how to start a business in Saudi Arabia 2024

how to start a business in Saudi Arabia 2024

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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.

you may be interested in The best lawyers in Saudi Arabia

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:

  1. 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.
  2. Strong economy: The Kingdom has a strong and diverse economy, driven  primarily by industries such as energy. Petrochemistry, Production and  Technology.
  3. Government  support:  The Saudi government has implemented a series of reforms to attract foreign investment, including Vision 2030, which aims to transform the economy.
  4. Market Access: With a population of over 35 million, Saudi Arabia  has access to a large and growing  customer base.
  5. 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 :

  1. joint liability
  2. establishment/sole ownership
  3. limited partnership
  4. joint venture
  5. joint stock company
  6. 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

How to Start a Business in Saudi Arabia:

Obtain a foreign investment license 

This is the first and most  important step. You must apply for a MISA  license in the sector of your choice by applying to the Ministry of Investment of Saudi Arabia (MISA). This process alone can take 6-8 weeks. You can hire an enterprise setup service provider to help you get your MISA license quickly.

Business Name Registration

Next you need to choose your business name and KSA and register it. You must obtain name approval from the Ministry of Commerce (MOC). Name reservations are valid for 60 days.

Present the notarized articles of  incorporation

The articles of association must be drafted  in accordance with the  Saudi Companies Law and notarized before filing.

Apply for Commercial  Registration

 This must be done within 30 days of receiving  the investment permit. You will receive your CR usually within 2 to 4 weeks.

Deposit share capital

 Commercial registration to start a business in Saudi Arabia  requires a minimum share capital of 50,000 Saudi Riyals (around  $13,000).

VAT Registration

 Businesses with a total taxable income of more than or equal to SAR 375,000 in Saudi Arabia must register for VAT with the Zakat Tax and Customs Authority. The VAT rate in KSA is 15%, and Corporate Tax, known as Zakat, is 20% for foreigners.

Get an office

 To run your business, you need office space. Depending on your needs and business activities, you can buy or rent office space in Saudi Arabia.

Submit additional documents

: These documents include:
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

You must obtain visas for yourself and your dependents or any workers you wish to bring to Saudi Arabia to work. If you want to hire workers for your company, you must register with the Ministry of Labor.

additional licenses

Some companies require additional licenses depending on their operations. Some of the agencies that issue such licenses include the Saudi Food and Drug Authority, the Ministry of Health, Saudi Tourism and the National Heritage Committee, Social Security and Municipalities. Note* Another important thing to note is that the company must have been operating in its home country for one year in order to receive the benefits of 100% foreign ownership in Saudi Arabia.

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:

  1. Local Partner Requirement:Foreign investors may need a local partner  or agency to establish certain types of businesses.
  2. Regulatory Compliance: Saudi regulations can be complex and  changing, requiring careful efforts to  comply.
  3. Cultural  awareness: Understanding and respecting Saudi culture and  traditions is  essential to successful business operations.
  4. Integrated management: Good management practices are essential to  adapt to local business standards and principles.

for more info please visit Saudi Arabia: a global investment hub.

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