Saudi Arabia offers great opportunities for business expansion due to its rapid economic growth and the launch of its Vision 2030 plan. The country has been attracting traders from all over the world in various industries due to its youth, strong purchasing power and government incentives.
According to Saudi Arabia’s FDI report, FDI inflows in 2021 amounted to SAR 100 billion. This was followed by a 22% increase in 2022, to SAR 122 billion. The growth trend is expected to continue as comprehensive regulatory reforms make it easier to set up and operate a company in Saudi Arabia.
In this article, we cover the reasons why the Kingdom of Saudi Arabia is a target, types of business Entities in Saudi Arabia,the steps to setting up a company in Saudi Arabia, and finally, we explain the challenges and considerations that need to be taken into account.
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Contents
Why the Kingdom of Saudi Arabia is a target for company formation
Before examining the details of company establishment, let’s review why Saudi Arabia is an attractive location for companies:
- Strategic location: Saudi Arabia is a strategic location between Asia, Europe and Africa, it considered a bridge between countries and strategic center for trade and commerce.
- Strong economy: The Kingdom has a strong and diverse economy, driven primarily by industries such as energy. Petrochemistry, Production and Technology.
- Government support: The Saudi government has implemented a series of reforms to attract foreign investment, including Vision 2030, which aims to transform the economy.
- Market Access: With a population of over 35 million, Saudi Arabia has access to a large and growing customer base.
- Tax benefits: Saudi Arabia offers adequate tax incentives, including tax exemptions in certain economic sectors.
Understanding Article 77 of the Saudi Labour Law
Business Forms for Investors in Saudi Arabia
The New Companies Regulations outline the types of companies in Saudi Arabia, and it available for local and foreign entrepreneurs to choose from.
The list of companies in Saudi Arabia includes :
- joint liability
- establishment/sole ownership
- limited partnership
- joint venture
- joint stock company
- limited liability business.
Saudi Arabia’s company formation law also provides special business forms suitable for foreign companies interested in participating in the local market,as follows:
- Branches : A branch may be an extension of a foreign parent company. Branches can only engage in the business activities of their parent company. It offers limited credit, but has greater restrictions for investors in certain areas.
- Representative offices: The representative offices will not carry out lucrative activities and their scope of activity will be restricted. Typically, they can only conduct market research in Saudi Arabia and promote business activities carried out by parent companies abroad.
How to Start a Business in Saudi Arabia
Obtain a foreign investment license
Business Name Registration
Present the notarized articles of incorporation
Apply for Commercial Registration
VAT Registration
Get an office
Submit additional documents
Proof of identity
addresses of all shareholders and directors of the company.
Copy of business name declaration.
Copies of passports of shareholders and directors Bank letters of recommendation.
Obtaining a visa
additional licenses
How much does it cost to start a business in Saudi Arabia?
The cost of starting a business in Saudi Arabia starts at SAR 60,000*. However, it may vary depending on various factors such as legal structure, business activities, location and office space.There are usually fees associated with licenses, permits and registrations.
Challenges and Considerations:
While Saudi Arabia offers many opportunities, it also presents unique challenges and considerations:
- Local Partner Requirement:Foreign investors may need a local partner or agency to establish certain types of businesses.
- Regulatory Compliance: Saudi regulations can be complex and changing, requiring careful efforts to comply.
- Cultural awareness: Understanding and respecting Saudi culture and traditions is essential to successful business operations.
- Integrated management: Good management practices are essential to adapt to local business standards and principles.
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