Business Setup in Saudi Arabia – Set Up a Company in KSA

One of the most populated countries in the Middle East, Saudi Arabia or also known as the Kingdom of Saudi Arabia (KSA) is a rapidly emerging new business-investment hub of the region. Its economy is one of the biggest ones in the Arab world and is growing at lightning-fast speed. This makes it an excellent place to start a business in the Middle East. Besides the oil and petroleum industry, the Saudi government is also taking multiple steps to give opportunities to other business sectors to grow and flourish in Saudi Arabia.

Before you start planning a business setup in Saudi Arabia, keep in mind that there are multiple factors and things that you must know in detail including taxation, laws, business frameworks, rules, regulations, financing, etc.

Investors and businessmen planning to set up a business in Saudi Arabia must go through this piece of content to get assistance in drawing associated insights before investing. Here is everything you need to know about business setup in Saudi Arabia.

Why Do Business Setup in Saudi Arabia?

The strong economy of Saudi Arabia makes it a perfect place for foreigners to invest. Here are some of the many reasons to start a business in KSA:

1. Tax benefits

Before you start a business in any new country or location, you make sure it helps your business grow and prove to be beneficial for the business. That is why you take taxation into consideration as one of the most important factors of business setup in any place. Saudi Arabia really excels in this area. Personal income tax obligations for foreign investors are minor, whereas the corporate tax rate is 15%. Furthermore, even though VAT is used in Saudi Arabia, many items and services are excluded and hence have a zero rate. Custom duty exemptions are also there for business owners. Plus, tax incentives are given to underdeveloped provinces.

2. Population is Increasing

While Corona pandemic caused problems for every country in the world, Saudi Arabia effectively dealt with it and prepared itself to revive its economy. The country revealed its 2021 budget, which was valued at 990 billion Riyals ($263.91 billion). The country expanded by 2.85% in the fourth quarter of 2020, and growth of 2.6% in 2021 and 4% in 2022 were projected. Saudi Arabia has over 36 million population as of 2023, a rise of 1.48% from 2022. The population of Saudi Arabia is projected to grow to more than 40 million people by the end of 2025.

3. Vision 2030

Vision 2030 entails a strategic framework for a country devoted to diversifying its economy and forming a vibrant society. Three continents are connected through this investment powerhouse. Global business investors can take advantage of multiple business opportunities arising from this pivotal economic and social evolution.

4. Effortless Business Setup Process

The straightforward process for setting up a business in Saudi Arabia is another reason that attracts investors for business from across the globe. The majority of business owners, according to surveys, prefer to deal with competent experts because legal proceedings can be resolved without too much bother. And with the easy-to-follow business setup process in Saudi Arabia, it surely is a fine place to work.

5. Business-Friendly Environment

Saudi Arabia is currently welcoming the rest of the globe for establishing businesses here. In order to promote a cosmopolitan future for the kingdom, the leaders of the country are dedicated to looking abroad and welcoming both foreign visitors and foreign investments.

This applies to both personal and business levels. You should anticipate first-rate hospitality from Saudis, who are renowned for being exceedingly kind and accommodating to visitors showing interest in their country. It will be simple for business owners to conduct their business here. Saudi Arabia has improved so substantially that it now ranks 62nd out of 190 countries in the World Bank’s Doing Business Index.

How to Get a License to Setup a Business in Saudi Arabia?

In order to make clear the procedures and conditions of the issuing of all pertinent government permit for foreign business companies, the Ministry of Investment released an investment manual in 2020. The document is thorough enough and goes into information regarding how foreigners can register their businesses, which Saudi ministries are responsible for registrations, and where to submit the business setup applications. The Ministry of Investment has also declared that after issuing the license, business entity operations are subject to rules and limitations. Each industry of business has its own set of regulations. The following is the schedule for license issuance:

Step 1. Issuance of Investment License

First of all, you need to issue an investment license. You need to submit last year’s financial statements for certifications by the Saudi Embassy and the company’s commercial registration certificate issued by the Saudi Embassy to the authorities. You can use MISA’s E-services portal for this step.

Step 2. Documentation of Memorandum Association

Then, you need to submit an official document to the Ministry of Justice and Ministry of Commerce stating the inclination to the branches of foreign companies. You need to submit the memorandum association to open a branch in the Kingdom of Saudi Arabia to complete the issuance of the Commercial Register.

Step 3. Issuance of Commercial Registration

Next up, you need to go for commercial registration of the parent company. For this step, you need the following things and submit it to the Ministry of Commerce:

• Proof of owners and the general director’s ID
• The decision of the Board of Directors to open a branch (only for branches of foreign companies)
• Documentation of the appointment of the general director
• Memorandum of Association (for new companies)

Step 4. Open Files

Post that, you have to get a file from the General Authority of Zakat and Tax (GAZT), the Ministry of Labor and Social Development Obtaining, and the General Organization for Social Insurance (GOSI). For this step, you can use MERAS E-services Portal.

Step 5. Issuance of General Directors Visa

Finally, you need to issue the General Directors Visa. For issuing the visa, you need to submit proof of the general director’s ID and the appointment of the general director to the MISA. You can use the E-services Portals on MERAS and MISA for this step.

As things stand right now, the Ministry of Investment of the Kingdom of Saudi Arabia will only make it easier for international businesses to enter the country. The government wants to provide them the chance to start businesses there if they are established as one of the following legal entities:

• Solidarity professional company
• Limited Liability Company (LLC)
• Joint Stock Company
• Limited Liability One-person Company
• Foreign Company Branch

In Saudi Arabia, LLCs are the most popular type of legal company chosen by foreign businesses. The fact that shareholders are only responsible for the debts incurred by the company to the extent of their investment and the ability to conduct the entire range of commercial activities are two significant benefits of an LLC.

Required Documents to Set Up a Company in KSA

You need to translate the documents into Arabic before submitting them to the authorities. Following are the documents that you need to submit to set up a business in Saudi Arabia:

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

How to Set Up a Company in Saudi Arabia – Step-by-Step Process

KSA is one of the thriving investment hubs that enable business investors to come forward and establish a corporate firm. The Ministry of Commerce and Industry (MOCI), which has the authority to approve the procedure, is in charge of handling the commercial registration. Saudi Arabia’s Company Registry regulations must be followed when registering a company there.

A businessman conducting business in KSA must follow the laws established by the jurisdiction’s government. This is one of the key topics you should talk about with your chosen business setup consultant to get a better understanding of the situation.

Here is a complete process to set up a business or company formation in Saudi Arabia that you must follow as an investor:

Step 1. Choose a Business Structure and Industry

First of all, you need to be incredibly clear about the business that you plan to set up in KSA. It is useful to have an understanding of how the industry functions in the chosen area. You must also be certain of the corporate structure, which is based on the amount of starting capital available and the total number of shareholders.

Step 2. Choose a Trade Name

One of the most important and significant duties at the same time is choosing a company or trade name. A company’s name serves as it is the public face of the firm, so care must be taken when selecting it.

The following considerations should be made as you move forward with deciding on the trade name:

• The word “Limited” or the abbreviation “Ltd.” shall appear on limited company documents.
• The name shouldn’t be a ripoff of an already existing rival business.
• It shouldn’t be insensitive or undermine religious principles.

Step 3. Draft a Business Plan

Moving on to the next step, you need to outline a company plan or list the key elements. As a company investor, you must describe the necessary steps because planning is a crucial part of business management. You can speed up the procedure and save time by following this step.

Step 4. Submit the Required Documents

Saudi Arabia requires important paperwork to be submitted to the registry for verification by the government in order to register a new business. You need to submit the required documents which are mentioned earlier.

Step 5. Get the Required Approvals

The government authorities conduct a thorough inspection to determine the status of the submitted documents. Any investor who is looking to set up a business in Saudi Arabia must obtain approval from the following authorities:

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

Step 6. Find a Physical Office

One of the crucial elements that must be worked out at the beginning of any business is its location. Location is crucial since it plays a crucial part in capturing the attention of the target Saudi market.

Step 7. Get the Government Approvals

It is only possible to incorporate a company in Saudi Arabia after obtaining the necessary approvals from the relevant government authorities.

For instance,  if it is a tourism-related firm, Saudi Arabia’s Ministry of Tourism’s clearance is required. However, the Ministry of Health must grant the necessary approvals if you wish to launch a business in the healthcare industry.

Post Business Setup Activities to Perform in Saudi Arabia

The next stage after a business investor forms a business entity is to take advantage of the pertinent services needed to administer the business effectively.

Following business incorporation in Saudi Arabia, a few of the essential services that may be needed are as follows:

1. Initiate Accounting and Bookkeeping

Even before the first closure of the business, it is important to keep accurate records of income and expenses. It’s crucial to keep track of every dollar since it enables you to track the expansion of your business. It is advised to keep business records up to date from the beginning.

2. Apply for a Bank Account

When it comes to conducting business activities, no business can do it without a bank account. Following receipt of the Certificate of Incorporation, choose the ideal bank with the assistance of a professional, and deliver the necessary paperwork to the bank which is as follows:

• Initial deposit amount
• A duly filled application to open a bank account
• Passport-size photos of shareholders and directors of the company
• Certificate of incorporation
• Identity and address proof of shareholders and directors of the company

3. Avail for IP Protection

Every company has a unique symbol or logo that eventually takes on the role of the company’s face. It is common knowledge that choosing a company name and creating a logo requires a significant amount of imagination, time, and work.

Therefore, as a company investor, you must safeguard your entrepreneurial endeavors. Hence, it is advised to move forward with Intellectual property services to safeguard business creations from the market’s current clients.

4. Get a Web Presence

Today, conducting business only requires the click of a button. The COVID-19 scenario has increased the number of distant business prospects for entrepreneurs.

Having a website proves to be a great first step in easily reaching the global market. Make sure to get a good domain name that matches your business name before moving on with online hosting for your website.

5. Hire the Required Staff

To preserve your business’s key functions and ensure the smooth operation of the business, you must hire the necessary people in the following phase.

Additionally, the Kingdom of Saudi Arabia gives entrepreneurs total freedom to hire qualified personnel from other countries. It should be emphasized that the chosen candidates must have a valid job visa.

Cost of Setting Up a Business in Saudi Arabia

The total cost will depend on the type of business being started by the investor in Saudi Arabia. One must have an idea of the cost of the following things in order to get them:

• Investment license at the General Investment Authority
• Register for membership at the Chamber of Commerce
• Legalize / notarize documents
• Open a corporate bank account
• Publication in the official gazette
• Establishment of the office
• Register in the commercial registry

Some Considerations on How to Start Your Business in Saudi Arabia

Saudi Arabian corporate laws resemble those of western nations in many ways. A business owner, for instance, may choose to operate the company in alternative entities. Although you essentially have the freedom to select how to launch a business, you should exercise caution when creating the necessary legal structures. To navigate regulatory challenges, seek expert assistance and legal advice.

Although the procedure of registering a business in Saudi Arabia has become simpler over time, there are still some possible roadblocks because of linguistic and cultural obstacles. Here are some crucial factors to keep in mind in order to avoid problems:

Proof of Financial Capabilities

A business owner is required to provide bank savings as evidence of the company’s financial capability as soon as it is officially registered with the Ministry of Commerce. State-to-state variations in the amount range from $10,000 to $50,000. The good news is that you can quickly withdraw the money after using it as a guarantee against liabilities.

Have Knowledge of the Region

If you are familiar with the area, you will know how to launch a business. It is a general principle that holds true anywhere and not just in Saudi Arabia. Make the effort to learn as much as you can about the industry in which your business will operate. A strong understanding of the rival businesses, target national market, and governmental requirements are essential for a successful business plan. It’s challenging to start a new business in a foreign country, but a solid marketing strategy and help from the community and the government will make things easy for you.

Early Business Partnership with Locals

The Saudi government once made it mandatory that a foreign corporation have at least one local partner who owned the majority of the company’s shares. Thankfully, the restriction is no longer in effect, allowing a foreigner to operate as the company’s single owner. Nevertheless, having a local partner is still beneficial. A local partner that is well-versed in the commercial climate of the area could prove to be a priceless resource for the business.

Frequently Asked Questions – FAQs

How much does it cost to start a business in Saudi Arabia?

The cost to start a business in Saudi Arabia varies from case to case because a lot of factors are involved in launching a business in the country.

Can a foreigner start a business in Saudi Arabia?

Yes, a foreigner can start a business in Saudi Arabia. They only need to follow the set process to launch a business here in KSA.

Can I set up a business in Saudi Arabia?

Anyone can set up a business in Saudi Arabia. Simply follow the process including submitting documents and getting licenses and you will be able to establish a business in the country.

Which business is best in Saudi Arabia?

Here are some of the best businesses in Saudi Arabia:

1. Cargo and courier company
2. Travel and tourism
3. Solar energy
4. Language services
5. Maid recruitment service

What is the most profitable business in Saudi Arabia?

The following are the most profitable businesses in Saudi Arabia:

• Building materials
• Real estate
• Agriculture
• Education
• Technology
• Luxury goods
• Healthcare

Start a Business in Saudi Arabia

That was all about business setup in Saudi Arabia. We have given you all the details including the process, required documents, and other things that you need to learn about for establishing a business in the country. Simply follow the process and you will be able to get going with your business right away.