Business Setup in Saudi Arabia

Saudi Arabia is among the richest countries in the Middle East. Entrepreneurs around the globe are planning to set up a business here. If you are one of them, then don't look any further.

This article will explain to you everything about business setup in Saudi Arabia. Let us start with the differences between the mainland and free zones.

Differences between Mainland and Special Economic Zone (SEZ)

In Saudi Arabia, the free zones are known as special economic zones (SEZ). Both mainland and special economic zones (SEZ) offer various opportunities to investors and entrepreneurs.

Here are some key factors to note before you decide to do a Saudi business setup:

	Mainland	SEZ - Special Economic Zones
Location and Focus	You get to do business anywhere in the country, spanning various sectors.	Can do business only in the designated SEZs.
Regulations	Must follow the rules and regulations set by the Saudi government.	Subjective to follow the regulation of that particular SEZ. Exempted from customs duty for certain activities.
Tax	20% of income tax	5% of corporate income tax
Ownership and Sponsorship	Foreign ownership is restricted to some extent. Often, there will be a requirement for a local sponsor.	100% ownership for a few activities in designated SEZ.   No need for a local sponsor.
Target Audience	Mainland caters to a wide range of business activities.	Primarily targets the companies operating in specific growth sectors.

Benefits of Business Setup in Saudi Arabia -

The Kingdom of Saudi Arabia (KSA) is offering numerous benefits like the following:

• Low crime rates
• Financial incentives
• 100% foreign ownership
• Standardized support network
• Business-friendly environment 
• Proper guidance from the authorities
• Low capital investment comparatively
• One of the richest economies in the world
• Minimal sales and income tax comparatively
• Physical presence is not required (Conditions apply)
• One of the fastest and most streamlined business setup process

Process of Business Setup in KSA -

The business setup process is not as daunting as it seems; there are a few factors you should consider for a smooth and hassle-free process. 

Here are the steps to be followed for the business setup in KSA:

• Decide your business structure

The legal structure is also known as the legal entity. Below is the list of legal entities you can choose before starting your business:

• Technical and scientific services office
• Limited liability company (LLC)
• Branch of a foreign company
• Joint Stock Company (JSC)
• Regional Headquarters
• General partnership

Note: The paid-up capital requirements and shareholding structure will differ depending on the business activity and the legal structure. 

• Find an Office Space

Pick an office space for your business. You can take a space for rent, or can also lease a place as per your requirements.

Note: If you are setting up a branch company in Saudi Arabia, it’s mandatory to have a regional headquarters in the country.

• Decide a Trade Name

A business requires a name of its own, so decide on a unique trade name. And get it registered from the commercial register office. 

Note: The name you choose should not be the repetitive name of any other business. Avoid using offensive or religious names. 

• Obtain a License from Relevant Authorities

For a business setup in KSA, it’s mandatory to get a license from an authority related to your business sector. The major license for investing in Saudi Arabia is in Investment license that you need to get from the Saudi Arabia General Investment Authority (SAGIA)

• Minimal Capital is to be Deposited in a Local Bank

For any business, you should have a minimum capital to invest. Investors must open a bank account to invest the capital by choosing the bank wisely as per the business requirements.

• Submitting Required Documents 

The next step is submitting the documents to the Ministry of Commerce. Keep the following documents ready beforehand:

• Address proof of all the shareholders and directors
• ID proof of all the shareholders and directors
• Memorandum of Association (MOA)
• Trade name confirmation certificate
• Reference letter from the bank
• Article of Association (AOA)
   

• Get a Visa

Getting a visa for your employees and also for dependents is made easy now in Saudi. But you should note the quantity of visas you can apply for on the basis of the size of your business and the chosen activity.

• Follow Labor Laws

Avoid ignoring the labor laws. Middle Eastern countries are strict in following the laws. So for your betterment and for the welfare of your employees, it’s always good to adhere to labor laws.

• Appointing a Local Sponsor

A local sponsor acts as a mediator between you and the government. He/ she should be a native of the country and should be able to read and write in Arabic.

The local sponsor will hold 51% of the share and will handle all the legal nuances.

• Registering with the General Authority of Zakat and Tax

This process is done after the completion of the Ministry of Commerce registration. You can do this registration by logging into the GAZT portal. Complete the required information. Once the process is done, you will receive a notification.

• Opening a corporate Bank Account

A bank account opening in Saudi Arabia is mandatory to have proper financial management.

Requirements depending on your Business Sector

Here are the different sectors and their requirements:

For Companies related to Trading

• The company can make its presence in three different nations
• One of them should be three years old.
• All businesses should deliver annual audit reports.

For Companies in the Service Sector

• The company can make its presence in three different nations
• One of them should be 1 year old.
• All businesses should deliver annual audit reports.

For Companies in the Industrial Sector

• The company can make its presence in three different nations.
• One of them should be three years old.
• Must submit a business plan.
• Require approval from the EHS authority.
• All businesses should deliver annual audit reports.

Business Activities Allowed in Saudi Arabia

Read the table to learn what activities you should follow to avoid any legal issues:

Allowed	Forbidden
Trading   Services   Industrial	Anything that is not legally privatized, such as manufacturing military uniforms.   Security and investigation services.   Oil & gas drilling and any explosion.   Fishing industry.   Any kind of real estate investment in Mecca and Medina.

Cost of Business Setup in Saudi Arabia

The total cost of business setup in Saudi Arabia depends on: 

• The size of office space you decide to incorporate.
• The business activity you choose to pursue.
• The number of employees you recruit.
• And your business location.

For a complete breakdown of the business setup cost, get in touch with Commitbiz. Our experts will walk you through the Saudi business setup process, along with the prices.