environment in Saudi Arabia, making it an appealing choice for investors seeking opportunities in the region.
Steps to Incorporate a Business in Saudi Arabia
PHASE 1: Clearance from the Saudi Arabia General Investment Authority (SAGIA)
As a non-Saudi national, the first task is to obtain a foreign investment license from SAGIA. Keep in mind that the Saudi authorities are keen to get investors who have business experience and are less inclined to people launching their first venture. Although there is no legal minimum capital requirement, SAGIA often requires foreign companies to have a capital of at least 500,000 Saudi Riyals (SAR).
Service sector companies typically can be 100% foreign-owned; however, activities such as trading require some local ownership. If you don’t have a local partner, a business consultant can arrange one for you for an annual fee.
Certain types of commercial activities are set aside for Saudi nationals only. The list is released by SAGIA and amended from time to time.
PHASE 2: MOA from the Ministry of Commerce for your Company Setup in Saudi Arabia
Foreign investors will need the Ministry of Commerce to issue a Memorandum of Association. You can apply for it via the unified national platform of the Saudi government. The cost is 1,200 Saudi Riyal (SAR), which can be accomplished in 24 hours.
PHASE 3: Commercial Registration from the Ministry of Commerce
Entrepreneurs will need to the Commercial Registration from the Ministry of Commerce. You can apply for it via their online portal or in person. In addition, the new company will have to appoint a director and provide items such as passport copies and entry stamps.
PHASE 4: Establish Company Files at various Saudi Ministries
Businesses are required to open a file under their new company name with the following Saudi ministries:
- Saudi Ministry of Labour and Social Development
- General Authority of Zakat and Tax
- General Organization for Social Insurance
While a few of these ministries have online platforms to facilitate their services, some functions still must be done in person. Foreign entrepreneurs can often struggle with this part of the endeavor if they do it independently, as it can take a few months to get it sorted.
PHASE 5: Apply for a Residency Visa via the Ministry of Investment and Open a Corporate Bank Account
Under Saudi law, a special residency permit is issued to qualified individuals who invest in the country and allows them to bring their family members to reside with them as well. Furthermore, such visa holders have the legal right to own real estate in the country.
There are two types of residence permits for investors; one is a permanent residency permit, and the other is renewable annually. The permanent residency permit is granted after an investor contributes a sum of 800,000 Saudi Riyal (SAR) to Saudi authorities. The annual renewable residency permit is given after the investor pays 100,000 Saudi Riyals (SAR).
The business banking sector in Saudi Arabia is well-developed and provides services to support businesses of all sizes. Several local and international banks are operating in the country, including National Commercial Bank (NCB), Al Rajhi Bank, Saudi British Bank (SABB), and Riyad Bank, among others.
In recent years, the Saudi Arabian government has promoted digital banking and fintech in the country, aiming to create a more efficient and accessible banking sector. As a result, there has been an increase in the availability of online banking services and mobile banking apps for companies in Saudi Arabia.
Get the Expert Advice for Business Setup in Saudi Arabia
It is recommended to work with a business consultant or lawyer when setting up a new company in Saudi Arabia to ensure compliance with all regulations and legal requirements for several reasons.
- Saudi Arabian legal system is different from other countries, and the laws and regulations governing businesses can be complex and challenging to navigate. Working with a consultant or lawyer can help ensure that your business complies with all applicable laws and regulations, including licensing, taxation, and labor laws.
- A business consultant or lawyer can help you navigate the cultural and linguistic differences that may arise when doing business in Saudi Arabia. This can be particularly important when dealing with government officials and regulatory bodies.
- A lawyer or consultant can help you establish and maintain good relationships with local partners, suppliers, and customers. Relationships are essential in Saudi Arabian business culture, and having an advisor who can help you navigate the nuances of local business practices can be invaluable.
- a consultant or lawyer can help you stay up to date with changes in the legal and regulatory environment, ensuring that your business remains compliant and that you can take advantage of new opportunities as they arise.
Overall, working with a consultant or lawyer can help ensure that your business complies with all applicable laws and regulations while providing valuable guidance on cultural and business practices in Saudi Arabia.
Don’t forget to try our Cost Calculator to get an estimate for your business setup in Dubai.