Business Setup Process in Saudi Arabia

Whether you’re a visionary entrepreneur or a growing business aiming for new markets, Saudi Arabia can be a leading option for you. Being a prime gateway, a booming economy, and bold transformations under Vision 2030 KSA has become a top-tier global business hub in last couple of years. However, the business setup process Saudi Arabia brings to the table can be demanding for particularly foreigners. The legal, cultural and environmental framework requires thorough understanding and a structured plan from the first to the final steps. In this article we will take you step by step through the procedure to establish and thrive a successful business in the dynamic landscape of KSA.

Understanding Saudi Arabia’s Legal Business Structures

Understanding and picking the Saudi Legal framework is mandatory before starting a business, lets discuss here some of the most common legal business entities in Saudi Arabia,

• Limited Liability Company (LLC): The most ideal business structure for global investors, requiring a minimum of one shareholder with up to 50 shareholders and limited liability protection.
• Joint Stock Company (JSC): Best suited for large enterprises and heavy investments, and offer capital raising through the public and private sectors.
• International Company Branch: Assist international businesses to launch a business in Saudi Arabia and expand their operations in the region while being fully owned by the parent company.
• Sole Establishment: A company managed by just a single investor with full financial responsibility.
• Partnerships: Joint ventures like general or limited partnerships, oftentimes between foreign and local entities, blending local expertise with international oversight.

A Guide to the Tax System

KSA has a simple and aligned tax framework for businesses, with some of the key tax obligations include,

• Corporate Income Tax: CIT is subjected to the non-Saudi and non-GCC companies, a fixed 20% CIT is applied on their annual revenues.
• Value Added Tax: VAT is paid on the consumption of goods and services. Currently set at 15%, VAT is applied across various industries
• Withholding Tax: All the payments made to the non-residents applies withholding tax. The rate normally varies between 5% and 15% depending on the nature of the transaction.

Certain sectors like renewable energy, technology, and key development industries are facilitated with tax exemptions and incentive to foster development and growth. It is crucial to register for tax and maintain tax compliance while setting up a business in KSA, businesses who fail to do so may face many strict legal actions and penalties.

Establishing a Business in Saudi Arabia: Step-by-Step

1.    Pre-Setup Stage

To lay a solid business foundation, it is important to build a roadmap that guides you through entire business setup process Saudi Arabia. During the pre-stage businesses must:

• Identify and pick the best suitable legal structure as per their ownership preferences and operational requirements.
• Clearly define business activities for the purpose of legal requirements, registration process and licensing.
• Choose a unique business name that meets Saudi Arabia’s naming requirements and at the same time represents the purpose of your brand.

It is important that companies should have all the legal documents before moving into the business setup process Saudi Arabia. Some of this essential paperwork includes, parent company’s memorandum, business license, certificate of incorporation, board resolution and power of attorney.

2.    Incorporation Stage

Once the basics are established, its now time to incorporate your business in Saudi Arabia. This phase is critical and demand expertise as it turns your plans into actual operation. Thus, it is necessary to not overlook even the minor details while business incorporation. This process includes,

·       Attaining Investment License from MISA

Obtaining the license from Ministry of Investment Saudi Arabia (MISA) is mandatory for foreign investors. This license gives companies legal work permissions to operate in the Kingdom.

·       Draft & Notarize Articles of Association

It is important to prepare and Notarize articles of association (AoA) for LLC or JSC. This document emphasizes on a firm’s legal framework, details of shareholders and management structure.

·       Register with the Ministry of Commerce (MCI)

Once you have got your Articles of Association (AoA) it is required to be registered with ministry of commerce (MCI) to incorporate your business in Saudi Arabia.

·       Issue Your Commercial Registration:

The Commercial Registration (CR) certificate validates you company by issuing an identification number. This document is obligatory for legal purposes and for financial transactions.

·       Register with Government Departments

Your company must register with different government bodies, such as Zakat, Tax, and Customs Authority (ZATCA) to comply with tax regulations and get work visas and residency permits (Iqama) for foreign employees through the Ministry of Human Resources and Social Development (HRSD).

·       Register for Social Insurance (GOSI)

To adhere with labor laws, it is compulsory to register with General Organization for Social Insurance (GOSI) for contributing in labor funds.

·       Obtain Necessary Licenses & Permits

Companies dealing in specific categories must further acquire licenses from relevant industries, such as Saudi Food and Drug Authority (SFDA) for food-related businesses and Saudi Central Bank (SAMA) for financial institutions.

·       Open a Corporate Bank Account

After all vital steps are taken, now it’s time to open a corporate bank account in Saudi Arabia. This account is required to deposit the initial share capital and for regular financial transactions.

·       Set Up an Office Space

For any business registration in KSA a physical office space is essential, the lease agreement must be provided as part of the registration procedure.

After securing all necessary approvals, businesses are legally permitted to operate in Saudi Arabia. Engaging top accounting firms in KSA for finance consulting is recommended to navigate regulatory requirements smoothly and ensure full compliance.

The Business Advantages of Saudi Arabia

There are a huge number of possibilities for businesses looking to expand or create a company in Saudi Arabia and its key reasons include,

• Encouragement from government and the Saudi Arabia’s Vision 2030 initiative which offer countless facilities and incentives for emerging businesses.
• Easy access to investment opportunities and funds like Public Investment Fund (PIF) offers financial support for businesses looking to scale.
• The attractive location and global market access of KSA makes it an ideal investment hub for a flourishing business.
• Government investment in developing skilled and talented workforce which is essential for building a robust team and business growth.
• Flexible business regulations, tax incentives and simplified processes makes KSA an ideal and entry easier market for investors.

What Foreign Investors Should Know

There are some key considerations that foreign business must address before starting a business in KSA.

• Although foreign investors can own up to 100% of certain business types yet many industries have ownership restrictions and demands local partners.
• Foreign companies must register and pay a corporate tax of 20% on their annual profits.
• There is a minimum fixed capital requirement for certain business activities. Such as capital demand for trading companies is SAR 500,000.
• The government offers various incentives, such as tax exemptions, funding support, and Saudization requirements in specific sectors.
• Business should allocate a specific percentage of Saudi Nationals depending on their industry as per Saudization policies.

Operating business while retaining compliance with laws can be intricate at times, legal structures can be complex to understand and business registration might need expert assistance. It is therefore best to opt for business consultancy services or partners who can standardize the process efficiently and professionally.

SS&CO Helping You Succeed in Business Setup

Whether you are a global entrepreneur looking for possibilities in the expanding market of KSA, or GCC investor ready to make your mark, we’ve got your back. SS&CO is one of the top accounting firms in KSA for finance consulting. We deliver professional guidance backed by a skilled team to navigate the legal and administrative hurdles for establishing a business in KSA. Think of us as your business GPS, guiding you through incorporation, tax registrations, licensing, and compliance with precision and ease. Some of our expert services include,

• Business Incorporation
• Compliance with legal laws and regulations
• Tax Registration and filing
• Visa and Employment Authorization Services
• Corporate Banking Setup Assistance
• Enterprise Support Services
• Professional Business Consulting

If you are still looking for options, we are here to offer help by picking the perfect legal structure for your venture. We’ll put forward the strengths and weaknesses so you can make thoughtful decisions. At SSCOKSA, we do more than business setup, we build futures that last. Book an appointment today and let us turn your vision into an accomplished dream.