Saudi Arabia is the biggest economy in the GCC. It is an increasingly feasible destination for international investors looking for a business setup in Saudi Arabia to take advantage of the expanding Saudi market. Recent legal reforms in the Kingdom have also considerably boosted the desirability for setting up businesses. These changes include enabling 100% foreign ownership via the Ministry of Investment of Saudi Arabia (MISA) platform.
Thanks to PRO support services in Saudi Arabia, who can help you with essential government registrations. They also have access to experienced local legal firms assisting with the company formation process. On the other hand, this development can be laborious and time-consuming. You can employ a business setup consultants to oversee the company’s construction from its initial registration until it is fully operational. It will save your company time and money, allowing it to focus on its expansion goals and strategy.
What Documentation Do I Need to Establish in Saudi Arabia?
To register as a 100% foreign-owned LLC or branch company in Saudi Arabia, you must first get a license from the Ministry of Investment and Small and Medium Enterprises Affairs. This will be a component of MISA’s first approval procedure and will be a part of it. For MISA to thoroughly understand the firm’s business operations and growth strategy in Saudi Arabia, the company must present a concise and well-written business plan.
Upon receipt of initial approval and clarification on the activity classification, you will be required to have the following company documents legalized, attested, and certified at the Saudi embassy or consulate in your home country. This will be necessary to continue the application process.
- Trade License (Commercial Registration)
- Articles of Incorporation / Memorandum of Incorporation
- Certificate of Employment
- Financial statement for the preceding fiscal year
- Copy of the passport of the General Manager of the Saudi organization
After all these things have been taken care of, the next step is to upload them to MISA’s website and make the necessary payment. This will set in motion the official application procedure, which, once accepted, will result in the generation of the MISA license.
What Business Setups Are Legal in KSA?
MISA recognizes the following legal entities:
- LLC (Limited Liability Co) 100% foreign ownership is permissible through MISA
- Limited liability one-person company
- Joint stock company
- Foreign company branch
- Solidarity professional company
Most non-Kingdom residents who invest money in the Kingdom go for limited liability companies, often known as LLCs. One of the most substantial paybacks of a limited liability company (LLC) is that the company’s shareholders are only responsible for the debts incurred by the business to the extent that they have contributed to the company’s capital.
In addition, a limited liability company can participate in the full spectrum of activities permitted by the company’s charter. Because of this, limited liability companies are frequently regarded in a more favorable light when replying to commercial opportunities in both the public and private sectors. Additionally, a limited liability company has the authority to sponsor its workers for residence.
Is Saudi Arabia an Ideal Place to Start a Business?
The startup activity rate in Saudi Arabia increased from 14% of the population in 2019 to 17% in 2020. Additionally, Saudi Arabia had the highest level of market optimism, with 80% of respondents seeing the pandemic as an opportunity to launch a business. These statistics show that business setup in Saudi Arabia can be profitable in the long term.
Foreigners’ Advantages of Establishing a Company in Saudi Arabia
The business setup in KSA makes sense from both an economic and a social perspective for several reasons. To begin with, the latter boasts one of the lowest crime rates in the world combined with one of the most significant levels of education and healthcare.
When doing business in this region, non-oil-related companies may take advantage of a robust support system and reduced income and sales tax obligations. This is especially true for international investors.
One of the reasons Saudi Arabia is becoming well-known is the country’s improved business climate. The Realm of Saudi Arabia has significantly improved in this area, placing higher than Qatar, India, and Luxembourg in the World Bank’s Ease of Doing Business Index in 2017.
Foreigner Company Formation Procedures in Saudi Arabia
Follow the steps below to know the procedure of setting up a company in KSA:
Step 1 – Choose your industry and company structure
You must first describe the industry you aspire to work in and the activities you expect to do. This will decide if it is preferable to establish a business in Saudi or a free economic zone. In addition, it will govern the sort of license and the legal entity you need.
Step 2 – Company premises
Foreign enterprises without a regional headquarters in Saudi Arabia will no longer be issued licenses beginning in 2023. Therefore, if you are establishing a branch company, you will need to lease a company location or employ a local service agent.
If you are a preliminary new company, you can acquire premises on the mainland or sign up for a licensing package in a free economic zone.
Step 3 – Investment license
Foreigners looking for a business setup in Saudi Arabia must get an investment license. This is issued by the General Investment Authority of Saudi Arabia (SAGA). This allows you to invest in the nation, purchase or create a new company, or open a foreign branch.
You must also apply for a business registration certificate from the Ministry of Commerce and Investment at this step.
Step 4 – Additional documentation
Next, you’ll need a few other papers from the Ministry of Commerce.
A business consultancy can coordinate with you and the appropriate entities to secure the Articles of Association and Commercial Registration. To validate the formation of your company, you must also pick a General Director and submit the required paperwork:
- Proof of address and ID for directors and shareholders
- Passport copies for shareholders and directors
- Copy of trade name confirmation
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Bank reference letter
A business visa is also mandatory to live, work, and reside in Saudi Arabia.
Aspects to Consider When Establishing a Company in Saudi Arabia
The rules governing corporations in Saudi Arabia are, in many ways, quite comparable to other western nations. For instance, a company’s proprietor can operate the enterprise as a private entity or one of many alternative forms. assist you in navigating the hurdles posed by the regulatory environment, you need to consult specialists in the field.
Business setup in Saudi Arabia has gotten simpler over recent years. Nonetheless, there are still some possible obstacles along the road owing to cultural differences and the language barrier. Below are a few of the vital things to keep in mind if you want to prevent any problems:
Gain solid knowledge
If you have a solid understanding of the local area, you can figure out how to launch a firm. Put forth the effort to get as much information as possible on the industry in which your company competes. Also, use that information to take your business decisions. A comprehensive grasp of the target market, governmental restrictions, and the industry’s rivals are essential for any business strategy. Starting a new company in a foreign country is not the simplest thing. Hence, if you have a good marketing strategy, you may be able to garner the support of the residents and the government.
Establish early commercial partnerships with members of the community
In the past, the government of Saudi Arabia demanded that every foreign company have at least one local partner. The local partner will have most of the company’s shares. Even while the rule is no longer in effect, a non-native person may now be the sole owner of a company. However, this does not eliminate the benefits of having a local partner. The presence of a local partner who has an in-depth understanding of the local business ecosystem may verify to be an extremely beneficial tool for the company.
Show evidence that you can support yourself financially
The owner of a company must provide proof of the firm’s financial competence in the form of a savings account at a financial institution as soon as the company setup is done with the Ministry of Commerce. Your money is a type of guarantee against your obligations. And the good news is that you are free to withdraw the money not long after the transaction has been completed.
Suppose you find yourself in a position where you need assistance with the project. The procedure is tedious. Also, there is always the possibility of incurring some financial losses. In that situation, you may consider hiring a professional with a solid track record who can help you with the registration procedure.
Professionals can assist investors looking for business setups in Saudi Arabia at every step. Make sure to hire the one with a reputation and proven work record.