Starting a business in Saudi Arabia presents a wealth of opportunities, thanks to the nation’s economic reforms and Vision 2030 initiative. However, navigating the regulatory landscape can be complex. Below are some frequently asked questions to guide prospective entrepreneurs through the process.
- What are the common types of business structures available for foreign investors in Saudi Arabia?
Foreign investors can choose from several business structures, including:
- Limited Liability Company (LLC): A separate legal entity offering limited liability to its shareholders.
- Branch of a Foreign Company: An extension of the parent company operating in Saudi Arabia.
- Joint Stock Company (JSC): A company whose capital is divided into shares, suitable for larger investments.
Each structure has distinct requirements and benefits. For instance, an LLC is popular for its limited liability, while a branch allows direct representation of the parent company.
- Is 100% foreign ownership allowed in Saudi Arabia?
Yes, Saudi Arabia permits 100% foreign ownership in various industries, especially under licenses issued by the Ministry of Investment of Saudi Arabia (MISA). However, certain sectors may have restrictions or require a local partner.
- What is the process for starting a company in Saudi Arabia?
The general steps for GCC citizens include:
-Issuing PoA (Power of attorney)
-Tradename reservation (Arabic Tradename ONLY)
-Selecting the business activities
-Drafting and submitting AoA
-Issuance of CR (Company Registration Certificate)
-GCC citizen visits Saudi Arabia
-Issuing Saudi residence (Iqama) for GCC citizens
-Getting a new SIM card under the Saudi iqama of GCC citizens
-Activating the Absher account after enrolling in bio-metric
-Linking Saudi residency of GCC citizens with CR
-Activation of Chamber of Commerce membership
-Activation of Government portals (Qiwa, Gosi, ZATCA, SPL, CoC, Muqeem, and Mudad, etc.)
-Renting business facility (Office, Workshop, Store, Warehouse, Factory, etc.)
-Opening a bank account
-Issuing Baladiya (Municipality) license for the facility
Steps for foreign entities include:
-Identifying the type of MISA License
-Selecting the business activities
-Preparing Foreign Entity documents
-Legalizing Foreign entity documents
-Obtaining an investment license from MISA
-Reserving the trade name
-Drafting & publishing of AoA
-Issuance of CR (Commercial Register)
-Applying for a GM visa or transferring GM sponsorship
-Issuing Iqama (residence) for GM
-Registering GM with the Chamber of Commerce
-Activation of govt. portals
-Renting an office or outlet for the client
-Registering national address
-Opening a bank account
-Issuing Municipality Commercial License
Note: The entire process typically takes between 30 to 60 days, depending on the business type and required documentation.
- Are there any industries restricted to foreign investment?
Yes, certain sectors such as oil exploration and military services have regulations. It’s essential to consult the Negative List issued by MISA to identify restricted industries.
- What are the tax obligations for foreign-owned companies in Saudi Arabia?
Foreign-owned companies are subject to:
- Corporate Tax: A 20% tax on adjusted annual profits.
- Value Added Tax (VAT): 15% on goods and services if annual revenue exceeds SAR 375,000.
- Withholding Tax: Ranges between 5% and 20% for payments to foreign entities.
Compliance with these tax obligations is crucial to avoid penalties.
- Is a physical office required to establish a company in Saudi Arabia?
Yes, a physical address is mandatory, especially for opening a corporate bank account, as banks require a site visit before approval.
- Can I open a corporate bank account before my company is fully registered?
No, obtaining a Commercial Registration (CR) and a MISA license are prerequisites for opening a business bank account in Saudi Arabia.
- What is the Entrepreneur License, and who is eligible?
The Entrepreneur License is designed for startups, allowing them to establish a 100% foreign-owned company without the need for a Saudi partner. Eligibility requires a recommendation letter from an approved incubator, accelerator, or venture capital firm recognized by MISA.
- Are there minimum capital requirements for foreign businesses?
Yes, in some industries there are capital requirements to acquire a MISA license for foreign businesses. Here are they:
1. Trading Investment License with Saudi Partner – 26,666,667 SAR (Ownership – 25:75)
2. Trading Investment License without Local Partner – 30,000,000 SAR (100% Ownership)
3. Services Investment License – No minimum capital
4. Manufacturing Investment License – No minimum capital
5. Real Estate License – 30,000,000 SAR (100% Ownership)
6. Entrepreneur Licenses – No minimum capital
7. Agricultural License – 400,000 SAR (100% Ownership)
8. License for transport – 10,000,000 SAR (100% Ownership)
9. Mining License – 400,000 SAR (100% Ownership)
- How can consulting firms assist in the company formation process?
Consulting firms can provide:
- Tailored advice on choosing the appropriate legal structure.
- Assistance with document preparation and compliance with Saudi regulations.
- Coordination with government departments to expedite approvals.
- Support for post-incorporation registrations and ongoing compliance.
Partnering with experienced consultants like DuVolks can save time, mitigate risks, and ensure a smoother entry into the Saudi market.
- How many days will it take to set up a company in Saudi Arabia?
With DuVolks, the company registration takes only a maximum of 14 days. In most cases, it gets done before that. For setting up the company, it takes only 30 days provided the GM has residency. Otherwise, you can expect a maximum of 45-60 days. Feel free to contact us to learn more.
Related topics
Entrepreneur Investment License in Saudi Arabia | Top Cities in Saudi Arabia to Start a Business | Government Payment Methods for Businesses in Saudi Arabia | How to Start a Business in Saudi Arabia for Foreigners | Benefits of Starting a Business in Saudi Arabia | How to Start a Business in Saudi Arabia
