Saudi Arabia’s economy will likely be one of the world’s fastest-growing economies this year. Labor market reforms, boosting employment, and ease of doing business are among the priorities for Riyadh.
With brands looking at KSA as a strategic gateway to the Middle East, businesses are looking to establish a commercial presence in Saudi Arabia.
Paul Arnold. Managing Director at Sovereign PPG, a Saudi company providing security, efficiency, and local knowledge to international corporations and investors looking to set up within the GCC, discusses in the below Op-Ed:
- How to obtain a business license in Saudi Arabia?
- What are the prerequisites to set up a business in Saudi Arabia?
- Is 100% ownership allowed?
- What is the process to set up a business in KSA?
How to obtain a business license in Saudi Arabia?
Commercial Registrations (and supporting Licenses) are issued by the Ministry of Investment Saudi Arabia (MISA) and the Ministry of Commerce (MoC). The most common form of legal status is a Limited Liability Company (LLC) for which 100% foreign ownership is permissible through MISA. For foreign investors, activity choices are available via The National Classification for the Economic Activities (ISIC4) and in most cases, a Saudi National shareholder is not required.
What is the process to set up a business in KSA?
Sovereign PPG Saudi Arabia can provide professional consultancy and step-by-step guidance on the incorporation process in Saudi ensuring good corporate governance from the outset and advice on common pitfalls to be avoided. The main steps to consider are primary and secondary registrations, the authorization to hire employees and residency (Iqama) for the General Manager, and bank account opening. We can support the entire process including the initial legalization and attestation of the required documents at the Saudi Embassy in the foreign investor’s country, right through to the issuance of the Commercial Registration and entity portal registrations in the Kingdom.
What are the prerequisites to set up a business in Saudi Arabia?
MISA will only consider a foreign business if it has an established track record (minimum of one year) and can demonstrate profitable, audited accounts in the last financial year. The entire set of constitutional documentation of the parent company should be legalized and attested in the home country. The business must also be willing and able to appoint an individual as General Manager who will obtain Residency in Saudi to open/operate a Bank account, amongst other mandatory formalities. The first hire must also be a Saudi National and businesses should be willing to embrace rapidly changing “Saudisation” initiatives. Depending on the complexities of the structure, we also highly recommend clients obtain independent tax and legal advice, specific to their operations in Saudi Arabia.
Is 100% ownership allowed?
Yes – Saudi Arabia has been promoting 100% foreign ownership for several years now. Licenses issued via MISA enable commercial investors to obtain a 100% foreign-owned company in Saudi Arabia and generally speaking, a business can then operate anywhere in the Kingdom. There are many professional activities that foreign investors can secure on their License to take advantage of 100% ownership, however, some activities e.g. Engineering, do require a Saudi National Shareholder to be active in the business and become a true e.g. 25% Shareholder.