Business Setup in Saudi Arabia Made Easy

Are you considering expanding your business to the Middle East? Look no further than the Kingdom of Saudi Arabia. With Saudi’s growing economy, the business environment is supportive therefore setting up a business has never been easier. 

This blog post will discuss the benefits of starting a business setup in Saudi Arabia. We will also cover the steps to start your company in this thriving country.

Overview of the Business Environment in Saudi Arabia

Saudi Arabia is the largest economy in the Middle East and one of the top 20 economies in the world. It is a member of the G20 and has been implementing economic reforms to diversify its economy beyond oil. 

Saudi Arabia ranked 62nd in the World Bank’s 2020 Ease of Doing Business report. It was 38th best in the same year for starting a business. This put it among the 10 most improved countries, according to the World Bank.

Image Source: World Bank Saudi Arabia Doing Business Report for 2020

Requirements for Incorporation and Types of Business Entities

Foreign investors must follow specific laws to start a business in Saudi Arabia. One essential step is getting a commercial registration (CR). You get it from the Ministry of Commerce and the Ministry of Investment. The CR is the company’s main ID. You need it to get other permits and licenses.

Foreign investors in Saudi Arabia have three types of business entities available:

  • Limited Liability Company (LLC)
  • Joint Stock Company (JSC)
  • Branch of a Foreign Corporation

The most common form of business entity among foreign investors is an LLC. It requires at least one shareholder. They must have the minimum capital set by the Saudi Arabia Ministry of Investment (MISA) to set up this business type.

On the other hand, a JSC is for larger companies with many shareholders. The minimum share capital is SAR 10 million. It requires 2 or more shareholders. With a single shareholder, it is SAR 500,000 or 5 million.

A foreign corporation’s branch is an extension of the parent company. It usually has a minimum capital of SAR 500,000. The required amount may be more or less depending on the activity. However, it must appoint a local agent to act as a liaison between the branch and the Saudi government.

Crucial Steps to Setting Up or Establishing a Company in Saudi Arabia

Starting a company in Saudi Arabia involves several meticulous steps. All companies, whether LLCs, JSCs, or Branches, follow certain uniform processes.

  1. Register the company name. This step can take 1-2 working days.
  2. Apply for and get the Ministry of Investment of Saudi Arabia (MISA) License. This step takes about 2-4 weeks, depending on your business.
  3. Reviewing and approving entity documents usually takes about 5 working days.
  4. Notarize the Articles of Association: This applies to LLCs and JSCs and can take 1-2 working days. For a branch office, this does not apply.
  5. Pay Registration Fees. Then, receive Commercial Registration. You can do this in 1 working day.
  6. Open a Corporate Bank Account: This can take 2-3 weeks to complete.
  7. Register Office Address: This is a compulsory requirement for all business entities.
  8. Complete Commercial Registry: This step takes about 2 working days.
  9. Complete the registration with the Chamber of Commerce in just 1 working day.
  10. Register with Labour: Also done in 1 working day.
  11. Register with Social Insurance: This takes about 2-3 working days to complete.
  12. You can also complete this important step of registering for taxes in about 2-3 working days.

Follow these steps. They make setting up a business in Saudi Arabia easy.

Considerations When Choosing a Location

When setting up a business in Saudi Arabia, location is crucial. The country has several major cities, each with its unique advantages for businesses. Here are some factors to be considered when choosing a location:

Proximity to your target market

Consider the demographics and consumer behavior of potential customers in different regions.

Availability of infrastructure

Choose a location with good transport, reliable utilities, and access to what you need.

Business regulations

Different types of businesses may have different rules. Some regions offer more incentives than others.

Cost of living

This is an important consideration if you plan to hire local employees. Salaries may vary by region, so choose a location with an affordable cost of living for your staff.

Cultural considerations

Different cities in Saudi Arabia have varying cultural norms and customs. Consider this when choosing a location. It ensures your business fits the local community.

Obtaining Visas for Qualifying Foreign Nationals in Saudi Arabia

You’ll need to understand the visa process. It’s for hiring foreign nationals in your new Saudi Arabian business. Here are the key requirements:

  • The passport must be original and valid for at least six months. It must have two empty visa pages in a row.
  • Complete the online application at https://visa.mofa.gov.sa. Follow the Enjaz guidelines. Be sure to select “single entry”.
  • Get a digital power of attorney from the Saudi employer. The Saudi Ministry of Foreign Affairs provides it.
  • A visa referral note has the visa number and date. The Saudi Ministry of Foreign Affairs or its branches in Jeddah or Dammam provide the note.
  • The sponsoring Saudi company should write an original letter. Then, the Saudi Chamber of Commerce and the Ministry of Foreign Affairs should certify it. The letter should include the block visa number, date, position, and applicant name. In some cases, you submit the letter through an embassy-approved visa agency. If so, let the agency handle all visa needs.
  • The sponsor and the applicant should sign the employment contract. Then, the Saudi Chamber of Commerce and the Ministry of Foreign Affairs should have certified it.
  • A certified and notarized copy of the applicant’s university degree/diploma. The Saudi Arabian Cultural Mission must authenticate it.
  • In some cases, the applicant has a training or technical diploma. They should provide a certified copy. If from the US, the U.S. Department of State must notarize and authenticate the copy. A Saudi Arabian Consulate in the United States must also notarize those diplomas.
  • You need to submit a medical report in three copies. Also, submit all lab results and three passport-sized color photos (white background). The applicant must be free of contagious diseases. A licensed physician must issue the report. It should be less than three months old at the time of application. Children under 16 do not need a medical report.
  • Get a police report issued within the last six months. It must have the applicant’s criminal history, if any.

You can process the visa application by visiting the Saudi Arabian embassy. Or, you can send it by mail to the embassy’s address: 601 New Hampshire Avenue, NW, Washington DC, 20037. Or, you can use embassy-authorized travel agencies.

Requirements for Business Setup in Saudi Arabia

Setting up a business in Saudi Arabia has specific requirements. The requirements depend on the type of business entity you wish to set up. Here are the key criteria for setting up three entity types:

LLC

  • Shareholders: At least 1, at most 50.
  • Capital requirements are set by the Ministry of Investment of Saudi Arabia (MISA). Activity and shareholding form the basis.
  • Limited Liability: Yes.
  • Measures for Capital Losses: Shareholders are not liable. This is if losses exceed half of their capital. This needs to have a meeting within 90 days. It will decide if the business ends or continues.
  • Corporate Taxes on Annual Net Profits: 20%.
  • Zakat Rate Payable by GCC Residents Only: 2.5%.
  • You must also be able to bid for government contracts. You must file an annual tax return and final statements. It would help if you also appointed an auditor.

JSC

  • Shareholders: 2, with the option to have 1 shareholder if they have at least a capital of SR 5,000,000.
  • Capital Requirements: SR 500,000 or SR 5,000,000 (in case of a single shareholder).
  • Limited Liability: Yes.
  • Measures for Capital Losses: Shareholders are not liable. This is if losses exceed 50% of capital. A general meeting must decide on increasing or dissolving JSC share capital. You must do this within 45 days if this occurs.
  • Corporate Taxes on Annual Net Profits: 20%.
  • Zakat Rate Payable by GCC Residents Only: 2.5%.
  • You also need to be able to bid for government contracts. File an annual tax return and final statements. It would help if you also appointed an auditor.

Branch Office

  • Shareholders: Not applicable
  • Capital Requirements: SR 500,000, but can be lower or higher depending on activity.
  • Limited Liability: No.
  • Rules for Capital Losses: The head office is liable for more than the branch’s capital. This needs a meeting to decide if the business will dissolve or continue. It must happen within 90 days if losses exceed 50% of capital.
  • Corporate Taxes on Annual Net Profits: 20%.
  • Zakat Rate Payable by GCC Residents Only: 2.5%.
  • You must also be able to bid for government contracts. File an annual tax return and final statements. It would also help here if you also appointed an auditor.

Challenges Associated with Business Setup in Saudi Arabia

While setting up a business in Saudi Arabia can be a profitable opportunity, it has its challenges. Some of the main obstacles include:

  • Foreign countries have cultural and language barriers. These barriers can make it hard to navigate the business landscape.
  • Every business setup in every country has paperwork that needs to be done. This can be time-consuming and frustrating for some. But it also depends if there are available services that can guide and help you with the paperwork to make it easier for you.
  • Expatriates have limited work visas available. It’s possible to get visas for qualifying foreign nationals. But, there are limits on the number of work visas. This makes it hard for some businesses to hire needed talent.
  • Saudi Arabia is a conservative Muslim country. It has strict adherence to Islamic laws and customs. Businesses must understand and respect these laws. This is important for them to operate well.

15 Tips for Establishing a Business in the Kingdom

Despite the challenges, there are ways to increase your chances of success. You can do so in your business setup in Saudi Arabia. Here are some tips to keep in mind:

  1. Before deciding, you must do thorough research. Look at the business environment in Saudi Arabia. This includes its cultural norms, laws, regulations, and market demand.
  2. Get professional help, consider hiring a local consultant. Or, hire an international law firm in the KSA with expertise in business setup in Saudi Arabia. This can help navigate the complex processes for incorporation. It also helps ensure compliance with local laws.
  3. Network and build relationships. Strong relationships are key to success in your business setup in Saudi Arabia. Business is often based on personal connections. Attend networking events and conferences to meet potential partners and clients.
  4. Understand the local market. As with any business, it’s important to know the local market and consumer behavior. You need to offer products or services suited for the Saudi market.
  5. Have a solid business plan. It must be well-researched and detailed. Such a plan is crucial for getting investors and partners in your business setup in Saudi Arabia. It should also include strategies for navigating cultural differences. It’s also best to include strategies for following local laws.
  6. Be patient and persistent. Business setup in Saudi Arabia may take longer than expected. So, it is important to be patient and persistent. Building relationships, obtaining necessary approvals, and completing paperwork can all take time.
  7. Consider the location. It can impact your business’s success in Saudi Arabia. Factors to consider include accessibility, cost, and proximity to target markets and suppliers.
  8. Understand visa requirements. If you plan to hire foreign nationals for your business, you need to know the visa rules in Saudi Arabia. Seek help from a professional to ensure proper documentation and compliance are being followed.
  9. Get the needed licenses and permits. It depends on the type of business you choose. You may need specific ones from Saudi authorities. These can include trade licenses, construction permits, and environmental clearances.
  10. Be aware of cultural differences. Doing business in Saudi Arabia requires understanding and respecting them. This includes religious practices. It also includes social norms such as dress code, communication styles, and business etiquette. You must do thorough research and seek guidance from local advisors.
  11. Prepare for challenges. Business setup in Saudi Arabia has its unique challenges. Some common challenges include bureaucratic procedures, language barriers, and cultural differences. It would help if you are patient and persistent when facing these challenges.
  12. Be flexible. As with any business venture, flexibility is key to success in Saudi Arabia. Adapting to market changes and unexpected challenges can help your business thrive. The market is always changing.
  13. Stay compliant. After your business setup in Saudi Arabia, you must follow all local laws and regulations. This includes getting needed licenses and permits. It also means keeping proper accounting records and following labor laws.
  14. Use government support. The Saudi Arabian government offers programs to help businesses. These include financial incentives, training programs, and help with market entry. Be sure to research and take advantage of these resources.
  15. Focus on building trust is crucial for starting a business in Saudi Arabia. Strong personal relationships with clients, partners, and employees are key. They are the key to long-term success in this market.

Final Thoughts

So, have you decided to start your business setup in Saudi Arabia? You don’t have to navigate the process alone. There are dedicated professionals like Decisive Zone who can help you. We can be your trusted ally. 

Decisive Zone offers personalized services for your business setup in Saudi Arabia. We tailor ourselves to fit the needs of corporate clients and individuals. The company covers all aspects of business setup in Saudi Arabia. It advises on corporate structure and jurisdiction. It also handles the process’s technical, administrative, and financial aspects. But our support does not end there. 

We also provide more services. We ensure your business runs after establishment. We cover areas like accounting, marketing, and HR.

Decisive Zone commits to two things. We promise to deliver great customer service. We also aim to build trusted, long-term relationships with all its clients. We’ll guide you from forming the company to processing visas. We’ll work with Saudi Arabian government agencies on your behalf. We also provide a supportive ecosystem for your company to thrive. 

So, make setting up your business in Saudi Arabia easy. Choose Decisive Zone as your partner. Simplify your business setup process. Ensure a promising start with Decisive Zone. Get in touch with us today, and let’s start building your business future successfully together in Saudi Arabia.